Smartphone vendors shipped 292 million units in the first quarter of 2016, according to TrendForce, marking a 1.3 percent dip year over year and an 18.6 percent sequential drop from the typically busy holiday quarter.
The firm said market saturation was primarily to blame for the sagging market, which has led to slowing growth from Samsung and Apple, the two leading vendors worldwide. Chinese brands shipped 125 million units during the quarter, in fact, surpassing the combined shipments from Samsung and Apple for the first time and accounting for 42.9 percent of global smartphone shipments.
Samsung was the top vendor in market share during the quarter, claiming 27.8 percent of all smartphone shipments, while the iPhone accounted for 14.4 percent of all shipments. Huawei, Lenovo, Xiaomi and LG rounded out the top six vendors.
TrendForce said Chinese brands have benefitted from increasing carrier subsidies in the home market but also gained traction in foreign markets. Meanwhile, sales of the iPhone 6s "have been lackluster," according to the firm, due to a lack of compelling new features and Apple's newfound conservative management of its channel inventories in advance of the launch of a new iPhone.
Apple suffered its largest sequential quarterly decline ever for iPhone shipments, according to TrendForce estimates, falling 43.8 percent from 75 million units in the fourth quarter of 2015 to just 42 million handsets in the latest quarter. And the firm lowered its forecast for 2016 iPhone shipments to 213 million, nearly 10 percent lower than in 2015.
"As the budget model, iPhone SE will support Apple's overall shipments in the second quarter before the next major iPhone release," analyst Avril Wu said in a prepared statement. "However, iPhone SE is going to face severe price competition from Chinese branded products in its target market, which is the mid-range device segment. This year's iPhone SE shipments are projected to come in below 15 million units and they are unlikely to help turn around the weak annual shipment result for Apple."
Samsung's decision to release the Galaxy S7 and S7 edge paid dividends as the company saw a 2.5 percent increase in shipments from the prior quarter. And Samsung's lineup of entry-level devices, branded the J series, found success in China and some other markets.
While market saturation clearly has become a major challenge for vendors in mature markets, ever-extending handset replacement cycles are also a growing concern. Consumers are holding on to their phones longer as operators have moved away from two-year contracts and toward leasing programs and equipment installment plans, and a lack of innovative new features and technologies has resulted in decreased demand for cutting-edge phones.
Jennifer M. Fritzsche of Wells Fargo Securities recently wrote that "Q1 is shaping up to be a near record low in terms of upgrades," and predicted that both Verizon and AT&T were likely to see upgrade rates of less than 60 percent during the first quarter, down 6.6 percent from the same period a year prior.
- see this TrendForce press release
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