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Snapshot of the smartphone market in May 2014

Every month we track the smartphone market across 35 countries from the supply chain to the retail POS and consumers to create accurate data and ultimately reveal the real sound of the market apart from the clutter our clients suffer from.

The overall Q2 2014 market is weak and larger vendors seem to suffer more than the smaller weaker ones. Below are the key takeaways from our regular Market Pulse report of May 2014.

1. The Market: In May handset sell through improved only slightly. Demand is getting better. Europe and the Emerging Markets improved but China is still slow and continues to contract. Japan and Korea are also weak although better than April. Sell-in shipments also followed the rise in sell-through sales demand. Q2 2014 is likely to be better than expected; potentially almost equal to shipments in Q1 2014.
Inventory at the industry level remain at manageable levels in most countries. Smartphones are now 69% of the market.

2. Vendors: Most international brands did not see improvement in sales – especially Samsung. Samsung still leads in all price bands and regions but loses share everywhere, all price bands and most regions including China and USA. Apple gains in the US. Both Lenovo and Motorola enjoy growth. Mostly Emerging market local vendors (or local kings) take share from Samsung. See our report on Pakistan and Qmobile at www.counterpointdb.com. Apple’s sales rebounded in the US due to changes in operator plans and deals. Lenovo has gained share with new models and Motorola is showing good momentum since its Moto G launch.

APAC accounted for the majority of Samsung’s sales and China contributes the most among countries, followed by US and India. The newly launched Galaxy S5 was the best selling handset in May but the “not-quite-sexy-enough” premium Galaxy S5 which seems to have peaked at 5 million units a month. The mid-low tier smartphones are also suffering as there aren’t new models. LG’s G3 effect is not showing yet but we expect it to kick-in starting from late June. Xiaomi sales in China started to fall as the flagship models grow old.

Smartphone market share by each month 2014

3. Price-band analysis: The share of sales in the $400+ price bands (ASP or transfer prices) fell as the mix of local smartphone brands strengthened further. Emerging markets were also strong although China was weaker than expected. In May month 56% of global Android devices were under $200 a 1pp increase from April.

4. Hardware Features: Handset features have shifted more toward larger 5inch+ displays, which comprised 45% of all smartphones sold. In May, LTE could be found in 35% of the total smartphones sold. Samsung leads the LTE market with 38% share; followed by Apple with 29% of share; rest of the market was highly fragmented. LG left Sony behind and stood at 3rd position in May (last month it was 4th) but the Chinese are growing fast especially Huawei and Coolpad.

Top 10 Smartphones in May 2014 – Galaxy S5 Fails To Displace iPhone 5s

Apple’s iPhone 5s is still the bestselling smartphone in May 2014, 8 months after its launch last year. Samsung’s new flagship, Galaxy S5 comes in at second.

According to Counterpoint’s channel survey across 35 countries, Apple’s iPhone 5s continues to be the bestselling phone in the world, a spot that many expected to be taken by Samsung’s Galaxy S 5. The highly anticipated Galaxy S5 comes in at second place but still a quite distant number two in terms of (sell through) unit sales. The iPhone 5c shipments continue to decline but Apple continued clearing excess inventory for the iPhone 5c during the month. apple iPhone 5c sales put it behing Samsung’s last year’s flagship Galaxy S4 and Galaxy Note III.

Xiaomi continues to maintain its position in our top 10 bestsellers list with strong performance in domestic market. The MI3, Hongmi Red Rice and Redmi Note are now available in many overseas markets with Xiaomi’s expanding distribution to cotribute to global sales volumes. But within China, the two models (Mi3 and Redmi) are reaching peak and ‘me-too’ competitors are pushing out similar high-specced products at aggressive price-points. A product refresh beckons in coming months from one of the most talked about Chinese brand.

Samsung’s Galaxy S4 mini stood at 8th and the Galaxy Grand 2 which was released last year captured the 10th spot. The Grand 2 is a more affordable phablet from Samsung with a display size of 5.25″. There are now 3 phablets in the top 10 list which reflects the ongoing trend of larger displays. almost 40% of the smartphones sold in May were phablets according to Counterpoint’s channel research across 35 countries. If Apple comes out with a phablet later this year it will instantly become a hit and top the list of phablets within two months of availability.

Outside of the top 10 list Sony’s Xperia Z1 came in close. Motorola’s Moto G along with Huawei’s Honor 3C and LG’s G2 made into the top 20 list. Next month we expect to see the Nokia X in the ranks of bestsellers as it is moving up fast after just two months of sales.

