If you needed an indicator of just how much the mobile market today is a smartphone market, look no further than the figures put out early today by Strategy Analytics. The researchers estimate that overall mobile phone shipments just under 1.7 billion, with smartphones accounting for nearly 1 billion — or 990 million, to be exact. While the wider mobile market grew only 5% in that time, smartphone units increased by 41% over 2012’s 700 million smartphone shipments.
But it’s not all a rosy picture for smartphones. While 41% growth sounds good, Ken Hyers, an analyst at Strategy Analytics, notes that it is actually down slightly on the 43% growth of a year ago. He says this is because of “high penetration in some major markets like the United States.”
The figures coincided with Apple releasing its Q1 earnings, and the issue of slowing sales in mature markets was something that had a direct effect on Apple. Traditionally a strong player in the U.S., CEO Tim Cook noted today that Apple’s sales in North America declined. And its second-biggest market, Europe (“mature” as well Old World), was up by only 5%.
As we pointed out earlier today, although Samsung continues to remain in the lead with its 32% of all smartphone shipments, the real story appears to be about what is happening underneath that.
Apple continues to fall (pardon the pun) and is now at 15.5% for the full year (compared to 19% a year ago) on 153 million units. And although Huawei, LG and Lenovo are all behind Apple, together they are nearly overtaking the iPhone maker in units, with a combined share of 14.6%.
That’s not to overlook that Samsung’s growth is nothing short of impressive: its 319.8 million smartphones shipped in 2013 was the “largest number of units ever shipped by a smartphone vendor in a single year,” according to the analyst group’s executive director Neil Mawston. Samsung also retained its title as the world’s biggest mobile phone maker overall: it shipped 451 million units for a 27% share of the market.
Although Apple made a point today of talking up its emerging market business, Strategy Analytics (and perhaps others, given the stock decline) are not buying it: “Apple remains strong in the high-end smartphone segment, but a lack of presence in the low-end category is costing it lost volumes in fast-growing emerging markets such as India,” writes Mawston.
As in quarters past, the Samsung/Apple juggernaut is all but dominating the smartphone world in terms of vendors.
“Large marketing budgets, extensive distribution channels and attractive product portfolios have enabled Samsung and Apple to maintain their grip on the smartphone industry,” writes analyst Linda Sui.
The question will be whether the economics of making cheaper phones will mean that the smaller vendors like LG, Huawei and Lenovo can stick around longer, or whether they will eventually find themselves in the same positions as Nokia, BlackBerry and HTC — all out of the top five rankings now partly because it eventually became unsustainable to play in the smartphone game without scale.
In any case, although in times past it seemed that the route to being a worldwide phone leader was to have a strategy of offering devices across a range of price points and feature sets, today that’s not as clear.
Over 70% of the handsets Samsung’s shipping right now are smartphones. And Apple, the number-three player in mobile sales overall, is a smartphone-only vendor. Meanwhile, Nokia’s smartphone share these days is so small that Strategy Analytics doesn’t break it out, meaning that its number-two position among mobile phone makers is based largely on its power at the lower end of the market.
However, it turns out the strategy of not having a killer smartphone lineup not only is not lucrative but eventually self-destructive.
Nokia’s global mobile phone shipments fell 25% between 2012 and 2013, from 335.6 million units to 252.4 million units. “Nokia faced tough competition from Samsung in developing markets like India, while LG and others ramped up the pressure in developed regions such as Western Europe,” writes Mawston. “Nokia’s Windows Phones have been performing relatively well, but this was not enough to offset sluggish demand for its Asha models and other feature phones during the course of the year.”
As Strategy Analytics points out, one route for smaller, national players to survive longer term is to continue to grow internationally. Huawei, it notes, is expanding in Europe; LG’s Optimus range “is proving popular in Latin America”; Lenovo’s Android models are selling at competitive price-points across China. “Samsung and Apple will need to fight hard to hold off these and other hungry challengers during 2014,” notes Sui.