In The Wake Of Price Cut, Apple Presses Warning Button For Smartphone Industry !

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Apple has recently released its Q3 earnings for the fiscal 2012 and reported a quarterly revenue of $35.0 billion. However, the company has failed to meet the expectations and it managed to ship just 26 million iPhones in the quarter. The global economic crisis has somehow shaken to Smartphone industry as well, despite Samsung and Apple had outburst in the last quarter. Anyway, Smartphone shipments grew up by 42.1% year-over-year in the second quarter of this year.

The Global Economic Crisis Has Affected Smartphone Industry

Despite of the global economical crisis, there was an incredible growth in Smartphone in the Q2 of this year. However, users in the emerging markets are still willing to own feature phones. Smartphone penetration rate was quite low in the developing countries during Q2 of this year. Anyway, thanks to advent of cheaper Android powered handsets in the developing countries which inspired users to get their hands on Smartphone. One thing has been quite cleared that Smartphone is now at top in the priority list of consumers’ electronics gadgets and that’s why, the smartphone industry has swallowed other electronic products around the world. People are more likely to upgrade to the device that facilitates touch screens, email and full web browsers.

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One can easily see the growth of Smartphone in the emerging markets, so marketers are discerning future in these markets even in the global economic crisis. But, an arrival of Huawei and ZTE in the smartphone sector has intensified the competition around the world. At present, market has been flourished with cheap Smartphones and vendors are focusing to launch the device at the nominal price. Apparently, we might expect dip in average selling price of the device by 2013.

Carriers Are Going To Be Bullish About Subsidy

At present, most of the Smartphone vendors are selling their devices for the nominal price. Now, operators are dropping their subsidies; recently, top three carriers in the U.S. such as AT&T, Verizon and Sprint have dropped its subsidies. The reason is quite obvious that they want to create more profit margin from the device, because they are currently selling the device at threshold prices. In addition to this, they are also trying to compel customers to upgrade the device less frequently. It’s well-known that carriers subsidize Smartphone on the contract basis so that users could easily afford the device.

ZTE And Huawei Are Potent Rivals In Cheap Smartphone Segment

The strategy to cut down the price of Smartphone is not worthwhile for struggling vendors like RIM, Nokia, HTC and LG. I think, it’s very difficult for these vendors to compete with potent rivals like ZTE and Huawei in the emerging markets in terms of price. On the contrary, Apple and Samsung are leveraging over their popularity and really, it is benefiting to both in price insulation. Undoubtedly, Q2 of the fiscal 2012 was one of the best quarters for Samsung, shipped 50.2 million Smartphones. Undoubtedly, Samsung and Apple are growing on the cost of smaller rivals.

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Apple Could Be A Big Threat For Smartphone Vendors 

It’s pretty clear why Google has acquired Motorola Mobility this year. Undoubtedly, Google wants to create an integrated hardware-software ecosystem around and which could jeopardize its Android partners such Samsung, HTC and more. In February of this year, I discussed how Apple accounted 75% of the profit share generated by top 8 majors in Q4 of the last year. Apple has created an impression (brand value) among businesses and professionals; they are relying on Apple’s smartphone and Tablet devices for their purposes. At present, Apple is generating more profit from its iPhone compare to other Smartphone vendors.

In Q2 (calender) of this year, iPhone’s shipments declined due to two factors; first, rumor of iPhone 5 launch and second, the global economic crisis. I have already mentioned how Apple could outburst Smartphone in its Q4 of the fiscal 2013. Two majors (iPhone 5 and iPad Mini) are going to be launched later this year, but there’s still a question, what will happen to struggling vendors (Nokia, RIM and more)? Indeed, Apple could be a big threat for Smartphone vendors later this year.

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