As one of the world’s largest industries, and one that is fundamental to the economic well – being of so many companies, it is vitally important that we stay up to date on the latest developments and trends in the smartphone industry. 2016 was a poor year for the industry in general. Industry giant Apple Inc. (NASDAQ:AAPL) had a relatively poor year, while Samsung Electronics (KRX:005930) was hit hard by the Note 7 fiasco. However, not all was bad news, and 2016 saw many Chinese OEMs continue their rise. We also saw some game changing developments in high potential markets like India, which may dictate the direction the industry is heading in the coming years. We saw many industry players begin to recover from a poor 2016 by bouncing back in Q1 2017. Now, Gartner’s data for smartphone sales Q2 2017 will give us more insight into the current state of the industry, and where we are heading from here.
Smartphone Sales Back On Track
According to Gartner, the global smartphone sales to the end user totalled to 366.2 million units in Q2 2017. This represents a 6.7% increase over the 343.2 million sales in Q2 2016. Samsung emerged as the largest vendor by sales to end users with 82.54 million smartphone sales in Q2 and a 22.5% market share. This represents a 7.55% YoY growth. This level of growth demonstrates that Samsung has left the Note 7 fiasco behind them with the Galaxy S8/S8+. In second place came Apple, with 44.32 million sales and a 12.1% market share. In contrast to Samsung’s strong sales growth, Apple’s sales actually went down by 0.2%. However, we must not read too much into this as Q2 is generally slow for Apple due to the lack of any high profile product launches. Making up the rest of the top 5 smartphones brands were Huawei, Oppo and Vivo in 3rd, 4th and 5th spots, respectively. All of these Chinese OEMs saw strong YoY sales growth of 17.3%, 44.1% and 70.8%, respectively.
However, it is important to note that this data varies quite significantly from IDC’s Q2 report which we addressed earlier this month. The most probable factor behind this is that IDC tracks smartphone shipments, whereas Gartner tracks sales. These are two separate metrics, which could account for the difference in data. IDC’s data painted a different picture entirely; one which showed an overall decline in smartphone shipments due to poor performance of fringe players. Samsung’s shipment growth was a much more modest 1.4% compared to their 7.55% sales growth. This would suggest large volume sales of Samsung’s older sales inventory. On the other hand, Apple also managed shipment growth of 1.5% compared to the sales decline of 0.2%. This would suggest lower sales of older existing inventory. Another notable difference is that while Xiaomi managed to overtake Vivo in terms of overall smartphone shipments in Q2, they still lag behind in terms of actual sales.
APAC And China Now The Primary Sales Driver
One of the primary features of the Gartner report was the enduring dominance of Eastern markets pertaining to sales volume. Greater China continued to lead by a fair margin, registering over 101 million sales and accounting for 27.7% market share. Despite their dominance, sales in Greater China were down compared to Q2 2016. This is likely due to longer smartphone replacement cycles brought about by the proliferation of higher quality devices. In contrast, sales growth in emerging APAC continued unhindered with over 78 million sales in Q2. This represents a 31.7% growth over Q2 2016 and now accounts for 21.4% of the global market share. Sales in Latin America declined by a small margin, while Western Europe experienced sales growth fueled by Huawei and Samsung.
A large factor behind the strong performance in APAC is India. Sales in this region were fueled by a high demand for newer 4G smartphones with better hardware and specs. This demand has also been coupled with a significant rise in smartphone ASP. In fact, the smartphone ASP in India rose to $155 in 2017 compared to $131 in 2016. This is in large part to the increased popularity and mainstream availability of faster 4G networks in this region. It started in mid-2016 with the launch of Reliance Jio, India’s first VoLTE enabled 4G network. Jio bucked the trend of high data prices and poor 4G availability in the country and triggered a price war in the industry.
Ever since then, data prices have come crashing down, spurring the demand for 4G capable handsets. This demand is now being fulfilled by an army of Chinese OEMs like Xiaomi, Oppo and Vivo who have completely displaced local vendors in a highly competitive market.
Takeaways
- Despite lower overall shipments, smartphone sales continue to grow driven by Chinese OEMs like Huawei, Oppo, Vivo, etc.
- Huawei has managed to establish themselves in Europe after expanding out of Asian markets. In fact, strong smartphone sales in Western Europe were driven in part due to Huawei’s strong performance.
- With most other regions experiencing stagnation or decline, the APAC region is slowly becoming the most lucrative destination for smartphone OEMs.
- Concern over rising component costs and shortages may affect the smartphone sales in the second half of 2017. This is especially applicable to upcoming premium smartphones such as the Apple iPhone 8, Google Pixel 2, etc.
