Strong growth in LTE smartphones, including TD-LTE phones sold in China, will lead to smartphone sales of 1.24 billion in 2014, according to a forecast from analysts at CCS Insight. However, CCS predicts smartphone growth will slow in the years ahead, largely due to saturation in mature markets.
CCS predicts that worldwide total mobile phone shipments will hit 1.95 billion units in 2014, of which 1.24 billion will be smartphones. The research firm also expects that by 2018, total handset shipments will reach 2.29 billion units, of which 1.89 billion will be smartphones.
In 2013, CCS said that 250 million LTE-enabled phones were sold worldwide, up from 64 million in 2012. However, in 2013 developed Western and Asia-Pacific markets like Japan and South Korea accounted for 94 percent of LTE phone sales. Looking ahead to this year, CCS expects LTE phone shipments to hit 500 million. "This unprecedented growth is down to two major factors: the falling cost of becoming an LTE user in developed markets and a push behind the technology in China," the analysts wrote in a research note.
CCS thinks LTE smartphone prices will drop below around $138 in the second half of 2014 and that carriers will stop charging a premium in service pricing for LTE. Meanwhile, TD-LTE networks in China, led by China Mobile, are set to boom, CCS thinks. The analysts argue that pre-orders from networks and distributors indicate 38 percent of phone shipments in China in 2014 will support TD-LTE technology, which will make China the biggest market for such phones this year. "As a result of these growth factors, we have once again raised our expectations for LTE shipments," the analysts wrote. "We expect 1.16 billion LTE-enabled mobile phones to be sold in 2018, accounting for 51 percent of all mobile phones sold worldwide."
However, this year and moving forward the research firm expects smartphone sales growth to drop off. In 2013, smartphones unit sales grew 40 percent year-over-year to 1.03 billion units, or 56 percent of worldwide shipments. Growth in China was particularly strong, as shipments jumped 76 percent to almost 300 million units. Prices are falling China, with branded Android phones falling below $48.
With these factors in mind, CCS predicts that in 2014, global smartphone growth rates will slow significantly. In developed markets, smartphone penetration is already very high, CCS notes--at the end of 2013, 70 percent of the mobile phones in use in North America and 60 percent of those in Western Europe were smartphones. Those who have held onto feature phones up until now will be harder to get to switch to smartphones than early adopters, CCS thinks. In China and other emerging markets, affordability will be the constraint in smartphones sales. As a result, CCS expects 1.24 billion smartphones to be sold in 2014.
Beyond 2014, smartphone shipment growth will continue to slow as it will be more difficult to go after low-end consumers and mature markets approach their saturation point, the analysts said.
CCS thinks Google's (NASDAQ:GOOG) Android has established a solid lead in smartphone platform market share, and that it "looks unlikely to be challenged, at least for the next three years." Shipment growth for Apple's (NASDAQ:AAPL) iPhone will come mostly from China and emerging markets, CCS predicts. "However, absolute growth in iOS shipments is subject to Apple bringing out a significantly improved version of the iPhone in 2014," CCS analyst wrote. "If it fails to do so, loss of market share, especially in developed markets, is likely as users with disappointed expectations start to look at other options."
CCS is optimistic that Microsoft's (NASDAQ:MSFT) Windows Phone will grow, especially after Microsoft closes its deal for Nokia's (NYSE:NOK) devices business. The analysts think Microsoft will "reach its break-even target of 50 million devices in 2014."
"BlackBerry's withdrawal from much of the market is opening up an opportunity in the enterprise segment, and early signs suggest that Windows Phone has already started to benefit from it," the analysts wrote. "Furthermore, the removal of license fees for Windows and Windows Phone devices smaller than nine inches and updates to enable Windows Phone to work on lower-cost hardware will enable Microsoft to attack price points down to $120. Although we continue to question the depth of phone manufacturers' commitment to Windows Phone, we acknowledge that it is now possible for many more manufacturers to include Windows Phone in their portfolios."
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