Research firms Gartner and CCS Insight think much of the mobile phone shipment growth that will occur in 2014 will be driven by low-cost smartphones, underlining a shift down market that vendors and platform companies have been keen to take advantage of in their search for growth.
Both research companies produced forecasts for total mobile phone shipments for 2014 ahead of the critical holiday shopping season. Although they differ in their expectations for how many phones will be shipped in total this year, both firms agree that the growth is being fueled by entry-level smartphones, especially in emerging markets.
According to Gartner, total mobile phone shipments are expected to grow to around 1.86 billion in 2014, up from 1.8 billion in 2013. Gartner thinks that sales of basic smartphones (including mid-range Android devices) will grow 52 percent in 2014, while so-called "utility smartphone units" (including low-end Chinese white box devices) will double in sales this year.
"The market is clearly favoring those vendors offering value in lower-priced smartphones. This trend has become more apparent, especially in the second quarter of 2014 when most of the top Chinese smartphone vendors grew volume and market share," Gartner analyst Roberta Cozza said in a statement. "As smartphones reach lower prices, Gartner expects nine out of 10 phones to be smartphones by 2018."
Indeed, Huawei and Lenovo grew at the expense of Apple (NASDAQ: AAPL) and Samsung Electronics in the second quarter. That trend is likely going to be mitigated in the third and fourth quarters thanks to Apple's introduction of the iPhone 6 and 6 Plus and Samsung's release of its Galaxy Note 4 phablet. However, lower-cost smartphones clearly have momentum.
Meanwhile, CCS Insight forecasts that worldwide mobile phone shipments will reach 1.94 billion units in 2014, of which 1.28 billion will be smartphones. A saturated high-end smartphone segment in developed markets, coupled with strong adoption of low-end smartphones in emerging markets, especially China, is fueling that growth, according to the firm. Additionally, the growth of entry-level devices in ultra-low price tiers has slowed the growth of the overall value of the market, the firm said. As a result, CCS notes that the average selling price of mobile phones is expected to decline for the first time in four years, to $160 in 2014.
CCS expects that mature markets in North America and Western Europe will see smartphone growth of only 9 percent and 10 percent, respectively, in 2014, as the transition from feature phones nears completion. "This market saturation has been reflected in the weakening financial results of many traditional smartphone manufacturers, with the notable exception of Apple," the firm added.
However, growth continues in emerging markets, and data from the first half of 2014 indicates that smartphone shipments in China will exceed 400 million units in 2014, accounting for 93 percent of total mobile phone shipments in that market. Other emerging markets, such as South-East Asia, Latin America and the Middle East and Africa, are also enjoying relatively high growth rates, according to CCS, with the total growth rate for smartphones across all emerging markets reaching 33 percent in 2014.
Gartner thinks the expansion of affordable mobile phones that are attracting replacements in many emerging markets has sparked an increase in overall global smartphone penetration, which is set to reach 71 percent in 2014, up 17 percentage points from 2013. "Android and iOS have further entrenched their market positions in the global phone market, making it difficult for alternative ecosystems to become more than niche players," Gartner concluded.
Google is keeping the pressure on with its Android One program, which is aimed at producing phones for around $100 with the latest Android software. However, Microsoft's (NASDAQ: MSFT) Windows Phone hardware partners are expected to produce devices this year that cost less than $200. Mozilla is also working with Intex and other Indian partners to deliver low-cost Firefox OS phones for around $33.
- see this Gartner release
- see this CCS Insight report (sub. req.)
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