Analysts: Samsung, Apple keep smartphone grip, but lower-end rivals are nipping

Samsung Electronics and Apple (NASDAQ:AAPL) maintained their stranglehold on the global smartphone market in the fourth quarter and for all of 2013, according to multiple research firms, but lower-end rivals are gaining market share at a faster pace. That may mean that over time the market for high-end, high-margin phones will erode, as average selling prices for smartphones worldwide fall.

Additionally, depending upon which research firm is consulted, handset makers around the globe either shipped just over 1 billion smartphones in 2013 for the first time or slightly under that mark.

According to research firm IDC, handset vendors shipped 1.004 billion smartphones in 2013, up 38.4 percent from the 725.3 million units IDC recorded in 2012. Smartphones accounted for 55.1 percent of all mobile phone shipments in 2013, up from the 41.7 percent of all handset shipments in 2012, IDC said.

IDC listed the top five worldwide smartphone vendors in the fourth quarter of 2013.

However, research firm Strategy Analytics said 990 million smartphones were shipped in 2013 and Juniper Research reported 980 million smartphone shipments. The main difference in the tallies between IDC and Strategy Analytics comes from the higher total IDC has for the "other" category, which includes companies outside of the top five vendors. That list includes notable vendors such as Nokia (NYSE:NOK), BlackBerry (NASDAQ:BBRY), HTC and Sony, but also smaller Chinese companies including TCL,  Xiaomi  and Yulong. IDC had 394.9 million units in the "other" category while Strategy Analytics only had 373.3 million.

For the fourth quarter and full-year 2013, both IDC and Strategy Analytics were in alignment on their rankings of the top-five smartphone vendors. In the fourth quarter, Samsung led the way, followed by Apple, Huawei, Lenovo and LG Electronics. For the full-year numbers, that order held as well, except that LG came in at No. 4 and Lenovo at No. 5.

A larger trend underway, according to IDC, is that the likes of Huawei, LG and Lenovo are gaining share at the expense of Samsung and Apple. Samsung and Apple saw their global smartphone market share dip to a combined 46.6 percent in 2013, down from 49 percent in 2012. Meanwhile, Huawei, LG and Lenovo saw their market share grow to a combined 14.2 percent in 2013 from 10.9 percent in 2012. Strategy Analytics observed a similar decline in the Samsung/Apple market share, but also reported market share declined for Huawei, LG and Lenovo.

"Samsung and Apple together accounted for almost half of all smartphones shipped worldwide in 2013. Large marketing budgets, extensive distribution channels and attractive product portfolios have enabled Samsung and Apple to maintain their grip on the smartphone industry," Strategy Analytics noted. "However, there is clearly now more competition coming from the second-tier smartphone brands. Huawei, LG and Lenovo each grew their smartphone shipments around two times faster than the global industry average and captured a combined 14 percent market share. Huawei is expanding swiftly in Europe, while LG's Optimus range is proving popular in Latin America, and Lenovo's Android models are selling at competitive price-points across China. Samsung and Apple will need to fight hard to hold off these and other hungry challengers during 2014."

The trend away from higher-margin phones has been presaged by numerous research firms. In November, IDC forecasted the average smartphone will cost just $265 by 2017. While IDC expects the smartphones segment to enjoy a compound annual growth rate of 18.4 percent from 2013 to 2017, reaching 1.7 billion units in 2017, growth in the years ahead is likely to come from smartphones with lower ASPs.

In line with that, in April ABI Research forecasted that smartphones costing $250 or less before carrier subsidies will make up 46 percent of all global smartphone shipments by 2018, up from 28 percent in 2012. That could open up new sales opportunities in emerging markets, but likely will mean lower profits and margins for handset makers.

For more:
- see this IDC release
- see this Strategy Analytics release 
- see this Juniper research release
- see this Engadget article
- see this Quartz article
- see this Reuters article
- see this Bloomberg article

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IDC: Smartphones to cost an average of just $265 by 2017
ABI: Smartphones under $250 to make up 46% of smartphone shipments by 2018