According to DRAMeXchange, a research division of TrendForce, with component cost continually decreasing, many mobile phone makers are developing entry to mid-level smartphones in an effort to increase market share. As a result, feature phones are gradually being phased out of the market; smartphone shipments are forecast to exceed 650M units in 2012, more than 40% growth compared to 460M units shipped in 2011.
Looking towards 2013, as 3G network infrastructure gradually becomes more widespread and mobile phone prices are dropping to market-friendly levels, smartphone shipments are likely to continue increasing. TrendForce estimates global smartphone shipments will exceed 830M units in 2013, a nearly 30% increase. Worth noting, Chinese brands are expected to see especially strong smartphone shipments, with 50% growth projected for next year, more than the global average.
High-end Smartphone Battle Over as Apple and Samsung Dominate
Currently, there is a plethora of high-end smartphones available, but Apple and Samsung products continue to dominate the market. Together, the manufacturers’ devices are expected to account for 50% of global smartphone shipments, at 330M units, in 2012. With the arrival of the iPhone 5 in the third quarter of 2012, Apple saw record-breaking pre-orders. iPhone 5 shipments are estimated to hit 45M units in the fourth quarter, pushing the total iPhone sales forecast above 120M units for 2012. Samsung’s Galaxy series has experienced similar popularity around the globe, with 2012 sales projected to exceed 200M units, nearly 30% of global smartphone shipments. Unlike Apple, Samsung’s smartphone supply chain is vertically integrated, from the core SoC to other components like memory, display, and battery. Not only does vertical integration give Samsung a cost advantage when it comes to smartphone production, but it also provides an outlet for Samsung Semiconductor components. As a testament to their success, Samsung is currently the leader in global smartphone shipments. On the high-end smartphone market, Apple and Samsung are each others’ main competition, which clearly both makers are aware of as intellectual property lawsuits between the two continue.
Chinese Smartphone Market May See New Leader; Lenovo-Samsung Market Share Gap Less than 1% in 3Q12
Traditionally, smartphones have sported price tags of at least 500 USD. However, as component cost has decreased, 100 USD smartphones emerged on the market in 2012, with Chinese smartphone brands and white-box manufacturers introducing the lowest-priced devices. TrendForce believes such low pricing is the main reason Chinese brands are able to show such strong growth against competition from major manufacturers. Chinese telecoms provide relatively low smartphone subsidies; most high-end devices carry a steep price tag even after signing a contract (prices fall in the 3000 to 5000 RMB range without a contract). The monthly cost of a contract plan is around 4.5 times that of a non-contract plan, which has pushed consumers with limited budgets towards the purchase of a non-contract device in the 800 to 1200 RMB range, creating a significant market opportunity for Chinese smartphone brands.
TrendForce estimates Chinese smartphone shipments will exceed 200M units in 2012, nearly 30% of the global shipment forecast. Of the Chinese brands, ZTE and Huawei’s combined smartphone shipments will reach 65M units in 2012, accounting for 30% of total shipment volume for Chinese smartphone makers. Taking a closer look at China’s mobile phone makers, as ZTE and Huawei began as telecommunication equipment manufacturers – Huawei is second only to Ericsson as a telecom equipment supplier – the move into the mobile phone market is a logical one. Huawei’s smartphones, while mostly sold on the domestic market, have seen a decent international sales. As for Lenovo, the manufacturer has only been in the smartphone market since the second quarter of 2012. With a solid reputation and a clearly defined price strategy, Lenovo’s smartphones fall into three major categories and are set to target consumers in the 700 to 2000 RMB budget range. After only six months on the market, Lenovo’s third quarter smartphone shipment volume has surpassed that of ZTE and Huawei, making the newcomer China’s leading smartphone brand. With 14.7% of the market, Lenovo is close behind Samsung, whose market share is currently at 15.5%. As a PC maker turned telecommunications product manufacturer, Lenovo’s smartphone strategy sets a good example for other major PC makers looking to follow suit.
Figure 1. 2011-2013 Smartphone Shipment Volume, Global vs. China