**Top 10 Smartphone* List of May 2014**
Rank	Brand	Model	Category
1	Apple	iPhone 5s	smartphone
2	Samsung	Galaxy S5	smartphone
3	Samsung	Galaxy S4	smartphone
4	Samsung	Note 3	smartphone
5	Apple	iPhone 5c	smartphone
6	Apple	iPhone 4S	smartphone
7	Xiaomi	MI3	smartphone
8	Samsung	Galaxy S4 mini	smartphone
9	Xiaomi	Hongmi Redrice	smartphone
10	Samsung	Galaxy Grand 2	smartphone

(table source: Monthly Market Pulse May 2014)
^*Mobile Phone sales only (not shipments). Tablets, PCs, dongles, fixed wireless devices not included. All regional or minor hardware variations included in each model.

For more information and/or to purchase a copy of the report please send an email to:
info@counterpointresearch.com

Background:

Counterpoint Technology Market Research is a global research firm specializing in Technology products in the TMT industry. 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 13 years in the high tech industry.

Apple Captures Record 34 Percent of Japan Mobile Phone Sales in September

Despite a slow month of sales globally, Apple continued to double its market share in several of its major launch countries for its iPhone 5s & 5c in September 2013. This will help Apple end its traditionally weak third quarter on a relatively higher note.

According to Counterpoint Research, in one of the premium and important global markets, Japan, Apple’s share jumped to a record 34% during the month of September.

Figure 1: Apple’s Share¹ in the Japanese Handset Market

Source: Monthly Market Pulse September 2013
¹Mobile Phones Sales only (not shipments). Tablets, PCs, dongles, fixed wireless devices not included

Commenting on this performance, Counterpoint’s Director Tom Kang notes, “This is the first time any handset brand has crossed the 30% mark during the last decade in Japan.”

Mr. Kang, further added, “Japan has always been a competitive market with more than ten handset brands being tightly controlled by the three major mobile operators, thus making it impossible for a single brand to capture a record one-third of the market. Even Sharp, after ruling the Japanese mobile handset market for almost 5 years had only reached 26% share during its peak. But Apple has surpassed this and it’s a noteworthy feat signifying the growing clout for the Cupertino manufacturer in this tough market”.

Counterpoint’s Director Neil Shah explained on how Apple achieved this feat, “Apple’s newly launched iPhone 5S became the bestselling phone of Japan in September generating almost half a million units in sales in just a few days. Apple mainly benefited from expanding its channels to Japan’s number one mobile operator NTT docomo and thus instantly gaining access to a base of more than 60 million mobile subscribers. It took Apple iPhone almost 5 years to hit Docomo’s shelves since the first iPhone launch in Japan in the summer of 2008.”

Mr. Shah, further added, “It will be interesting to see how iPhone performs at NTT docomo. It will test the operator’s 20 million+ strong Android subscriber base on how quickly they will jump ship for an iPhone after using an Android smartphone for 3 years. This will prove if Android has enough value proposition to truly lock-in its user base and conversely if Apple has enough brand equity to consistently chip away this seasoned Android user base.”

Japan’s mobile phone market looks completely different from few years ago as foreign brands are dominating and pushing the once leading domestic brands under the rock. Foreign brands such as Apple, Samsung, LG & others together now control almost half of the mobile handset market from less than a fifth of the market three years ago. Meanwhile, domestic vendors such as Fujitsu, Sharp and Sony are fighting extremely hard with Apple and within themselves to capture market share.

Apple is on the verge of replicating its dominance in Japan market similar to what it is enjoying in its home market USA. This is possible due to expanded distribution channels as well as commanding higher subsidies (selling power) for the iPhones in these operator driven premium mobile phone markets.

Methodology:

Our Monthly Market Pulse market share data is based on sell-through (sales) surveyed at major mass retailers, distributors across different markets by Counterpoint Research team plus sanity checked with demand side surveys & expert Analyst estimates.
:
Background:
Counterpoint Technology Market Research is a global research firm based out of Asia specializing in Technology products in the TMT industry. 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 13 years in the high tech industry.

For more information or to be added to the distribution list please contact us:
info@counterpointresearch.com

Apple’s US Smartphone Share Doubles in September with new iPhone 5s and 5c

PRESS RELEASE

Apple takes the number one position from Samsung in the US in the month of September doubling its market share from the previous month. Apple captured 39% share of the smartphone market and 34% of the overall mobile phones market in September, a record high for the Cupertino smartphone vendor for this calendar month in US.Commenting on Apple’s impressive performance, Tom Kang, Research Director at Counterpoint Research comments, “In spite of supply constraints and just three weeks of sales, iPhone 5s raced to become the bestselling smartphone model in the US in September. Samsung Galaxy S4 was the second best-selling model followed by Apple’s new iPhone 5c which captured the third spot. Demand was robust after a lull in July-August months in anticipation of newer iPhones.”

