The Jiayu S2 smartphone.

JULY 21, 2014 • For the first time Chinese who use their smartphones to access the internet (83.4%) outnumber PC users (80.9%). As of June 30 total internet users in China had reached 632 million, of which 527 million were China mobile users. At the end of 2013 there were 618 million internet users. The figures were released by the China Internet Network Information Center (CNNIC). The shift to mobile use was also seen with smartphone games. People playing games online rose to 368 million, or 58.2% of total internet users. At the end of 2013 it was 54.7%. CNNIC found the driver of that growth was mobile games with 47.8% of internet users employing their smartphones to play. Between December and June those who used their smartphones to make payments rose from 25.1% to 38.9% at 205 million. Internet penetration for the country as a whole was 46.9%, up 1.1% compared to the end of 2013.

DFC Intelligence Forecast For China Mobile Game Revenue 2013-2018

Impact: These are all significant market numbers, but when you dig a little deeper it seems that internet growth in China has hit something of a wall. Only 14.4 million new internet users were added during the first half of the year. That’s the lowest six-month growth rate seen over the last eight years. China has had to deal with a hit to its national growth rate like the rest of the world since 2008. That leaves a huge hunk of poor rural communities that have yet to take part in China’s economic revolution. So while the scale of the market is huge the number of new internet users will be constrained for some time to come. That is why mobile is such a big thing in China as both current and new internet users are buying smartphones at a fast pace. For the short-term the major mobile growth opportunities will be in areas such as payment processing and games. Yet in a couple of years the market will have to shift to hardware upgrades to help keep people buying new smartphones. The introduction of 4G networks will help in this regard, but we still see a leveling off of mobile growth trends until more of the rural poor in the country get new economic opportunities. Nevertheless DFC Intelligence is bullish about the potential for growth of mobile in China. Overall DFC forecasts smartphone and tablet game revenue to triple from an estimated $2 billion in 2013 to over $6 billion in 2018.