With almost $430 billion in sales revenue in 2016, the smartphone industry is undoubtedly one of the biggest in the world. Over the past decade or so, the tech landscape has been dominated by smartphone hardware and software. Now, this industry has become an integral foundational pillar of the global economy. Over the past couple of years, however, there have been indications of stagnation in the industry. Growth has often been lethargic and unremarkable. 2016, in particular, was privy to many high profile flops. The Galaxy Note 7 fiasco set market leader Samsung back significantly. Samsung’s chief rival Apple also had a rather dismal year by their lofty standards.
So, is the global smartphone industry back on track for impressive growth in 2017? IDC’s recent smartphone shipment report for Q2 2017 sheds light on the matter. Let us have a closer look.
Global Shipments Decline But Market Leaders Bounce Back
According to the data from the IDC report, smartphone OEMs shipped a total of 341.6 million units of smartphones in Q2 2017. This represents a decline of 1.3% compared to Q2 2016. It also represents a 0.8% decline over Q1 2017. The quarter over quarter decline is expected, as Q2 and Q3 are generally less lucrative in the smartphone industry as they coincide with fewer product launches. On the other hand, the YoY decline is somewhat surprising, especially considering the strong performance of last quarter. During the last quarter, the smartphone industry beat expectations and registered strong YoY growth of 4.3%. On the face of it, it would seem that the smartphone industry is on a downward trajectory once again. However, a closer look at the data reveals an altogether different, and surprising trend.
Despite an overall decline in global shipments, all of the major smartphone OEMs registered strong growth. Samsung consolidated their superiority at the top of the table with 79.8 million shipments equating to a 23.3% market share. This represents YoY growth of 1.4%, as Samsung look to bury the Note 7 fiasco firmly. the sales of Samsung Galaxy S8 and Galaxy S8 Plus primary helped Samsung to reclaim its lost ground.
Apple placed second with 41 million smartphone shipments (iPhone), globally, resulting in a 12% market share. They also registered a YoY growth of around 1.5%. It is important to note that while Apple ships only around half as many smartphones as Samsung, their considerably higher profit margins mean that they remain highly profitable.
Just like last quarter, Chinese OEMs maintained ludicrous growth levels in Q2 as well. Huawei comes in at third, inching closer and closer towards Apple. With 38.5 million shipments, an 11.3% market share and a significant growth rate of 19.6% YoY, they are well on track to challenge the market leaders. Oppo also performed similarly well with 27.8 million shipments, representing a whopping 22.4% YoY growth.
However, the biggest success story of the quarter was Xiaomi, who climbed back into the top 5 displacing Vivo. With 21.2 million units of shipments and a phenomenal growth rate of 58.9% YoY, the future is looking bright for the “Apple of China”.
Fringe Players Struggling To Survive In Ultra Competitive Smartphone Market
While things are looking up for the established players in the smartphone market, the situation has become even direr for other OEMs. The market share of the “Others” category continued its free fall and dropped to 39%. This represents a decline of 16% YoY. The overall shipment decline despite the strong performance by incumbent OEMs would suggest that consumers are jumping ship to the established brands. This means that demand for companies out of the top 5 is falling rapidly, as they struggle to keep their heads above the water.
This situation is only set to get worse, with established players looking to expand their portfolios even further. Companies like Apple and Samsung have an iron grip on mature, elite markets such as the US and Europe. Meanwhile, Chinese OEMs like Xiaomi, Oppo and Huawei have a stranglehold on emerging high potential markets like India and China. In fact, both Oppo and Xiaomi’s strong performance this quarter can be attributed in large part to their investment and success in India. Of course, this growth has come at the expense of local vendors such as Micromax, Lava and Intex, who have been all but wiped out within a year.
This trend is very bad news for newer entrants hoping to make a splash in the market. Companies such as HMD Global and Essential may well find it extremely hard to penetrate the ultra competitive smartphone market in the coming years. We may also find many older OEMs like HTC struggle to keep up with the changing times.
Takeaways
- Despite declining global shipments, things are looking good for established smartphone OEMs, all of whom registered appreciable growth this quarter.
- The second half of 2017 can be expected to revitalize the smartphone industry with many high profile device launches such as the Google Pixel 2, Galaxy Note 8, iPhone 8, LG V30 and more.
- After a difficult couple of years, Xiaomi look set for a phenomenal comeback in the next few quarters. A large reason for this turnaround is their massive success in India.
- Huawei continues to fuel further growth with successful forays into Europe. If they manage to enter the US with carrier level integration successfully, they could challenge Samsung and Apple for the top spot.
