Worldwide smartphone market sees big declines in Q4

Apple nudged out Samsung for market lead in the fourth quarter of 2017.

Holiday sales of high-end devices did not live up to expectations in the U.S., which, along with softening demand in China, made for significant fourth-quarter declines in the smartphone market and a flatter-than-expected 2017 overall. Apple, however, nudged out Samsung to take the market lead for the quarter.

The fourth quarter of 2017 saw “the biggest annual fall in smartphone history,” according to Strategy Analytics, which said that global smartphone shipments declined 9% annually in the fourth quarter, from 438.7 million units in the fourth quarter of 2016 to 400.2 million in the fourth quarter of 2017.

That dovetails with preliminary data from the IDC Worldwide Quarterly Mobile Phone Tracker, which found that Apple, Samsung et al saw a 6.3% decline in the fourth quarter, thanks to “meh” reactions by consumers in China and the U.S. to top-tier handset releases. Global shipments for the fourth quarter totaled 403.5 million units, compared to the 430.7 million units shipped in the final quarter of 2016, the firm said.

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"The latest flock of posh flagships may have had consumers hitting the pause button in the holiday quarter," said Anthony Scarsella, research manager of Mobile Phones at IDC. "With ultra-high-end flagships all the rage in 2017, many of these new bezel-less wonders proved to be more of a luxury than a necessity among upgraders. Even though we have seen new full-screen displays, advanced biometrics, and improved artificial intelligence, the new and higher price points could be outweighing the benefits of having the latest and greatest device in hand."

Analysts at Strategy Analytics said that a collapse in the huge China market contributed significantly to the shrinkage too. Demand there fell 16% annually due to longer replacement rates, fewer operator subsidies and a general lack of “wow” models.

The disappointing quarterly outing made for flat sales overall year-over-year. IDC said the worldwide smartphone market saw a total of 1.472 billion units shipped, a negligible decline from the 1.473 billion units shipped in 2016. Strategy Analytics meanwhile saw a negligible change in the other direction: Global smartphone shipments grew 1% to top 1.5 billion units for the year.

Breaking things down by vendor, Apple captured first place in the fourth quarter with a 19% global market share in Strategy Analytics’ numbers, nudging Samsung into second position. Xiaomi meanwhile continued its relentless rise, almost doubling smartphone shipments from a year ago.

The firm said Apple shipped 77.3 million smartphones worldwide in the quarter, slipping 1% annually from 78.3 million the year before. That’s not all that unusual: iPhone volumes have actually declined on an annual basis for five of the past eight quarters, the firm noted, amid just fair iPhone X demand and an iPhone average selling price of about $800.

“If Apple wants to expand shipment volumes in the future, it will need to launch a new wave of cheaper iPhones and start to push down, not up, the pricing curve,” said Neil Mawston, executive director at Strategy Analytics, in a press release.

Overall though, the Cupertino giant’s strategy should stand it in good stead for the long haul. “Apple continues to prove that having numerous models at various price points bodes well for bringing smartphone owners to iOS,” IDC said in the Tracker. “Although demand for the new higher priced iPhone X may not have been as strong as many expected, the overall iPhone lineup appealed to a wider range of consumers in both emerging and developed markets.”

Samsung, meanwhile, dipped 4% annually and shipped 74.4 million smartphones in the fourth quarter, for 19% market share worldwide, according to Strategy Analytics. That’s up slightly from an 18% share a year ago.

“Samsung is under pressure from Chinese rivals in some major markets, like China and India, but it remains by far the largest smartphone brand on a global basis, shipping an unmatched 317.5 million units in full-year 2017,” Mawston said.

IDC found that Samsung remained the overall leader in the worldwide smartphone market for 2017 despite losing out to Apple in the fourth quarter. Samsung finished the year with 317.3 million shipments, up 1.9% from the 311.4 million shipments in 2016, it said.

IDC added that the pending arrival of their next flagship, the Galaxy S9, may represent the brand's best chance of winning over both new and current customers in 2018.

As for the rest of the pack, Chinese powerhouse Huawei maintained third position with flat-for-the-year 10% global smartphone market share in the fourth quarter of 2017, Strategy Analytics found, despite intensified competition from growing Chinese players such as OPPO and Vivo. In terms of hard numbers, IDC said that it shipped 41 million units, down 9.7% from the 45.4 million shipped in the fourth quarter of 2016.

“Huawei is performing well across Asia and Europe, but it is struggling to crack the valuable U.S. market due to limited distribution channels,” said Woody Oh, director at Strategy Analytics. “Huawei’s goal to be the world’s No. 1 or 2 smartphone vendor is unlikely to happen if it cannot make headway in the United States.”

The main success story for the fourth quarter is Xiaomi, which managed to double its share to 7% from 3.3% during the holiday quarter, according to IDC. This is largely because it continues to focus on growth outside China, with India and Russia being two of its largest markets.

In India, Xiaomi also launched Redmi Y-series in India and roped in Bollywood celebrity Katrina Kaif to endorse the selfie-centric smartphone series as its first product endorser. The Redmi 5A, which was launched at $78, saw more than a million devices being sold within a month. The company also has fast build-outs in markets like Indonesia, where it has partnered with Indosat to offer a telco bundling package.

Xiaomi’s success comes at the expense of other low-cost rivals. IDC also said that OPPO dropped one place to the fifth position, as the company shipped 27.4 million smartphones in the fourth quarter. Strategy Analytics, which pegs the shipments at 29.5 million, noted that its quarterly growth is unmoved from a year ago.

Where IDC said the company maintained 12% growth for the full year (amounting to 111.8 million smartphones), the fourth quarter numbers are concerning, according to Strategy Analytics.

“OPPO was growing smartphone shipments at a 99% annual rate a year ago, but its growth has now dropped to zero,” said Linda Sui, director at Strategy Analytics. “The golden age for OPPO is coming to an end, and it is facing serious competition from Xiaomi and others.”

That said, like Xiaomi, OPPO has its sights set beyond the domestic Chinese market, and has looked to gain a foothold in other Asian countries like India, Indonesia and Vietnam—a factor that may affect its performance in 2018.