Low-cost devices will account for an increasing proportion of the Chinese smartphone market, with 40 percent of smartphones sold in 2015 expected by analyst firm Canalys to be priced below US$200.

Chinese brands will play a significant role in lowering prices. ‘Established mobile phone makers, such as Yulong, Gionee and K-Touch, have the advantages of strong operator relationships and channels. In addition, emerging vendors, like Xiaomi and Green Orange, are building a reputation quickly in the youth market,’ said Shanghai-based Canalys analyst Nicole Peng.
 
Internet companies such as Alibaba and Baidu have recently entered the smartphone market, which is expected to further increase competition at the low end.

Prices will also be driven down as Chinese operators publicly outline minimum hardware specifications for smartphone procurement. Peng said a device with an equivalent spec to the US$110 Lenovo A65 cost US$158 to purchase in the final quarter of 2011. ‘Price erosion is accelerating,’ she said.
 
China is already the largest smartphone market in the world and sub-US$200 smartphones are expected to make up 25 percent of sales in 2012. The country will account for a third of the global increase in smartphone shipment volume in 2012 compared to 2011.

International vendors, such as Apple, HTC and Samsung, will remain strong at the high-end, according to Canalys. However, Peng said Chinese tier-one vendors Huawei and ZTE will need significant marketing investment and time to deliver significant return on high-end devices.