Samsung and HTC have just announced their latest offerings in the S6 and M9 respectively, over at MWC. Prior to that, Apple showcased and released their latest offerings in the mobile arena in 2014 with the iPhone 6 and 6+ devices. My personal opinion is these devices lack innovation, and this seems to be backed by the dip in market share for some of the big boys over the last couple of years. Is it really the death of the flagship device? Let’s take a look at the facts.
OK, so let me start by caveating this article up the ying yang! Flagships aren’t dead in terms of no longer being released or even needed. The major players in the mobile device market are all well capable of absorbing dip in sales and will continue to pursue the annual release cycle of an iterative product. My main point relates to the fact that the consumer is seemingly getting slightly tired of this model and technological advances are changing the landscape of mobile device adoption.
So, can this stance be backed up? The answer is somewhat, yes.
Back in 2013, Samsung shipped over 444 million smartphones and sat pretty at the top the individual market share charts with a cool 24.6%. The Galaxy S4 and Galaxy Note 3 both played a big part in that figure. Fast forward to 2014 figures and there is a significant dip in sales with only just over 392.5 million units shipped seeing their market share drop to 20.9%.
Perhaps it shows a dip in Android sales overall? Not so. The opposite is actually true according to IDC’s Worldwide Smartphone Unit Shipments report by OS. In fact, Android is the only OS to see an improvement in market share, jumping from 78.7% to 81.5%.
Let’s take a look at Apple’s performance then. Well, it’s certainly not a bad outlook here. 2013 shipments sat at over 150 million units whilst their market share was 8.3%. 2014 actually saw an increase in both shipments and market share bolstered no doubt with the release of their iPhone 6 line up. Over 191 million units were sold in 2014 and market share increasing to 10.2%. Not huge increases numbers perhaps given the flagship release towards the end of the year, but a healthy improvement year on year considering their position back in 2012 where they sat with just 7.5% market share and shipping over 130 million units.
All’s happy in Apple world then. They continue to improve financially, but certainly aren’t breaking down the Android dominance in terms of worldwide units.
Let’s have a look elsewhere then. Nokia’s mobile division became Microsoft’s in 2014 and the Lumia line continues to saturate the Windows Phone space. Microsoft saw their market share drop 4 points from 13.9% to 9.9%. Equally poor is the slump in units shipped from over 250 million units in 2013 to just 185 million units in 2014. Windows Phone isn’t looking like breaking through the foundations that iOS and Android have laid firmly.
If the market share of the big boys was eaten into, or in Apple’s case, increased only slightly, where did that Market share go? The last two years saw the growth of companies such as Xiaomi, Huawei, and more well-known to most western consumers, Motorola (now Lenovo). Their product mix of low and medium end devices enabled growth, not only in the Far East, but struck a chord with Western consumers also. Xiaomi’s Redmi and Mi3 devices in 2013, followed up with their Mi4, and Redmi Note lines in 2014 saw them more than triple their numbers with the end of 2014 seeing them sitting with 3% market share and over 56.5 million devices sold. Lenovo and Huawei show slightly smaller growth but still very impressive with 4.5% and 3.8% market share respectively at the close of 2014 compared to their 3.7% and 2.9% 2013 numbers.
The above figures only tell half the story. It’s fine seeing small increases and large declines in the established brands and increases for the lesser known or less favoured brands in the space, but what’s the reason. My opinion is product mix. Samsung and Apple are two companies that have taken diametrically opposing stances in terms of their product family choices and line ups. Samsung likes to saturate the market with as many devices across the vertical mobile stack as possible with many low, medium and to some extent, high-end options available whilst Apple seem happy to keep their mobile device line up clean, and clutter free, offering just 2 devices up to now.
Lenovo, Huawei, and Xiaomi have managed to find that middle ground which has grown since 2013 and sees devices like the Moto G, Huawei’s Ascend and Honor lines, and Xiaomi’s Mi devices giving good performance, good build quality, good features and almost certainly most of all, good pricing.
The smartphone is so analogous with modern lifestyle that owning one has become less of a status symbol than 5+ years ago, and more of necessity. Consumers are less and less happy to part large quantities of increasingly hard-earned cash to get the latest smartphone. Companies like those already mentioned are finding a comfortable foothold in the middle ground and are exploiting it to the point where the lines between flagship and mid range devices are becoming blurred.
Furthermore, there is some anecdotal evidence that consumers are becoming less and less enamoured by the carriers constant assertion that an 18-24 month contract is required for the latest and greatest handset. This may point to consumers keeping their handsets longer and thus the numbers in 2015 might show an increase due to cyclical changes in carrier contracts. Perhaps consumers are looking at alternative tariffs with the rise of SIM only deals lending more flexibility to the consumer in terms of when a handset refresh is required. Time will tell on that.
Is This The End?
So, you’ve read the facts, by now you know my opinion, and you’re perhaps wondering whether it is all doom and gloom. Despite my prophesy that we’ll continue this trend for a couple of years and see the likes of Samsung and Apple shrink somewhat due to the growth of these other players, it’s not already written this will come to pass.
Firstly, carriers are getting clever with the tariffs they provide. Subsidised prices have been cut and even new handsets can be purchased, on a shorter contract, for a (more) reasonable price. We hope that continues as that will only drive turnover.
Furthermore, whilst Plato was perhaps right in his assertion that “Necessity is the mother of invention”, it seems it’s certainly not the case of innovation. Apple, Samsung, and many other mobile manufacturers are finding it increasingly risky to shake the status quo of annual iterative mobile device releases and look to deliver something new. Whether that be a price point, a features list, a device footprint; really I’m not sure it matters. It’s all about freshening up a stale market place. That’s what Xiaomi, Meizu, Huawei, and even Oneplus have managed to do, and that’s what I think Apple and Samsung will have to do. Look to the consumer for the problem, and then start answering it. Smartphone batteries are starting to increase in size, but more could be done. More widespread Wireless Charging adoption could be pushed both in handsets and in outlets. Privacy options could be explored and made user-friendly for consumers. There is much that could be done.
You could argue that Samsung introducing the Note Edge and more latterly the S6 Edge, and Apple plumping for a bigger-than-big sibling in its usually solitary iPhone flagship range shows that they are taking heed of that particular point. It’s just not enough in my opinion. When you’re a big OEM and you’re used to churning out nearly the same device for 3-5 years with a slightly different polish, it’s understandable if your shareholders are a little anxious about upsetting the apple-cart. There can be no mistake now however. Market share is being lost and with that comes decline in sales (not yet for Apple), and ultimately, with that comes disgruntled shareholders.
There is no doubt something will give. Will it be too late for the big boys to turn things around?