Mr. Kang further adds, “The key reason for this sudden jump in sales can be attributed to the big wave of upgrades due in this launch month from Apple’s huge installed base of iPhone users in US. This depicts a healthy replacement cycle and user base growth trends for Apple despite the array of Android devices launching from tens of OEMs every month.”

Peter Richardson, Research Director at Counterpoint Research, notes, “Apple dominates the ultra-premium $500+ price-band capturing a 90% share of this segment and helping Apple double its overall market share in just a few weeks.” Mr. Richardson, further comments, “While Apple dominated the ultra-premium price band, Samsung showed great strength in the $400-$500 price band; more than half the sales in this segment came from Samsung, which allowed the Korean vendor to maintain a healthy 32% share in the US mobile phone market overall.”

Commenting on Samsung’s prospects Counterpoint Research Director, Neil Shah notes, “Samsung needs to create a beachhead in the $500+ segment in 4Q13. We believe the combination of its Galaxy Note 3 and Galaxy Gear is a good offering to help Samsung in this battle. The Note 3 is showing good early traction — gathering a loyal following with its large display, unique offerings like S Pen and attractive smart watch accessory, the Galaxy Gear. Thus, Samsung can capitalize on Apple’s current lack of larger screen smartphones and advanced accessories at least for near-term.”

Mr. Shah continues, “Apple and Samsung, captured a combined two-thirds of the smartphone market making US a largely duopolistic market, thanks to the hero flagship models and growing brand equity for these two smartphone giants. Consumers are now just not looking beyond iPhone or Galaxy series at point of sale.”

Meanwhile, the third largest smartphone vendor in US, LG, saw its share fell below 10% mark in September after a decent momentum for its flagship LG G2 over the last three months. Surprisingly, Motorola was the only other brand that maintained its market share during the month with some traction for its new Moto X smartphone, pegging ahead of Nokia and HTC in terms of smartphone market share in September. However each of these three players command less than 5% share.

* Chart and table source: Monthly Market Pulse September 2013

Background:

Apple iPhone 5s & 5c : Forget Low Cost Its Just High Profit !!

The most awaited launch event of the year kicked off today as Tim Cook unveiled the very expected iPhone 5s (but with a smaller s) and to everyone’s surprise a second new flagship the ‘iPhone 5c’ and not a “lower-cost” or lower-specced iPhone. So many Analysts will have to now revise (lower) their iPhone volumes outlook for Q4 2013.

iPhone 5s & 5c Flagships – Global LTE Ready

Apple is ignoring (again) the high growth smartphone markets especially the unsubsidized emerging and prepaid developed markets. Our Market Outlook service estimates that sub-US$300 smartphone price bands will contribute to more than two-thirds of the smartphone volumes globally in 2013. This is the segment which Apple is bravely ignoring and will be almost absent for some time now.

Apple’s strategy is clear here which is that it’s on an offensive to strengthen its position in “high-value” and “high-profit” premium smartphone market and protect its lion share of mobile industry hardware profits by clawing back share away from Samsung, LG , HTC and others. Apple has done three things right which will work in its favour atleast for the near- to mid-term to maintain its profit leadership:

1. Multiple Flagships Strategy: Apple is following its competitors such as Samsung (Galaxy Note 3 & S4), Sony (Xperia Z & ZL), Nokia (Lumia 1020 & 925) and Lg (Optimus G2 & G Pro) going with multiple super premium high profit flagship models i.e. iPhone 5s and iPhone 5c both with rejuvenated software, hardware design and features will provide fresh differentiated offerings to stimulate growth.

2. Multiple LTE band Support: Apple wants to tap high-growth areas within US$300 and above segments and that growth will be coming from LTE segment. We estimate almost 89% of the LTE smartphone volumes will fall in the US$300+ and above trade ASP smartphone segment. So with iPhone 5s & 5c which has multiple SKUs out of which some support upto 13 LTE frequency bands (e.g. Model A1456) with one SKU (A1529) supporting three TD-LTE bands as well out of which one sits perfectly for China Mobile’s future TD-LTE roadmap. Apple aims to challenge Samsung and others in this LTE race maintaining its profit leadership with iPhone 5s and 5c and at the same time maintain scale and provide a solution to the fragmented global LTE spectrum.

