Demand in China's smartphone market is expected to reach 422 million units in 2014, with 278 million units contributed by China-based vendors, according to the latest DIGITIMES Research Special Reprort, "2014 China Smartphone Market and Industry - Forecast and Analysis."The continued expansion by international vendors Samsung and Apple will push up their sales to almost 144 million units in the China market, growing nearly 4% from 2013.As competition in the local market heats up, China-based vendors are turning to overseas markets in order to maintain their shipment volumes, especially taking an aggressive approach to penetrating emerging markets, which hold higher barriers for overseas vendors to enter, according to the DIGITIMES Research Special Report.This DIGITIMES Research Special Report examines two aspects of the China smartphone market. The first part covers the China smartphone market, measuring local shipments in China from both China-based vendors and international vendors such as Samsung and Apple. The second portion of the Special Report covers the China smartphone industry and measures shipments from China-based makers and vendors in the local China market as well as their shipments to overseas markets.The outlook for the 2014 China domestic smartphone market is that fewer local brands will remain to compete in the market. With the general enhancement of software-hardware specifications in 2013, brand-building and channel management have become the key to sustainability. Vendors without the advantage of substantial product differentiation will face the challenge of being eliminated in the short term. On the other hand, local vendors need to deal with inventories with discretion to counter the vigorous attacks initiated by international vendors in the domestic market.In terms of the China smartphone industry, DIGITIMES Research expects global shipments of China-based smartphone vendors to reach 412 million units in 2014, a 30.7% increase from 2013. Overseas shipments will account for about 126 million units. While shipments to mature markets are expected to grow on a small scale, shipments to emerging markets are expected to expand at strong rates, mainly due to the low base they are starting from.In the forecast for shipments from different vendors in 2014, Lenovo and Huawei are expected to reach 50 million units. Huawei has been engaged in overseas markets for a long time so its export portion outweighs Lenovo's. ZTE's and CoolPad's shipments are expected to reach 35.5 million units. TCL has shown a significant growth in exports with shipments expected to exceed 26 million units in 2014, ranking No. 5 on the list. Second-tier vendors Gionee and Xiaomi are expected to ship 20 million units.DIGITIMES Research is the research arm of DIGITIMES Inc, Taiwan's leading high-tech media outlet. Operating as an independent business unit, DIGITIMES Research focuses on monitoring key high-tech industries, while also guiding clients toward suitable new businesses. Digitimes provides market intelligence and analysis to more than 1000 corporate customers worldwide. Research and consulting services cover a full range of industries, including information and communications technology (ICT), flat panel display (FPD), LEDs, semiconductor design and manufacturing.

China-based handset vendors will continue to focus on rolling out entry-level to mid-range smartphones for China and other emerging markets in the first half of 2014 due to persistently strong demand for those models, according to Digitimes Research.Instead of unveiling new flagship models at Mobile World Congress (MWC) 2014 held in Barcelona in February, Huawei, ZTE and Lenovo all highlighted their latest entry-level and mid-range models at the fair.Huawei unveiled its mid-range model, the Ascend G6, which sports a 4.5-inch display and supports 3G and LTE standards, targeting mainly the emerging LTE market in China.ZTE also showcased an array of LTE-enabled models, including the Grand Memo II LTE, which comes with a 6-inch IPS display. ZTE also unveiled two Firefox-based models, the Open C and Open II, targeting the entry-level segment.Lenovo launched three mid-range models at MWC. All of the three models are powered by a MediaTek MT6582 quad-core CPU, with prices ranging US$229-349. However, Lenovo currently lags behind other fellow companies with regard to the development of LTE smartphones, according to Digitimes Research's analysis.

