Holiday seasonality, strong end-user demand, and a deep selection of models propelled smartphone volumes to a new record level for the quarter and for the year. According to preliminary data from the International Data Corporation (IDC) Worldwide Quarterly Mobile Phone Tracker, smartphone vendors shipped a total of 375.2 million units during the fourth quarter of 2014 (4Q14), resulting in 28.2% growth when compared to the 292.7 million units shipped in 4Q13 and 11.9% sequential growth above the 335.3 million units shipped in 3Q14. For the full year, the worldwide smartphone market saw a total of 1,301.1 million units shipped, up 27.6% from the 1,019.4 million units shipped in 2013.
Having spent 11 quarters prior to 4Q14 as the number two smartphone vendor in terms of shipments, Apple managed to close the gap to a near tie with Samsung in 4Q14. Led by the success of its newer, larger iPhone 6/6+ models, Apple reduced the volume gap to just 600,000 units in the fourth quarter. Despite being far more profitable for quite some time, Apple's shipment volumes trailed Samsung's by more than 33 million units during the same quarter a year ago. Continued success from Apple, coupled with the ongoing challenges facing Samsung, could enable Apple to overtake Samsung during the 2015 calendar year. Samsung's challenges have not only come from Apple, but also from the increasing number of low-cost Android OEMs that are putting out products at much lower margins. In order for Samsung to regain its share at the top, it will either have to accept lower margins from here forward or revamp its high-end strategy to compete with Apple.
"Most of the industry expected an extremely strong holiday quarter from Apple, especially with regards to the iPhone. However, worldwide shipments of 74.5 million units beat everyone's expectations," said Ryan Reith, Program Director with IDC's Worldwide Quarterly Mobile Phone Tracker. "Beyond the record-setting quarter, a few impressive things stand out with regard to Apple. First, at a time when average selling prices (ASPs) for smartphone are rapidly declining, Apple managed to increase its reported ASPs in the fourth quarter due to higher-cost new models. Second, the growth of iPhone sales in both the U.S., which is considered a saturated market, and China, which presents the dual challenges of strong local competitors and serious price sensitivity, were remarkable. Sustaining this growth and higher ASPs a year from now could prove challenging, but right now there is no question that Apple is leading the way."
In 2013 IDC talked about the smartphone industry topping the 1 billion unit milestone, and while year-over-year growth did slow from 40.5% in 2013 to 27.6% in 2014, the market clearly still has legs. This past year volumes surpassed 1.3 billion units and the vendor scenario has witnessed continued shakeups. Growth is forecast to decline to the mid-teens in 2015, but opportunity exists as much of the world's population is either not a wireless subscriber or has yet to move to a smartphone.
"That the worldwide smartphone market grew by 27.6% in 2014 is noteworthy, but it also represents a significant slowdown compared to 2013," said Ramon Llamas, Research Manager with IDC's Mobile Phone team. "Mature markets have become increasingly dependent on replacement purchases rather than first-time buyers, which has contributed to slower growth. In emerging markets, first-time buyers continue to provide a lot of market momentum, but the focus has shifted toward low-cost devices, creating a different dynamic for both global and local vendors.
"What remains to be seen is how the vendors beyond Samsung and Apple will assert themselves," added Llamas. "With Lenovo acquiring Motorola, and Xiaomi having greater aspirations beyond China, the competitive pressure will come more from below and less from above. This will make the smartphone race continuously competitive as 2015 shapes up."
Smartphone Vendor Highlights:
Samsung remained the leader in the worldwide smartphone market for the quarter and for the year, but nonetheless experienced continued competitive realities. With increased pressure in the high-end from Apple, and at the low-end to midrange from Chinese manufacturers Xiaomi, Huawei, ZTE, and others, Samsung faces a multi-front battle. To this end, Samsung has streamlined its operations and product portfolio to become more competitive in the market.
Apple reached a new quarterly shipment record in 4Q14 and fell just short of surpassing Samsung for overall leadership in the smartphone market. An elevated consumer appetite for big-screen devices, as well as Apple's push into China and other countries, saw iPhone sales up 44% in the U.S. and up 97% in the BRIC countries (Brazil, Russia, India, China). Sales doubled year-over-year in China, Brazil, and Singapore. What remains to be seen is how long Apple can sustain this runaway growth.
Lenovo was a distant third in the fourth quarter, narrowly edging out Huawei thanks to the completion of the Motorola acquisition earlier in the quarter. Lenovo continued to dominate the sub-$150 handset market in China with a vast portfolio of devices including the popular Golden Warriors S8 and more expensive flagship Vibe Z2 pro. Lenovo has recently announced that it will bring the Motorola brand back to China in 2015, starting with the Moto X next month.
Huawei returned to the list of top 5 worldwide vendors, emphasizing its midrange and high-end smartphones (P Series and Mate Series respectively), and saw continued success with its Honor line. Huawei attributed its 2014 success to improved brand awareness and overall customer experience, which it will look to evolve even further in 2015.
Xiaomi fell from the third position to fifth in 4Q14, beating out LG for the final spot among the top 5. Even though volumes declined slightly from 3Q14 levels, Xiaomi posted the largest year-over-year growth of all the leading vendors, thanks to a solid demand within its home country of China and a steady release of new devices, including the Mi4 LTE. Xiaomi's grip on the number 5 spot is tenuous at best, with LG and ZTE following close behind.
Top Five Smartphone Vendors, Shipments, Market Share and Year-Over-Year Growth, Q4 2014 Preliminary Data (Units in Millions)
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Source: IDC Worldwide Quarterly Mobile Phone Tracker, January 29, 2015
www.idc.com
