There has been talk for some time now that smartphones would reach a saturation point. Have we already reached that point? Back in October 2013, the expectation was that by November 2015 the U.S. smartphone market will be essentially saturated.
Just a couple of months ago smartphone shipments among low-cost providers grew at a faster rate than Apple and Samsung. This was seen as a demonstration of saturation in the U.S. as well as other mature markets. For the first time smartphone sales accounted for more shipments than any other cell phones in 2013.
At the end of April, Samsung announced a weak set of first quarter 2014 results, even though its revenue increased by 1.5 percent over the same period last year. The belief is that the weak performance was driven by lackluster mobile device sales. It seems that there was a decline of 1.2 percent year-over-year, once again highlighting the growing saturation at the high end of the smartphone market.
We are seeing competition increase at the low end of the smartphone spectrum and saturation seeping in at the high end. The outlook is that it will be tough for Samsung to sustain its past mobile growth. Samsung has already acknowledged this when it said that it expects only a slight sequential increase in demand for smartphones and tablets in the second quarter despite the launch of Galaxy S5 in April.
This is backed up by a report from Digitimes that states, “Samsung is putting in weaker than expected handset component orders to the supply chain as competition from other vendors, most notably in the China market, intensifies. The company has been focused on expanding its handset product mix in the first quarter of 2014 to further compete in the market but as competition from other vendors intensifies Samsung is re-evaluating its market outlook, which will affect orders to upstream supply chains.”
We are seeing that the deployment of wireless networks is expanding into emerging markets. These are often regions where people do not have a lot of money, so buying a $600 plus iPhone is not what they are looking for. This has led to there being a lot more low-end or feature phones being made available to the regions. Unfortunately for Samsung, this seems to have led to a loss in the global smartphone market share for the first time in four years.
Other Chinese OEMs, including Xiaomi, ZTE and Coolpad, have also been seeing healthy shipment growth as the industry is shifting more towards cheaper phones aimed at the emerging markets. In fact, Xiaomi is looking at almost doubling its shipments this year to 40 million.
It will be interesting to see what type of impact this will have as Digitimes says that Samsung's decrease in orders are expected to be mostly for low-priced smartphones. Does this mean that we will see a saturation of high-end smartphones in the very near future?
Edited by
Maurice Nagle 
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