3. Expanding TAM: With the new launches Apple also announced it has expanded its distribution reach to one of the world’s “premium” and advanced carrier, NTT Docomo, Japan with access to 60 million richer subscribers. The next big step would be China Mobile and TD-LTE capable SKUs of the new iPhones will help achieve that in next few quarters once the deal is finalized and tap into a subscriber base of 750 million users.

In addition to above key points the overall design change remains tangible from the main flagship perspective apart from the cosmetic changes and few unique features of iOS7, moving to 64 bit arch as well as taking biometrics mobile (in iPhone 5s) courtesy last year’s acquisition of Authentec. These incrementsshould be (again) enough for Apple loyalists in subsidized postpaid markets to upgrade but we still warn about a higher-level of ‘iPhone ecosystem fatigue” which could slow down the greater than expected sequential growth in some markets.

However, this gives a great opportunity for Samsung and others to attack the rest of the two-thirds of the smartphone market and maintain huge marketshare lead over the next few quarters and at the same time squeeze Apple with cutting-edge premium hardware as done by Samsung, HTC, LG and Nokia in the last two quarters.

Apple has thus for now given up the “low-cost” strategy and will continue in its march to just go after profits rather than volumes (market share).

Apple is still No. 1 in profits, Samsung will have to wait for its triple crown

Apple still at top of profit share with 53%, Samsung at 45%, others at…2%

The second quarter of this year ended again as everyone expected. Samsung dominates in volume and revenue with Apple and LG following in order. Looks like there wasn’t anything exciting except for the tiny fact that Samsung’s revenue grew compared to the first quarter while Apple’s revenue toppled. This led to the question: If Samsung tops the market in volume and value what about profit? Profit was the only category where Samsung trailed behind the market leader, Apple so far.

Apple had been so successful in demanding a premium to the mobile operators, the actual B2B value chain purchasers, that it had always enjoyed a hefty profit. But transfer prices of the iPhone dropped below $600 for the first time in 3 years and volumes also shrunk to a low point, a prime opportunity for Samsung to claim its third and final crown.
But it didn’t happen…yet. We’ve calculated that Apple was still at top with 53% profit share and Samsung held 45%, LG 1% and the rest of the industry shared a tiny 1%.

* Apple
Apple reported $35B in revenue and $9.2B in operating profit for the quarter. Of the revenue iPhone took $18B and profit-wise we calculate $5.5B. This is an average 30.5% profit margin through our bottom up methodology for iPhone revenue.
We can’t disclose all our BOM analysis here but I will argue that our calculations are consistent with previous numbers from Apple. The $18B revenue, $5.5B profit for iPhone in Q2 tells us that iPhone revenue was 50% of Apple total revenue and 60% of total profit which has been a trend for almost a year now. iPhone profit margin was 30% while all other products had an average 20% profit, a 10% point difference which has also been a continuing trend.

* Samsung
Samsung again enjoyed a record quarter. The division revenue which is called IM (IT and Mobile) had record numbers, 34.6 trillion Won which translates to $31B. In IM there are tablets, network equipment and PC revenue. If we exclude one by one based on historical numbers, we end up with $25.6B. Again applying our bottom up BOM analysis, we get 18.6% operating profit margin for Samsung’s mobile business which is higher than the 17.7% of the IM division. Samsung’s mobile operating profit is calculated to be $4.7B, definitely lower than Apple.
Our analysts were the first to start calculating profit share back in 2008 and we’d be most eager to announce breaking news if there was any but looks like it’s not time yet.

We anticipate that Samsung’s sales will grow again in Q3 2013 while Apple will have limited growth due to the late launch of new products (iPhone 5S, 5C) so it will be another close call in terms of profit for the two. To offer our predictions for the future, we think in Q4 2013, Apple sales will almost double making Apple the indisputable leader in profit once again. But in 2014 it’ll finally be Samsung’s turn to lead in profits as the scale advantage starts to kick in.

For more information and a free copy of the summary of the profit share report please send us an email to:
info@counterpointresearch.com

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Insights Tag： iphone 5S

Snapshot of the smartphone market in May 2014

Top 10 Smartphones in May 2014 – Galaxy S5 Fails To Displace iPhone 5s

Apple’s US Smartphone Share Doubles in September with new iPhone 5s and 5c

Apple iPhone 5s & 5c : Forget Low Cost Its Just High Profit !!

Apple is still No. 1 in profits, Samsung will have to wait for its triple crown

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