Samsung’s and Apple’s global smartphone shipment market share will decline to around 25% and 14%, respectively, by 2015 (2013: 31% and 15%), says Fitch Ratings.
The decline will be due largely to rising competition in emerging markets, where lower-priced handset models from local competitors should continue to gain market share at the expense of Apple and Samsung. In these markets, where cost is relatively more important than global brand strength or cutting-edge technology, competitors’ devices retailing at US$100-300 can offer most of the key features of more expensive phones from Samsung and Apple, according top Fitch.
Fitch expects the big two’s combined smartphone shipment volume to stagnate at around 450 million-460 million units in 2014 (2013: 467 million), even as the global smartphone market rises by around 20% to 1.2 billion. Fitch estimates that smartphones account for roughly two-thirds of the global handset market, and they believe growth will come largely from emerging markets. India and China together are expected to account for over 60% of growth in smartphone shipment volumes. Local handset makers including China’s Xiaomi, Lenovo, Huawei and India’s Micromax Informatics are the principal large competitors for Apple and Samsung.
MacDailyNews Take: No, China’s Xiaomi, Lenovo, Huawei and India’s Micromax Informatics are not Apple iPhone’s competitors and stating so simply highlight’s Fitch’s ignorance of the smartphone market.
According to data from IDC, global smartphone shipment volumes increased by 5% in 2Q14 to 295 million units (1Q14: 281 million units). In China, Xiaomi took the lead with 15 million devices with a market share of 15% – ahead of Samsung’s 12%, which shipped 13.2 million smartphones. Concurrently, developed markets’ smartphone profitability should also continue to decline, as market saturation and the lower incremental benefits of new models has lengthened the replacement cycle and slowed growth. Competition has also intensified as more manufacturers have been able to produce devices which exceed most consumers’ design and technical requirements.
Apple’s next iPhone, rumoured to be launched in September 2014, is likely to have a larger screen, and developments are likely to be incremental rather than revolutionary. Fitch believes that the innovations – which include curved screens and compatible wearable devices – are unlikely to change the trend facing Samsung and Apple. Nevertheless, Fitch does not expect these trends to affect Samsung’s credit rating (A+/Stable). Fitch’s analysis has always assumed that smartphone margins of the last few years were unsustainable in the long term. For some time, Samsung’s ratings have been constrained by its long-term exposure to cyclical businesses and investment-intensive markets, despite very strong financial metrics.
Source: Fitch Ratings
MacDailyNews Take: Apple’s goal is not market share.
Apple loses nothing. Its sales will not go down, only its market share. Samsung is the one who will be hit, because people buying cheap phones are their target customers.
As long as AAPL continues to sell increasingly more handsets and maintains good margins, investors have nothing to worry about. Let everyone else kill each other at the low end.
It’s the same with Macs. the continue to sell more and more Macs while others earn pennies to the dollar making Windwos boxes. Who’s shoes would you rather be in?
MSFt all day long. They have the best perpetual income model in the world. Apple needs to always push out new hardware and MSFT dies not. MASFT have never been close to extinction but Apple has.
Microsoft is staring extinction in the face right now.
The last extinction we saw this bad was when an astroid carved out The Gulf of Mexico.
MSFT is not a Windows box maker.
I don’t think Microsoft is as safe from extinction as many think:
1. Windows phones are not selling
2. Xbox is losing money
3. Surface is losing money
4. Microsoft will lose business in the enterprise as a result of the IBM/Apple deal.
5. They will also lose business in the enterprise once managers realize productivity will increases because of Apple’s Continuity.
5. Apple is including their “Office” like applications for free with the purchase of new devices. This means there will be less subscriptions of Office sold.
6. When Microsoft discontinues “free” Windows 7 updates in a few months there will be a huge backlash against Microsoft. Apple provides free updates, including major releases. This means the total cost of remaining in the Microsoft ecosystem will increase exponentially compared with Apple. In addition, as Microsoft’s overall business decreases they will begin to charge for updates on their current operating systems. These tactics might increase their revenue in the short run, but individuals and businesses will eventually flock to other platforms.
Fitch ratings… No expertise, no cell phone knowledge, just searching for blog hits to sell adds and white papers. So sad.
Market share should be an automatic acknowledgement of lack of any real understanding of the world marketplace. If you say it in any serious context, people automatically stop listening.
Just a thought.
why is Fitch worried about selling smartphones to the dirt farmers of the Gobi Desert? Just like the dolt Hans of the Gobi, who lost their topsoil to extensive farming with no crop rotation and year round over-grazing, Fitch cannot spot a sustainable model.
Would this be the same agency that gave triple-A ratings to worthless crap just prior to the sub-prime fiasco?
Well that’s obvious. As smartphones become the norm and completely replace feature phones, the share of high end phone will decrease.
The author forgets though that the profit share will remain largely with Apple.
And of course do you think Apple will stand still. New generations of phones and devices will be launched by Apple that will supersede the smartphone. What shall we call it? The smarterphone, the geniusphone, the noitallphone.
I love how they talk about Apple of having incremental change. They only talk about screen size. No talk about iPhone being the only phone with 64bit, a usable fingerprint reader, App Store updates, and a integrated TV box. Of course they can’t get this info from Android makers. Google’s Android One will change the smartphone market by taking away most of the R&D needed to make new phones. This will be the death to feature phones, and very soon all phones will be smartphones. To combat this high end OEMs will need to differentiate themselves so buyers will know why they should pay more. The easiest way will be 64bit, something Apple is way ahead on. With Android One I give it a year before Samsung and HTC change the definition of smartphone.
Many of Androids ideas are rip offs of iOS jail-broken OS enhancements.
It is simple. Samsung’s success with Android came through differentiation from Apple. In direct competition, Samsung’s premium phones have failed on a grand scale. Where they were able to gain share is with sub- $300 devices — the field where Apple doesn’t bother, ceding the space to others. Among all those others, Samsung was most successful at scaling up and slashing margins, in order to offer a “smartphone” for $250, $150, $100… Of course, when you begin chasing margins, you quickly discover why IBM sold PC business to China, why Compaq and HP merged and are still struggling, why DELL went private… If you are brand-name company from the developed world and are chasing margins, you simply cannot win against the no-name device makers from China. Nobody can. Samsung is facing a significant losing streak.
Fitch simply doesn’t understand this.
“Fitch simply doesn’t understand this.”
Or he’s paid to say otherwise.
FUD. For every article that makes this claim there are 3 times as many that suggest otherwise and the numbers as they are and have been never support these claims.
I expect that Fitch is half right. Where Samsung is concerned, yes, *other* low-priced phones will eat away at Samsung’s share, because there’s not much to differentiate one Android phone from another.
Apple will continue to be the only real choice for those who have the money for the real thing and are willing to spend it.
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