International mobile phone manufacturers such as Nokia and Motorola have halted the rapid rise of their local rivals in the crucial Chinese market, according to market analysts.

The market share of Chinese mobile phone companies has levelled off when measured by sales volume and is falling when measured by sales value.

This marks a significant shift in a country that has become one of the handset industry's most important sources of demand.

The victory for international handset makers comes after the revamping of distribution chains and introduction of new designs.

Chinese manufacturers emerged from almost nowhere in 1999 to claim about half of all handset sales in the country last year, prompting speculation that global producers such as Nokia of Finland and Motorola of the US would be squeezed out. However, market research company GfK Asia said that between January and June this year the proportion of Chinese brand handsets sold in China fell from 49 per cent to 46 per cent, and their value fell from 42 per cent to 37 per cent of the total.

“The outlook for the Chinese brands . . . does not seem encouraging if there is no drastic improvement made in the next six months,” GfK said.

Other researchers and industry executives also held the view that the share of the market controlled by local producers, such as Ningbo Bird and TCL Mobile Communications, had peaked. “This year we are starting to see the resurgence of the international players,” said Colin Giles, head of Nokia's mobile phone business in China.

Mr Giles credited the foreign brands' revival largely to efforts to build distribution systems reaching beyond the big cities. Foreign manufacturers have in the past two years set up design centres to develop handsets for the Chinese market and expanded manufacturing facilities in China to take advantage of low production costs. Jeffrey Jiao, vice-president of Sino-Market Research, said the introduction of ever-more advanced handsets meant the domestic industry, with less to spend on R&D, would struggle to increase its share of sales by value.

GfK said the share of the market held by local powerhouse TCL, for example, fell from 6 per cent by value in January to 5.1 per cent in June, and the proportion of its handsets selling for less than Rmb1,000 ($121) soared from 20 per cent to 44 per cent. TCL declined to comment.

Nokia said the company did not break down its China sales figures: “We took the number one spot in Q1 and strengthened it in Q2.”

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