Q1 2014: Apple's iPhone Mania Steadily Spreading Internationally

  • Apple announced its Jan-Mar quarter results for 2014 and while the results beat street expectations were inline with Counterpoint Research’s forecasts for the Q1 2014
  • Apple shipped a record 43.7 million iPhones during the quarter growing 17% annually and down 14% from the strong Dec quarter
  • Apple generated $26 billion of revenues by shipping these iPhones globally expanding distribution reach at key carriers globally. e.g. China Mobile. Revenues grew an impressive 14% YoY
  • Demand for Apple iPhone 5s remained healthy across subsidized markets during the quarter
  • Apple was successful in flushing out accumulated iPhone 5c inventory during the quarter running aggressive promotions in markets such as USA and Europe
  • However, there was a surprise uptick in demand for iPhone 4/4S across some emerging markets such as India, China and Latin America. Call it a “halo effect”
  • However this pulled down iPhone ASP to US$596  from US$613 in the same period last year
  • The iPhone shipments mix shifting towards higher growth international markets is a good sign for Apple as Apple has peaked out it share across its home market and few European developed markets with this portfolio
  • Counterpoint Market Pulse research estimates Apple continued to dominate the US$400+ premium phones segment during the quarter capturing a lion 60% share. We can call this is an “Apple Tier”

Q1 2014 - Premium Handset Segment - Apple Dominates

  • Apple sold 16.4 million iPads during the quarter down 16% annually which portrays tough competition in tablet space from Asian OEMs and fast-growing  phablet categories which will spark a need for Apple to launch a bigger screen iPhone SKU later this year
  • Another interesting thing about Q1 results were Apple generated three times more revenues through Accessories than iPod segment.  Smartphones & OTT streaming music services are eating mp3 players
  • Counterpoint also estimates, iTunes, services and software segment revenues will overtake Mac revenues later this year which signifies growing importance of scalable software and services trumping even premium hardware especially in this post-pc era

Top Mobile Devices Trends in 2014

Technologically speaking there has never been a dull year in mobile industry. Every year promises and brings in new technologies, disruptions, business models and lots of surprises and we hope 2014 will be another great year for mobile devices segment. Let’s see what we expect to happen in 2014.


Multiple Cores are fine but where is the Memory?

Dual Core processors will continue to dominate sub US$100 smartphones but the differentiation and competition in 2014 will shift to the point to see which vendor (Tier-1 or Tier 4) offers 512MB or 1GB RAM bundled at these price points first. This will unlock compatibility to upcoming platform updates and applications thus reducing fragmentation especially in Android & Windows Phone platforms. Quad-Core smartphones at sub-$100 retail price points will also be on the cards in second half of 2014. Watch out for likes of Lenovo, Samsung, Micromax and MediaTek in this space.

64 bit CPU is here but where are the apps?

Racing to get the 64-bit processors into the smartphones to win back mindshare will remain the hot topic but lack of applications written for 64 bit processing will make it an overserved feature until some OEM or platform vendors steps in to lead in 64 Bit app development (esp. For Android & after Google supports it in 2H 2014).

Watch out for likes of Apple, Qualcomm, Google, Intel and Microsoft in this segment.

LTE Phones reaching mass-market before the Networks

LTE phones which will reach mass-market (sub-US$150 retail) in mature LTE markets in 2014. OEMs will continue to supply LTE-ready phones (for scale) to newer markets and in the hands of consumers before even the LTE networks are live. LTE Device Installed base will be greater than LTE subscriber base and the trend will continue until the LTE plan pricing reaches mass market. China, USA will be the key market to drive this trend in 2014.

Additionally, many operators will leapfrog to LTE-A and hence the flurry of LTE cat-4 devices will start appearing in operator’s shelves.

Watch out for ZTE, Qualcomm, MediaTek and Samsung stimulating mass-market LTE market.

Sharper & Flexible – The New Glass

As Full HD (1080p) displays have gone mainstream at sub US$350 price-points, the battle shifts to getting either a 2K display or a Flexible display into the devices. Displays will remain the battleground for differentiation across price-bands in 2014 allowing OEM to either raise the price or reduce the price for a SKU. In the era of ‘size 0’ smartphones are trending the other way as consumers want bigger and bigger displays every time they are out for shopping their very personal device. Phablets and Tablets together are going to be US$170 Billion worth segments in 2014. Smartphones are achieving steady state towards 5-6 inch whereas tablets towards 7-8 inch formfactors. However, phablets are also poised to overtake tablets next year.

