The traditional quarterly rush of smartphone market share estimates has begun, and there are only small signs of threat to the top two, Samsung and Apple. However, there is a more intense rivalry for the other spots in the top five than we have seen for years. The Chinese majors are expanding their reach while more traditional, but faded, players like Sony, Motorola, LG and even Nokia start to stage a comeback.
This will lead to fragmentation in the short term, and then, most likely, a further shake-out, with success in the midmarket being critical to securing a firm place in the top five leagues of 2014. For now, the contest is so close that different analyst firms have estimated different top five rankings for the third quarter. Strategy Analytics and IDC both award third place to Huawei for the first time ‘ estimating 12.5m and 12.7m units shipped respectively – and also see Lenovo entering the top quintet, but as Telecoms Europe notes, Juniper Research has Nokia in third position.
This is likely to reflect each firm’s different definitions of ‘smartphone’, since Juniper includes Nokia’s Asha range, which is not a true smartphone, since it does not have a full open operating system, but is often labeled a ‘smart featurephone’, as it offers many of the functions of its larger cousins.
Nokia, which sold 15m units across its Lumia and Asha ranges in the quarter, did not figure in the top five lists of the other two analysts publishing their ratings this week. IDC put Lenovo in fourth place, after Huawei, with 12.3m units shipped, and LG in fifth. Strategy Analytics reversed those rankings.
In terms of the total market size, Juniper assessed shipments to have hit a record 250m during the quarter, up almost 49% year-on-year, while Strategy Analytics said shipments were up 45% to 251m units and IDC estimated 38.8% growth with shipments of 258.4m.
Huawei’s success still remains heavily reliant on its home market, which is, of course, now the largest in the world. Its P6 and G610 models have been particularly important there but the firm needs to build a more sustainable base in the US and Europe, from the starting point of its high profile Ascend family launches this year.
Up in the lofty heights of the top two, Samsung and Apple remain well ahead of the scrap going on below them, but the gap between them is widening. While last year saw them almost head-to-head, and often swapping positions, the Korean vendor’s dominance is currently assured. According to Strategy Analytics. Samsung’s shipments grew 55% year-on-year to 88.4m units, twice Apple’s figure of 33.8m, and taking about one-third of global sales total. Apple, by contrast, saw shipments growth of 26%, well behind the overall smartphone segment increase of 45%, reflecting the company’s failure to dazzle the market with recent upgrades, or to expand its range as effectively as Samsung or Huawei into emerging markets.
Strategy Analytics is, however, forecasting a recovery for Apple in the fourth quarter because of demand for its new iPhone 5s, reflecting how increasingly seasonal the US firm’s results are, given its once-a-year launch cycle. By contrast, Samsung launches devices throughout the year with a wide range of models targeted at different user profiles and price points.
Some of that pattern was seen in Apple’s fiscal fourth quarter figures, though it still delivered a record iPhone result for this period on the back of the recent new launches. Apple and Nokia reported quarterly results on the same day this year ‘ the shift from its traditional Thursday just the first sign of the huge transition ahead for Nokia as it prepares to sell its handset business to Microsoft. While the gulf between the two firms in the device market was almost as gaping as ever ‘ Nokia’s 8.8m smartphones compared to Apple’s 33.8m, not to mention an operating loss of $64.6m versus a profit of $7.5bn ‘ both turned in mixed results.
Given their contrasting starting points, Nokia could be said to have the stronger signs of hope, which will cheer Microsoft, while Apple continues to struggle to regain past glories. The Finnish firm, for instance, reduced the operating loss in its devices business to less than one-fifth of its year-ago size, from €252m in 3Q12 to €47m ($64.6m). This was despite a fall in device sales ‘ down 19% year-on-year in revenue terms to €2.8bn, and down 22% in unit terms to 64.6m. This reflects the ongoing shift away from featurephones towards higher margin smartphones and the Asha ‘smart featurephones’. The Lumia smartphone range increased its sales by almost 40% year-on-year to 8.8m units.
While that summary shows a rise in some key metrics for Nokia’s device unit, and some hopeful signals for Microsoft, Apple saw net profit in its fiscal Q4 fall by 8.5% to $7.5bn, although it set a record for fiscal Q4 iPhone shipments, at 33.8m, up 25.6% on the year-ago period, and its overall revenues were up from $36bn in Q312 to $37.5bn.
Apart from squeezed profits, another sign of concern focused on the iPad, whose shipments were up by a measly (in Apple terms) 100,000, compared to last year, to reach 14.1m units.
One area where the contrast between Nokia and Apple is particularly glaring is in margin. Nokia predicts a non-IFRS operating margin of 12% in the final quarter of this year (plus or minus four%age points). Apple is forecasting a gross margin of between 36.5% and 37.5% in the same period, along with revenue of between $55bn and $58bn, boosted by holiday quarter sales across its ranges.
Apple CFO Peter Oppenheimer told investors that iPhone sales were ‘ahead of our expectations’ despite supply constraints, and were particularly strong in some emerging markets. He said unit sales were ‘up sharply year-over-year in Latin America, the Middle East, Russia and India. We were also very happy to add NTT Docomo to our carrier line up in Japan, a country where demand to iPhone has been especially strong.’
CEO Tim Cook did not break out sales of the lower end iPhone 5c, which has been rumored to be suffering disappointing shipments, nor comment on the product. He did touch on reported moves into new form factors, saying: ‘In terms of new product categories, specifically if you look at the skills that Apple has from hardware, software and services and at incredible app ecosystems, these set of things are very, very unique. I think no one has a set of skills like us and we obviously believe that we can use our skills in building other great products that are in categories that represent areas where we do not participate today.’