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February 13, 2014

Smartphone Sales Surpass Feature Phones Around the World in 2013

Perhaps it is because more smartphone manufacturers are beginning to make devices with less functionality designed specifically for emerging markets, or maybe it is because more of these markets are beginning to see greater coverage by their carriers. Regardless of the reason, the fact is that for the first time smartphone sales overshadowed feature phone sales.

According to a new report from the Gartner Group, worldwide sales of smartphones to end users totaled 968 million units in 2013. This represents an increase of 42.3 percent from 2012. According to Gartner, sales of smartphones accounted for 53.6 percent of overall mobile phone sales in 2013, and exceeded annual sales of feature phones for the first time. 

You can see the breakdown in the following chart:

Worldwide Smartphone Sales to End Users by Vendor in 2013 (Thousands of Units)

Company

2013

Units

2013 Market Share (%)

2012

Units

2012 Market Share (%)

Samsung

299,794.9

31.0

205,767.1

30.3

Apple

150,785.9

15.6

130,133.2

19.1

Huawei

46,609.4

4.8

27,168.7

4.0

LG Electronics

46,431.8

4.8

25,814.1

3.8

Lenovo

43,904.5

4.5

21,698.5

3.2

Others

380,249.3

39.3

269,526.6

39.6

Total

967,775.8

100.0

680,108.2

100.0

Source: Gartner (February 2014)

The report goes into further details about fourth quarter results. Smartphone sales increased by 36 percent in Q4 2013, giving it a 57.6 percent share of the overall mobile phone sales. This represents an increase of 44 percent year-over-year. Gartner notes that mobile sales in saturated mature regions fell due to weaker demand during 2013, with emerging markets providing the engine for growth.

Most of this growth took place in Latin America, the Middle East and Africa, Asia/Pacific and Eastern Europe. Smartphone sales grew by more than 50 percent in the fourth quarter of 2013 in these regions.

India exhibited the highest smartphone sales growth among the countries tracked by Gartner with a 166.8 percent increase in the fourth quarter of 2013. Latin America saw the strongest growth among all regions with a 96.1 percent showing in the fourth quarter. China also contributed significantly to worldwide smartphone sales as sales grew 86.3.

Anshul Gupta, principal research analyst at Gartner, said "Mature markets face limited growth potential as the markets are saturated with smartphone sales, leaving little room for growth with declining feature phone market and a longer replacement cycle. Lack of compelling hardware innovation has further exacerbated replacement cycles for high-end smartphones in 2013 because consumers don't find enough reasons to upgrade." 

A breakdown of smartphone sales by operating system can be seen in the following chart:

Worldwide Smartphone Sales to End Users by Operating System in 2013 (Thousands of Units)

Operating System

2013

 Units

2013 Market Share (%)

2012

 Units

2012 Market Share (%)

Android

758,719.9

78.4

451,621.0

66.4

iOS

150,785.9

15.6

130,133.2

19.1

Microsoft

30,842.9

3.2

16,940.7

2.5

BlackBerry

18,605.9

1.9

34,210.3

5.0

Other OS

8,821.2

0.9

47,203.0

6.9

Total

967,775.8

100.0

680,108.2

100.0

Source: Gartner (February 2014)

If we look at another chart prepared by Gartner, we see that worldwide sales of mobile phones to end users totaled 1.8 billion units in 2013. This represents an increase of 3.5 percent year-over-year.

Worldwide Mobile Phone Sales to End Users by Vendor in 2013 (Thousands of Units)

Company

2013

Units

2013 Market Share (%)

2012

Units

2012 Market Share (%)

Samsung

444,444.2

24.6

384,631.2

22.0

Nokia

250,793.1

13.9

333,938.0

19.1

Apple

150,785.9

8.3

130,133.2

7.5

LG Electronics

69,024.5

3.8

58,015.9

3.3

ZTE

59,898.8

3.3

67,344.4

3.9

Huawei

53,295.1

2.9

47,288.3

2.7

TCL Communication

49,531.3

2.7

37,176.6

2.1

Lenovo

45,284.7

2.5

28,151.4

1.6

Sony Mobile Communications

37,595.7

2.1

31,394.2

1.8

Yulong

32,601.4

1.8

18,557.5

1.1

Others

613,710.0

34.0

609,544.9

34.9

Total

1,806,964.7

100.0

1,746,175.6

100.0

Source: Gartner (February 2014) 

Gartner’s expectation is that smartphones will continue to drive overall sales in 2014. In keeping with I predicted above, Gartner feels that an increasing number of manufacturers will realign their portfolios to focus on the low-cost smartphone sector.

Below is a Gartner analysis of top smartphone vendors:

Samsung: While Samsung's smartphone share was up in 2013 it slightly fell by 1.6 percentage points in the fourth quarter of 2013. This was mainly due to a saturated high-end smartphone market in developed regions. It remains critical for Samsung to continue to build on its technology leadership at the high end. Samsung will also need to build a clearer value proposition around its midrange smartphones, defining simpler user interfaces, pushing the right features as well as seizing the opportunity of bringing innovations to stand out beyond price in this growing segment. 

Apple: Strong sales of the iPhone 5s and continued strong demand for the 4s in emerging markets helped Apple see record sales of 50.2 million smartphones in the fourth quarter of 2013. 

Gupta mentioned, "However, Apple's share in smartphone declined both in the fourth quarter of 2013 and in 2013, but growth in sales helped to raise share in the overall mobile phone market. With Apple adding NTT DOCOMO in Japan for the first time in September 2013 and signing a deal with China Mobile during the quarter, we are already seeing an increased growth in the Japanese market and we should see the impact of the last deal in the first quarter of 2014." 

Huawei: Huawei smartphone sales grew 85.3 percent in the fourth quarter of 2013 to maintain the No. 3 spot year over year. Huawei has moved quickly to align its organization to focus on the global market. Huawei's overseas expansion delivered strong results in the fourth quarter of 2013, with growth in the Middle East and Africa, Asia/Pacific, Latin America and Europe. 

Lenovo: Lenovo saw smartphone sales in 2013 increase by 102.3 percent and by 63.1 percent in the fourth quarter of 2013. Lenovo's Motorola acquisition from Google will give Lenovo an opportunity to expand within the Americas. 

Gupta said, "The acquisition will also provide Lenovo with patent protection and allow it to expand rapidly across the global market. We believe this deal is not just about entering into the U.S., but more about stepping out of China." 

Most likely we will see sales of high-end smartphones slow down as sales for low-end smartphones begin to rise. The fact that low and medium priced smartphones are gaining popularity, especially in the emerging markets, will most likely mean that we will also see a decline in average smartphone selling prices, in turn, this would lead to a slowdown in revenue growth.



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