Watch out for LG, Samsung, Toshiba, Sony and Oppo to lead this trend in 2014

Imaging Kickstarts the Sub-Ecosystem wars, who will win it?

The camera resolution, OIS and low-light imaging wars have been reignited by Nokia, Sony and others in 2013 and the competition to differentiate will continue with Imaging as a key differentiator. The differentiation will come in the form of software behind the optics array imaging, 4K image and video capture, video editing on the go, image stabilization, Kinect style interactions etc. This will kickstart a whole new sub-ecosystem of already popular use-case in a mobile phone – Imaging.

Watch out for Nokia, Sony, Qualcomm & NVIDIA to dominate this space.

Wearables a segment ready for prime-time or  just forced down the consumers’ throat?

 Appcessories are great as they have revolutionized the different use-cases leveraging apps, sensors and will continue to take off in 2014 and expand across price-bands reaching mass-market.

But do consumers need or want wearables those have another display on it to interact with? Smart-wearables with displays such as smartwatches, glasses are stuck between functionality of appcessories and smartphones. For such smart-wearbles to take-off in 2014 or future years will need a whole new set of ecosystem initiated by a new set of intuitive interaction mechanisms, connectivity technologies, extraordinary battery design, specially designed applications, software and services.

 2014 won’t be the year of smartwatches or smartglasses unless OEMs fulfills the above criteria building a unique user-experience or these devices experience an iPhone moment to stimulate the demand. We see supply greater than demand as OEMs (forcefully) try to create a category out of it just to have these devices in portfolio and not being left out. Lots of work needs to be done for consumers to ‘want’ them.

Watch out for long tail of smaller startups such as Pebble, Vuzix, Omate, Misfit to players such as Epson, Symphony Teleca, Varta and bigger players such as Microsoft, Samsung, Google, Jawbone, Nissan and Sony.

9 out of 10 Handsets Sold in China are Smartphones

Smartphone momentum continues in the world’s largest mobile market, China. According to the latest Monthly Market Pulse Report from Counterpoint Research, smartphone sales in China reached an all-time monthly high of 30 million units in August 2013. The smartphone penetration of the total handsets sold also reached a record high of 91% topping many developed markets such as USA which reached 87% during the same month. China is now almost three times larger than the US market after it surpassed USA last year to become the largest smartphone market globally.

Most of the contribution came from the domestic players such as Lenovo, Huawei, Coolpad, Xiaomi and ZTE boosted by their broader smartphone portfolio and expanding distribution reach. These vendors realized healthy sell-through after a channel inventory built-up in July 2013.

As a result, Android OEMs captured a combined record 96% share during the same period. While Samsung saw its share dipped to 15%, Lenovo maintained the number two spot with 11% smartphone share. Meanwhile, Nokia (& Windows Phone) surpassed Apple (& iOS) thanks to better movement for lower-priced models such as Lumia 520. But we believe this is a temporary setback as Apple will likely regain significant share from competition with the new iPhone 5s & 5c launches starting September 2013.

The premium smartphones’ growth significantly slowed in China in August 2013 following a small spike in May & June with Galaxy S4 launch. The key reasons being a dip in iPhone sales in anticipation of newer iPhones plus a shift in operator subsidies towards mid- to lower priced models.

The real volume growth driver in August 2013 was the sub-US$200 wholesale price band smartphones. Domestic vendors captured more than three-fourths of this fast growing segment thanks to smartphone retail prices reaching feature phone levels. Furthermore, the generous subsidies from Chinese operators significantly lowered the barriers for consumers to purchase these smartphones. Feature Phones are thus quickly moving towards oblivion and are disappearing from majority of OEMs’ product portfolios and & Operators’ shelves.

Figure 1: China Smartphone Sales* & Sales Penetration % Trends

China Smartphone Sales & Sales Penetration % Trends

Figure 2: China Market Smartphone Sales Share August 2013

China Monthly Market Pulse OEM Smartphone Share August 2013

Source: Monthly Market Pulse August 2013

* The numbers in this press release only account for the official and legitimate channels.

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