If you live in the bay area it is easy to come to the conclusion that Apple has huge market share and is in a very strong position in the mobile market. Everyone has an iPhone.
But the truth is less flattering. Yes, Apple continues to make large profits and it made record iPhone shipments. However, only 51M and Wall Street expected nearly 55M. The problem is that Apple is growing much more slowly than the overall market. Apple grew 7% year on year in Q4 but the market grew by about 50%. Apple’s market share is down to 16% in Q4, from 22% in Q4 of 2012. With (probably) no new models for a couple of quarters I think that market share will continue to shrink.
The other big company is Samsung. They are #1 in unit shipments at around 90M, not that far off twice Apple. While not as profitable as Apple due to its product mix, it is still a very profitable business. The second tier players like Sony, LG and Nokia are all struggling too, not cheap enough to be competitive at the low end but without the fashion cachet of an iPhone or Samsung Galaxy. Meanwhile, other Chinese names (Huawei, ZTE and Lenovo) also continue to do well.
The biggest market for smartphones is China and the growth is all at the low end. Yes, Apple finally has a deal with China Mobile but it is really too highly priced to manage the kind of market share that it has in the West. Samsung used to be #1 in pretty much every market (it is #1 worldwide) but in China last quarter it looks like the leader is Xiaomi. That’s right, a company you have almost certainly never heard of overtook Samsung in the biggest smartphone market of all. It was founded in 2010 and only released its first smartphone in 2011. This is unit sales, of course. Samsung has products at every price point and presumably sold its share of the high-end Galaxy phones that compete pretty much head on with iPhone and so it probably made the most money in China. That is a Xiaomi phone above (the first two characters are xiaomi small rice, the second are shouji hand machine which is what they call mobile phones, end of your Chinese language trivia for the day).
The reality is that the market is pretty mature. Android has leveled the playing field so the user experience is very similar on all phones. The growth numbers in $ terms are slowing too, which reflect both the maturing of the market and the transition to cheaper phones. Roughly the market grew 40% last year and is expected to grow a little over 20% this year, half the rate.
Mobile will continue to be the biggest market for chip suppliers. I think the internet of things (IoT) is at the overhype stage right now. Sure Google just bought Nest for a lot of money. Wearables were the big thing at CES. But these are not going to be selling in the billions of units in 2014 (there were over a billion smartphones sold in 2013) and they are not going to sell at $600 price points like the high end of the smartphone market.
2014 should be an interesting year.
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