There were 428.2 million subscribers of OTT (over the top) TV subscribers in China as of the end of 2013, increasing 144.3 million from 2010 and accounting for 69.3% of all Internet service users, according to Digitimes Research.OTT set-top boxes (STBs) took up 15.1% of all types of STBs shipped in the China market during the third quarter of 2013, hiking 10.4ppt from 2012, Digitimes Research indicated.Device vendors such as Huawei Device and Xiaomi Technology, OTT TV operators such as LeTV and PPTV, cable TV operators such as BesTV and Wasu, and Internet service providers such as Alibaba, launched own-brand ARM-architecture OTT STB models for retail sale at CNY299-499 (US$49-81) in 2013.

China touch panel makers are making slower-than-expected progress producing in-cell and on-cell touch panel technology during 2014, according to findings from Digitimes Research.Digitimes Research recently visited FPD China 2014 and found that major touch panel makers such as BOE, Tianma and China Star Optoelectronics Technology (CSOT) are behind in their originally estimated schedule for producing in-cell and on-cell touch panel technology and instead are turning to producing other touch technologies.Some of those technologies include carbon nanotube, graphene, metal mesh and nano silverwire, which have all undergone mass production as of 2014, said Digitimes Research, adding that the China makers plan to use graphene thin-film touch panels for use in white-box handsets.Digitimes Research also said that Nippon Electric Glass (NEG) was also in attendance to display advancements in its glass products and is reportedly further cooperating with Taiwan touch panel makers to produce new touch panels in 2014.

Samsung Display and LG Display are expected to hold a 50% or above share of large-size (9-inch and above) TFT LCD panel supply capacity throughout 2017, according to Digitimes Research.China-based panel makers have taken the industry by storm when news of new 8.5G lines set to be unveiled over the next few years spread through the media recently. While some market observers believe the makers are aiming to increase production capacity mostly in the large-size panel segment, Digitimes Research noted the makers, such as BOE, will focus mostly on small- to medium-size panel production.Taiwan's panel makers meanwhile currently do not have plans to increase production capacity for large-size TFT LCD panels in the near future, and will be responsible for about 25% of large-size TFT LCD production capacity throughout 2017, which will allow Korea-based panel makers to maintain a steady hold in the large-size segment.Production capacity for large-size TFT LCD panels is expected to increase no more than 2% in 2014, noted Digitimes Research.

Samsung started flooding the tablet market with new devices in the first quarter and is pushing its new 12.2-inch tablets, featuring a new user interface and multi-tasking abilities, as its main products for the enterprise market. However, because the devices have weaker price/performance ratios compared to notebooks of similar pricing and most of Android's enterprise applications are inferior to those of the PC platform, Digitimes Research expects Samsung's 12.2-inch tablet shipments to reach only around one million units in 2014.Out of profitability concerns, Samsung stopped trying to bump up its notebook shipments through low-price strategies in the second half of 2013 and the strategy change resulted in a drop of its quarterly notebook shipments to from 3.5-4 million units to only 2-2.5 million. With the 12.2-inch tablets, Samsung is hoping the devices to help offset the declines in the notebook market.Instead of pursuing better hardware specifications, Samsung placed its focus on developing a new user interface, software, applications as well as software-hardware integration, and is cooperating with third-party service providers to strengthen applications. Through these efforts, Samsung is aiming to strength the tablets' penetration into the enterprise market and enhance their competitiveness.However, Digitimes Research believes Samsung's 12.2-inch tablets will have difficulties competiting against notebooks in the enterprise market in the short term. Currently, even the most entry-level 12.2-inch tablet from Samsung, the TabPRO 12.2 starts at US$649. The high-end NotePRO's US$849 starting price is already the price of a mid-range/high-end notebook. Except for a thinner and lighter industrial design and a longer battery life, the 12.2-inch tablets have no other competitive edge against a similar-level enterprise notebook in terms of component specifications such as processor performance, memory and storage capacities.In addition, Android's lack of apps for tablets and limited enterprise and professional apps compared to the Windows and Mac platforms, are expected to impact the Android platform's ability to satisfy enterprise users' various needs. Even existing apps are having issues supporting some of Samsung's specially designed functions such as multi-windows and hovering touch.

