A few compelling high-end handsets are coming to market as we enter the fourth quarter, which could lead to a happy holiday season for smartphone vendors. And Apple appears to be particularly well positioned to ring in the new year on a high note.
The worldwide smartphone market is clearly slowing as penetration rates reach saturation in many markets and as handset upgrade cycles have lengthened. IDC said in March that 2015 was likely the last year global smartphone growth would exceed 10 percent, with single-digit growth expected for at least the next few years.
And that slowing growth appeared to take a toll on last year’s holiday sales. Best Buy said flagging mobile sales were primarily to blame for a year-over-year drop in its holiday revenues in 2015, and Apple warned component partners of lower-than-expected first-half revenues following last year’s tepid holiday season.
But new phones from Apple, Google and Samsung provide reasons for hope in an otherwise lackluster landscape. Demand for the iPhone 7 was strong out of the gate thanks in part to carrier promotions that one analyst described as “unprecedented.”
Indeed, shipping dates for Apple’s latest flagship two weeks following its launch were longer than they were at the same point last year for the iPhone 6s or 6s Plus, Walter Piecyk of BTIG Research observed last week. That could signal a return to growth for iPhone sales during the fourth quarter, he predicted.
“iPhone demand should be strong” this holiday season, Avi Greengart of Current Analysis told FierceWireless via email. “Apple did not change the way the iPhone looks, but addressed many consumer pain points around battery life, water and an improved camera.”
And while the worldwide recall of its Galaxy Note 7 has been a debacle for Samsung, the Korean manufacturer is still likely to be a strong competitor in the fourth quarter. The Note 7 was “off to an excellent start” in the United States on its release, according to BayStreet Research, enjoying 25 percent higher sales than its predecessor, which was released at roughly the same time last year.
And tales of exploding batteries may not be the public relations disaster some expected they would be. Samsung said last week that around 90 percent of Galaxy Note 7 users had chosen a replacement model “since products became widely available” rather than opting for a different Samsung phone or a refund.
“Samsung is saying that 90 percent of all Galaxy Note 7 owners are taking a new Note 7 rather than switching to something else, which is not that surprising given the strong loyalty early adopters have for the Note line,” Greengart said. “Whether Samsung is able to convince everyone else to invest in the Note 7 after the recall is still an open question.”
It’s also worth noting that Samsung’s Galaxy S7 is still an attractive high-end handset. Samsung led all smartphone vendors with 80 million units shipped worldwide in the first half of 2016, according to Canalys, thanks largely to the runaway success of the Galaxy S7. And carriers continue to support the phone with significant promotions, paving the way to continued success.
The dark horse in the race for the high end of the U.S. smartphone market in the fourth quarter is Google. The internet giant this week unveiled the Pixel, which starts at $650 and offers some impressive specs. The move marks a notable change in strategy for Google, which is stepping up its hardware ambitions in an effort to both generate revenues and showcase its software and services.
The Pixel faces some major hurdles, particularly in the short term. Apple and Samsung dominate the high end of the market in the U.S., of course, and Google opted to grant Verizon exclusive rights at launch, severely limiting the addressable market. And Google has precious little experience at the retail level, which is crucial in the smartphone space.
“IHS expects Google’s Pixel smartphones to struggle at this price because Google lacks the brand awareness and capabilities as a hardware maker of Apple, or Samsung,” wrote Ian Fogg, senior director of mobile and telecoms for IHS Market.
But early adopters are likely to find the Pixel an attractive alternative to the two familiar names in the space. And it may sell well to Android enthusiasts who prefer a stock version of the OS rather than one laden with branding and bloatware.
“Google will be investing very heavily in marketing the new Pixel, but it will only be available in the U.S. at Verizon (at least in terms of how most customers buy phones),” Greengart said. “It is also very expensive. I expect that the Pixel will make life miserable for Lenovo’s Moto Z, which is also a Verizon exclusive, and deal a glancing blow to Samsung.”
That “glancing blow” may sting Samsung, particularly when Verizon’s exclusivity ends. Regardless, consumers have some very attractive options in high-end smartphones as the holiday season nears. And that could give the overall market a much needed – if temporary – lift. Colin | @colin_gibbs