Q2 2015: Chinese Brands Dominate As Huawei Becomes The Third Largest Mobile Phone Brand Globally For the First Time

Counterpoint Research team of Analysts have completed preliminary sizing of the global handset and smartphone market as few OEMs have already released their Q2 2015 (Apr-Jun) performances. Following are our preliminary market share and rankings according to our quarterly Market Monitor service.

The key highlights of the quarterly performances so far include:

Market:

  • Global mobile phone shipments reached a March quarter record of 470 million units up 6% YoY and 3% QoQ as Chinese brands continued to dominate
  • Global Smartphone shipments also climbed to an all-time record of 370 million units for the June ending quarter growing a very healthy 20% YoY
  • 8 out of 10 phones shipped globally were smartphones as feature phone demand continued to shrink fast globally
  • Rising proliferation of LTE smartphones is driving smartphone demand in markets such as USA, China, Europe  and others
  • Meanwhile in emerging markets too there is a swift transitioning from 2G smartphones and feature phones to 3G as well as leapfrogging to future-proof 4G smartphones as the demand in the sub $150 retail smartphone segment continues to expand
  • Chinese brands continued to rise with aggressive go-to-market strategies, with some brands strongly benefiting from e-commerce channels in emerging markets whereas some mature Chinese brands through carrier channel partnerships in markets such as USA, Europe and Latin America.
  • The Chinese & Indian brands have become highly competitive not only from time-to-market perspective but also in offering thinner, metallic and premium designed LTE phablets at sub $150 retail price-points allowing these brands to penetrate much faster than the other tier-1 brands
  • Chinese brands such as Huawei, ZTE, Xiaomi, Vivo and Oppo were the fastest growing brands during the quarter and moved up the rankings significantly
  • Huawei became the world’s third largest handset as well as smartphone brand for the first time ever surpassing Microsoft (Nokia)
  • BBK backed Oppo & Vivo entered the top ten rankings during the quarter due to the strong performance in domestic China market as well as other South Asian markets.
  • 7 out of the top 10 smartphone brands globally were Chinese which combined captured more than 30% share of the total smartphone market
  • The top eight global smartphone brands together captured almost 60% of the global smartphone market

 Exhibit 1: Overall Mobile Handsets 

Q2 2015 Counterpoint - Handset Shipments

Exhibit 2: Smartphones*

Q2 2015 Counterpoint - Smartphone Shipments

*preliminary estimates only – Q2 2014 – Lenovo volumes only

Samsung

  • Samsung shipped  89 million mobile phones down 6% annually as the feature phone volumes declined QoQ & YoY
  • Smartphone shipments declined across key markets as the Galaxy S6 series launch did not move the needle or arrest the slowing growth
  • Samsung’s mid- to high tier new Galaxy A/E series after an initial jump in Q1 slowed down considerably but was offset by strong performance in entry- to mid-tier J/Z (Tizen) series as well as price-cuts on older models
  • Premium ($450+) smartphone shipments remained flat annually but were up QoQ as Galaxy S6 series demand almost was similar to S5 in many markets in spite of being the third and fourth best selling smartphones globally in June.
  • In terms of regional performance, Samsung’s position in markets such as India, MEA and parts of Europe remained on par with last year but in USA, China, Latin America weakened further
  • We continue to recommend Samsung to significantly cut down on hundreds of SKUs to a few hero models which will immensely help Samsung focus on its products design, experience and generate greater scale to improve profitability which is lurking in single digits from 20% level when Samsung was at peak

Apple 

  • Apple posted yet another strong quarter for both revenue and sales for iPhone with shipments at 47.5 Mn during the quarter, a Y-o-Y increase of almost 35% and above the market growth.
  • Apple iPhone revenues were at 63% of the total Apple revenues, depicting importance of iPhone’s performance for total corporate performance . (more analysis here)
  • Apple’s overall handset market climbed to 10% and the smartphone market share climbed to 13% during the quarter
  • The popularity of higher capacity offering led to iPhone ASP of $660 an increase of $100 annually driving healthy top and bottom lines
  • With iPhone 6 and 6 Plus, Apple has successfully retained its user base and also recaptured most of the previous iOS users who had defected to Android because of larger screens
  • China continues to be the strongest market for Apple as it now corresponds to almost 27% of the total corporate revenues
  • Regionally, iPhone recorded strong sales in countries like Korea, India,China, Vietnam, Malaysia, USA, Germany and Turkey
  • Apple is becoming a strong emerging markets player with highly aspirational brand value driving demand not only from rich urban consumers but also beginning to penetrate and capture a good share of middle class consumers’ wallet

Huawei

  • Huawei surpassed Microsoft Mobile to become the third largest handset as well as smartphone brand for the first time ever
  • Smartphone shipments grew by 48% Y-o-Y as Huawei’s market share climbed to 8% mark, its highest ever
  • Honor brand is yielding results for Huawei with a presence in more than 60 countries around the globe and contributed to more than a third of the shipments.
  • Honor brand has given successful entry in emerging countries like India where traditionally it was not strong whereas Ascend is doing well Middle East Africa and Europe
  • Huawei’s volumes more  than doubled in Europe, North Africa and Middle East as the vendor remained aggressive on pricing and distribution to capture market share
  • North America remains a weak spot for Huawei whereas Latin America has been strong especially, Mexico, Columbia and others.
  • Apart from this Honor brand has managed to gain significant share in mid to high-end smartphone segment, a segment which was traditionally a weak spot for Huawei
  • Going forward it will continue to leverage the momentum by launching more flagships in various geographies along with its online only business model in some of the regions
  • Huawei has shifted focus towards profitability and streamlining portfolio with mid- to premium tier models rather than focusing on sub $75 price models and aims to ship 100 million smartphones in 2015
  • However, we caution the heavy sell-in needs to be converted into sell-through as our channel survey data shows Huawei ending the quarter with relatively higher inventory in some parts of Latin America & Europe.

Xiaomi

  • Xiaomi moved back into top 5 rankings in smartphone segment surpassing Lenovo & LG in Q2 2015 shipping 19 million smartphones
  • Xiaomi saw healthy shipments for its low-cost LTE smartphone Redmi 2 as well as its new premium Mi Note series
  • Xiaomi’s performance in China improved after a two quarter dip as it cleared out some older inventory left in the market and refreshed its portfolio with newer LTE models
  • Xiaomi market share in global smartphone market for Q2 2015 stood flat at 5% compared to a year ago
  • Furthermore, Xiaomi is now selling its smartphones to more than seven countries outside China and achieved a notable feat of clocking million shipments in one quarter for the first time in India.
  • It has also expanded its distribution strategy from Online only to hybrid in countries like India and Indonesia.
  • However going forward it will continue to invest in regional content platforms in countries like India and Indonesia and at the same time expanding in new regions like LATAM
  • India has become its biggest market outside China where it has plans to invest locally in terms of developing locally relevant apps with MiUi now supporting six India languages.
  • Xiaomi entered Brazil at the beginning of Q3 2015 and would like to make Brazil its third largest market in coming quarters
  • However in the west where the barriers to entry are high, Xiaomi entered the USA market last quarter with the launch of its accessories and other products through its portal mi.com but no sight of smartphones launch

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