China-based Huawei and CoolPad have both recently launched their new low-price high-specification phablets in China, aiming to grab shares from the high-end phablet market. Both vendors have adopted similar online hunger marketing strategies for the devices.Compared to most first-tier vendors' entry-level to mid-range phablets in emerging markets, the two vendors' devices carry attractive price/performance ratios, and their specifications, quality and prices are all capable of competing against mid-range smartphones in China, according to Digitimes Research's analysis.Meanwhile, Samsung Electronics, which is aiming to become the largest tablet vendor by 2015, has launched the Galaxy Tab 3 Lite for the entry-level market. However, the tablet's price has no advantages compared to its similar-level competitors.Hewlett-Packard (HP) has released its Slate 7 VoiceTab in India. Although the device has beaten Samsung's similar-level tablet in terms of certain specifications, it does not have obvious advantages over its competitions.

Despite the slow-season performance of China's smartphone market, chipmaker MediaTek's smartphone application processor (AP) shipments in the first quarter continue to see strong growth like it did during the previous quarter. The good price/performance ratios of MediaTek's entry-level and mid-range WCDMA smartphone APs have boosted their popularity among emerging markets.Seeing MediaTek's rapid penetration into emerging markets, its competitors, particularly Spreadtrum, face great challenges defending their market shares. Spreadtrum used to focus on supplying EDGE and WCDMA smartphone AP products to emerging markets, but its shipments have begun to drop sharply since early 2014 with a pace even faster than the decline its single-core TD-SCDMA products saw during the second half of 2013.According to Digitimes Research's figures, Spreadtrum's smartphone AP shipments in January and February 2014 were only half of those of the same months in 2013 and were even lower than its monthly average of the second half of 2013. Although market watchers expect the China chipmaker's shipments to improve in March, it is unlikely to help it fully regain the market share it has lost to MediaTek.Spreadtrum was originally set to release its 3-mode LTE smartphone AP products in April, but the China government's policy change requiring five-mode support is expected to dampen Spreadtrum's shipments in the second half of the year.In the second half, Spreadtrum will release its baseband-integrated tablet APs to increase its presence in the market, but with MediaTek already dominating the market and Qualcomm aggressively trying to make forays into the segment, the China-based maker will be unlikely to have any advantage in terms of product specifications or prices.Enty-level smartphones and tablets are starting to adopt quad-core APs, but Spreadtrum's quad-core APs and solutions are immature. Its clients have started turning to MediaTek's solutions for their devices, which means Spreatrum will have a difficult year.

Sony president and CEO Kazuo Hirai in early 2014 unveiled the Life Space UX project, featuring the company's latest 4K ultra short throw projector, which adopts Sony's SXRD LCoS technology to allow projection of up to 147-inch 4K-resolution images in a very short distance. The projector will become available in the US in summer 2014, priced at around US$30,000-40,000.Meanwhile, Sony also announced to spin off its TV business into a subsidiary by July. In the future, the subsidiary will mainly target Ultra HD display products and is aiming to turn profits by March 2015.Digitimes Research believes Ultra HD products will become a major profit contributor of Sony in the future because of their high gross margins. Sony has the technologies and manufacturing abilities to produce LCoS and HTPS projectors and components.Because of LCoS' advantages in high-definition projection and the fact that it is the only display component that is fully controlled by Sony in terms of technology and production, Digitimes Research expects the SXRD to become the key development focus of Sony's Life Space UX project in the future.

In addition to the smart mobile device markets, Apple and Google have also been expanding their presence in other industries such as automobile electronics.Google announced the establishment of Open Automotive Alliance (OAA) at the Consumer Electronics Show (CES) 2014, while Apple unveiled its CarPlay technology during the Mobile World Congress (MWC) 2014.However, both players are still new to the car-use computer, telematics and infotainment industries and may take a while before they can see meaningful growth in these sectors, Digitimes Research believes.