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Changing trends in Smartphone industry in 2019; iPhone losing market share


  • Overview of the global smartphone industry in the past and present
  • Changes in market share of smartphone companies in 2019
  • The decline in sales volume of iPhone in 2019

 

The smartphone, as a technological device, was introduced to the market about a decade ago. This device was a revolutionary transformation from the simple mobile handsets used by people. The conventional handsets had limited functionalities apart from calling and sending messages. The smartphones were a big leap in technology that allowed people to use high speed internet to perform a variety of activities such as booking cabs, flight & movie tickets, scheduling doctor’s appointments to even reading books online amongst others. People started switching over from conventional handsets to smartphones over time. The transition from conventional handsets to smartphones was gradual and began with the developed countries first. The developing countries followed suit in a matter of time.

The first brand name that comes to mind when we think of smartphones is, of course the iPhone. Apple, the maker of iPhones, can rightly be said to be one of the pioneers of the smartphone. Apple earned a strong brand recognition for the iPhone and had strong hegemony over the smartphones market for several years after the first iPhone was introduced in 2007. The iPhone has always recorded more than 15% market share for most of its tenure with occasional peaks crossing 20%. The company that saw a very steep growth in the early years was Samsung whose market share rose from 3.3% in Q4 2009 to 29.1% in Q4 2012. The market share has remained more or less stagnant around 20% after that with occasional highs and lows. During the same period Nokia witnessed an equally steep decline from a market share of 38.1% in Q4 2009 to almost 3% in Q4 2012. Some new players that emerged and are presently on a growth trajectory are Huawei, Xiaomi and OPPO.

The smartphone industry, as a whole, has been witnessing a decline in shipments for the past three years and the decline continued in 2019. The sales volume of smartphones in H1 2019 was lower by 4% than that in H1 2018. In 2019, there have been some interesting twists in the global smartphone industry. The leader in smartphone innovation, Apple witnessed its market share, in terms of sales volume, drop down to 11.9% in Q1 2019 and 10.1% in Q2 2019. While the market share of Samsung remained more or less consistent, the three emerging players saw their market share going up significantly in 2019. Huawei, in particular, was the winner amongst the emerging leaders with a market share of 19% in Q1 2019 and 15.8% in Q2 2019 in terms of sales volume and with this the market share of Huawei has surpassed Apple in 2019. Xiaomi and OPPO saw their market share reaching 10% and 9% respectively in 2019. In fact, the YoY volume drop stood at 30.3% for Apple in Q1 2019 and 13.8% in Q2 2019. On the contrary, the corresponding YoY increase was 50.4% for Huawei in Q1 2019 and 16.5% in Q2 2019. The growth in sales volume of Huawei in Q2 2019 was despite the ban imposed by the United States against its sale in the country.

It seems that the high valued brands of smartphone are unable to command the same position of prestige and reputation than they did in the past. The willingness and desire of consumers to pay a premium in order to acquire an iPhone, which has been a status symbol for many, has declined. While this may be one of the reasons for new users to be wary of buying an iPhone, according to a survey, brand loyalty among the existing iPhone users is also waning. The survey found that while more than 90% of existing iPhone users in 2017 & 2018 were willing to buy the next version of the iPhone during their next smartphone purchase, only 73% are willing to do so in 2019. The exact cause for this change in trend cannot be ascertained. However, one of the reasons could be the availability of cheaper smartphones of comparable quality. Apple, on its part, has continued with its strategy to majorly cater to the premium consumer segment. The below chart shows the price range of iPhones which have only increased over time. The correlation of average selling price of iPhone and the revenues generated from it has been positive for Apple and we can say that the strategy has worked well for the company. However, a more than anticipated drop in sales volume in the future and any unwillingness of the premium segment to buy an iPhone can become a risk. Apple, popular amongst brand conscious consumers for its superior product quality and unique features would have to continue innovate to keep its customers close while adding more followers in future.

According to IDC, the smartphone sales are expected to be lower in the rest of 2019, compared to 2018. 2019 will be the third consecutive year of fall in smartphone shipments. China and Brazil are the only countries, among the top five countries for smartphone demand, that are expected to close the year positively. The smartphone market has reached saturation in the developed countries and the growth rates are also relatively declining in the developing countries. This could be the reason for fall in sales volume for the last three years. In addition, the years 2018 and 2019 have witnessed growing trade wars. Large number of developed and developing economies have witnessed a recessionary environment in last few years while some are continuing to record subdued economic growth. This has also affected consumer debt amidst low growth in income alongside weakening employment situation. These economic factors could have possibly decreased the willingness among people to pay a high price for smartphones. Also, people change phones when the market has something advanced to offer. The 4G technology has been around for a while and the 5G technology is still in a very incipient stage and is expected to reach the market in 2020. People with existing 4G handsets are perhaps unwilling to buy another 4G handset in 2019 when they know that the 5G handset would be available soon. After the companies release new models with 5G enabled features we may expect a surge in smartphone sales again.

The political and economic conditions of 2019 and the changing consumer trends have given ample growth opportunities to the new players, especially Huawei. It is appreciable that Samsung has been able to keep its market share constant in spite of the changing market conditions. The iPhone formed a big share of Apple’s revenue earlier, but Apple is not just a smartphone company today. It has diversified itself into a variety of other businesses in services sector and seems to be well hedged against any threat to its iPhone. The company has launched a new iPhone last month, though probability that it will bring the glory back to Apple seems to be low. We are moving into a scenario where increasing number of Asian players would dominate the smartphone space in the coming years.

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