Q2 2017: USA Market Back to Growth as Smartphone Shipments Jump 14% YoY
The strong growth comes following the weak 2nd quarter of 2016, the slowest quarter of last year. Operators such as Verizon, T-Mobile, Tracfone and OEMs such as Samsung, ZTE drove most of the smartphone shipment growth during the quarter.
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August 16, 2017
According to the latest research from Counterpoint’s Market Monitor program, the US overall smartphone market saw a 14% YoY increase in smartphone shipments. The uptick was helped by solid results in both postpaid and prepaid markets. On the postpaid side, phone net adds were almost 1.25m. T-Mobile dominated the postpaid phone adds followed by Verizon which saw a surprise uptick after a lull last year.
Commenting on the competitive environment among smartphone vendors, Research Director, Jeff Fieldhack, noted, “The top 5 OEM suppliers Samsung, Apple, LG, ZTE, and TCL’s combined market share grew from 88% last year to over 91% this quarter. Chinese vendor ZTE led the way growing 36% with successful prepaid sales within three major carriers and particularly strong growth within national retail channels. ZTE is the number one brand in the channels with 21% share outside of the top four carriers. This growth can be attributed to a broader portfolio from ZTE catering to most of the consumer segments within the fast growing low to mid-tier prepaid markets. The company offers competitive specs, low price points and variants designed for operators. The range and price points of popular models is broad. The company had a successful quarter selling the ZTE Cymbal flip feature phone as well as the 6” inch phablet ZTE Max XL. It’s surprising to see a Chinese company charting growth whereas other successful Chinese brands such as Huawei, OPPO, vivo, and Xiaomi either have struggled in the US or have not attempted to enter.”
Mr. Fieldhack added, “LG, after over-shipping last quarter, was down 14% QoQ, but still grew a healthy 24% YoY inching its market share to 15% level. LG G6 volumes have been a disappointment for the company, but K-series devices remain go-to within multiple channels. The race for the third spot has been closer than ever, as ZTE looks to close the gap with LG in coming quarters. LG will need its upcoming flagship V30 to drive some halo effect offsetting the so far disappointing LG G6 sales. There are two battles ensuing with a flagship battle between Apple and Samsung and a low to mid-tier battle between ZTE and LG.”
Commenting on the top two brands, Research Director, Neil Shah, highlighted. “Apple-Samsung together have added another percentage of share growing to 60% of the US market. Samsung experienced 20% growth overcoming GS8 / 8Plus shortages. Its mid and entry portfolio also gained share within prepaid channels and national retail. Apple smartphone volumes grew just over 10% as iPhone promos helped alleviate a postpaid slowdown pre-refresh. The company also added prepaid subs with a new low point of sale price of $49 of its older 5S model. 5S, 6S and the SE models with refreshed memory capacities together accounted for almost 30% of the total iPhone shipments in Q2 2017.”
Motorola’s volumes dropped 2% YoY. However, the launch of the Z Force 2 across carriers will help. The major carriers are promoting ‘Moto Mods’ (modular battery, speaker, projector accessories) at launch. The flagship launch could provide a halo effect for its entry devices, which have been successful selling in open channels. Google Pixel had 0.3% market share in the US market. The upcoming launch, if expanded across channels like the Z Force 2 and with sufficient supply, should be help Google carve out share in the important premium smartphone market.
Commenting on the growth story, Research Analyst, Archana Srinivasan, highlighted, “The quarter represented what a competitive market the US has become. After many quarters of T-Mobile dominating phone adds, the rest made improvements—especially Verizon.” Verizon remained the number one channel in terms of smartphone shipments and activations with 22% share closely followed by T-Mobile. The gap which has narrowed considerably over the past couple of years. Bringing back “Unlimited Data” plans helped Verizon gain this quarter, the largest carrier by subscribers. AT&T and Sprint have their work cut out as they feel a squeeze from T-Mobile and Verizon postpaid brands as well as healthy growth in prepaid segment from Tracfone and unlocked open channel players.”
• Samsung regained the top position with 31% market share with healthy sell-in for S8 series though Samsung exited with slightly higher inventory overall
• Apple remains to be stronger than last year with iPhone 7 and older iPhone models driving demand up 10% YoY in postpaid and prepaid channels respectively
• US market upgrades should continue to grow through the end of the year due to Apple, Samsung, and other flagships launching
• The US market is very competitive. All carriers have unlimited data plan offerings, but only T-Mobile has seen data revenues increase
• As wireless revenues (service + equipment) have been squeezed, US operators have managed to improve churn metrics. Verizon saw record low .7% churn during the quarter
• Service revenue declines could flatten by end of 2017 as the postpaid base trends to 90% on unsubsidized plans
• Despite growing competition, look for T-Mobile to continue to win the majority of phone net adds through 2017. More uncarrier initiatives, such as T-Mobile ONE, giving 55+ 2 unlimited lines for $60 will help. This is a demographic owned by Verizon & AT&T. The company is also gaining high ARPU B2B subscribers. Finally, the carrier will have over 3k new stores in key metro areas by YE17
• T-Mobile will be pushing out 600MHz devices. Samsung & LG will be first providers / benefactors
• All carriers are attempting to pull in 5G rollouts. But first, they will be deploying unlicensed LTE, LAA, mmWave, and small cells in addition to GB LTE
• To reduce costs, all carriers are growing their digital presence. This could affect non-carrier online sales growth prospects
• All US carriers are aggressively deploying IoT networks. Verizon has a lead on IoT revenues
• BYOD activations have doubled annually. In addition, refurbished smartphone volumes are hitting critical mass. Q2 saw a 20% YoY growth of refurbished devices sold in the US
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The Market Monitor research is based on sell-in (shipments) estimates based on vendor’s IR results, vendor polling triangulated with sell-through (sales), supply chain checks and secondary research.
Counterpoint Technology Market Research is a global research firm specializing in detailed industry analysis of the TMT sectors. It services major technology firms and financial firms with a mix of monthly reports, customized projects and detailed analysis of the mobile and technology markets. Its key analysts are experts in the industry with an average tenure of over 15 years in high tech industries.
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