The global smartphone market grew at its slowest pace since 2009 in the third quarter, according to research firm Strategy Analytics, a sign that even though Apple's (NASDAQ: AAPL) profits are sky high and Samsung Electronics appears to be back on the road to recovery in its mobile business, the overall smartphone market is cooling.
Samsung Galaxy S6 Edge+ and Note
Strategy Analytics said global smartphone shipments grew just 10 percent annually to 352.4 million in the third quarter, up from 323.4 million units in the year-ago period. "This quarter was the smartphone industry's slowest growth rate for six years, since the depths of the global economic recession back in 2009," Strategy Analytics analyst Ken Hyers said. "Smartphone growth is slowing due to increasing penetration maturity in major markets of the U.S., Europe and China."
Indeed, although Apple said that its sales in the third quarter in greater China – which includes mainland China, Hong Kong and Taiwan – grew 99 percent year-over-year to $12.5 billion, China's slowing economic growth has weighed on the wider smartphone industry. Although China is the world's largest smartphone market and there are still at least tens if not hundreds of millions of potential smartphone customers, it achieved that position through rapid adoption of smartphones. Now, it appears China is starting to join more mature and developed markets in reaching smartphone saturation.
After Samsung and Apple, the smartphone market was led by Huawei, which claimed the No. 3 spot with 26.7 million smartphone shipments and a 7.5 percent market share. Lenovo/Motorola took the No. 4 spot and Xiaomi came in at No. 5, according to Strategy Analytics.
"Huawei maintained third position with 8 percent global smartphone markets share in Q3 2015, up from 5 percent a year ago," Hyers said. "Huawei is expanding rapidly across Asia, Europe and the United States, putting competitive pressure on key rivals such as Lenovo-Motorola and Xiaomi." He added that "both Lenovo-Motorola and Xiaomi are struggling to make headway in the fast-growing 4G smartphone market and they are being punished by a bullish Huawei and a resurgent Samsung."
According to Strategy Analytics, Samsung saw a slight increase in smartphone shipments to 83.8 million, up from 79.2 million a year ago (Samsung does not release quarterly smartphone shipment numbers). Total sales in the company's mobile division grew 10.3 percent year-over-year and inched up 2 percent from the second quarter to around $22.68 billion (25.94 trillion Korean won). The mobile division posted a $2.1 billion operating profit for the quarter, up from the year-ago quarter's $1.54 billion but down from $2.4 billion in the second quarter.
Samsung said it saw a "significant increase in sales of smartphones in the quarter, compared with the second quarter," with increased shipments of Galaxy Note 5, Galaxy S6 Edge+ and the Galaxy A and J series. However, due to price cuts it made to the Galaxy S6 and Galaxy S6 Edge and increased shipments of mid-to-low-end smartphones, revenue increased slightly whereas profit fell from the second quarter.
Samsung said the Galaxy Note 5, Galaxy S6 Edge+, which it released in August, are "receiving positive feedback from markets and they are expected to exceed in shipments reached by their predecessors."
Looking ahead, global smartphone and tablet sales in the fourth quarter are expected to improve from the third quarter, driven by higher market demand toward the end of the year, but competition is expected to get stronger. Samsung said it "will focus on maintaining a profit level similar to the previous quarter by expanding product sales for each price segment that were introduced in the third quarter, and by continuously improving efficiency in the expenses."
In 2016, Samsung thinks "the growth rate for the smartphone market is expected to slow down continuously, compared with previous years. However, the company will reinforce its premium products and streamline the line-up to increase sales and to maintain solid business performance."
In other smartphone earnings news, LG said it shipped 14.9 million smartphones in the third quarter, a 6 percent increase from the previous quarter. LG said that despite a 12 percent sales increase in North America, overall revenues of $2.89 billion were 7 percent lower quarter-on-quarter and plunged 21 percent year-over-year "due in large part to weaker demand for high-end devices" in South Korea. LG expects the launch of the high-end V10 and mass-market Nexus 5X smartphones in the fourth quarter to improve its overall product mix. The company's mobile business posted a loss of $68 million in the quarter.
And Sony said sales in its Mobile Communications unit fell 152 percent from a year ago (and 17 percent on a constant currency basis) to $2.32 billion (¥279.2 billion). The company saw its smartphone unit sales fall as a result of a "strategic decision not to pursue scale in order to improve profitability." The unit's operating loss narrowed by $1.23 billion to around $172 million. In the year-ago period Sony recorded a $1.45 billion impairment charge on the smartphone unit. Sony CFO Kenichiro Yoshida said efforts to revamp the smartphone business were making progress, according to The Wall Street Journal.
- see this Strategy Analytics release
- see this Samsung release
- see this Samsung presentation
- see this WSJ article on Samsung (sub. req.)
- see this The Verge article on Samsung
- see this CNET article on Samsung
- see this LG release
- see this AP article on LG
- see this Reuters article on LG
- see this Sony release (PDF)
- see this WSJ article on Sony (sub. req.)
Gartner: Apple shows strength in China, but overall smartphone growth weakened in Q2
Analysts: Smartphone growth slows to around 15% in Q2 thanks to weaker growth in U.S., China
Report: Samsung to see first-ever year-over-year drop in smartphone shipments in 2015
Samsung forecasts nearly 80% jump in profit for Q3, but mobile biz 'isn't out of the woods yet'
Samsung says it will be 'flexibly adjusting' Galaxy S6 prices as Q2 numbers disappoint
LG's smartphone sales dip in Q2 despite G4 launch