A smartphone, when you think about it, really is an incredible item. It combines the functionalities of many things into one: a phone (yes, you can still use them to make calls), a camera, a calendar, a purse, a diary, an alarm clock, a photo album, a book, and so much more. It'd be harder to come up with things smartphones can't do than what they can.
All this is to say that the smartphone market is a competitive space with companies working on secure, user-friendly, and innovative devices to garner consumer interest and market share.
The global smartphone market has moved from a high growth phase (experienced few years ago) towards a phase of stabilized long-term growth. Majority sales in developed countries are now being generated from upgrades to a better device rather than first-time buying. Instead, you can find first-time buyers in emerging markets.
Back in 2016, Gartner said, “The double-digit growth era for the global smartphone market has come to an end.” The global smartphone market grew by 2.7% and 1.2 % in 2017 and 2018, respectively, followed by a 1% decline in 2019 (some estimates suggest a 2% fall).
The COVID-19 pandemic, and its effects on the economy and movement of people, lockdowns, and point-of-sale closures, have further put pressure on the smartphone sales. The smartphone market shrunk around 16–20% during Q2 2020 based on varied reports and is projected to decline 9.5% year-over-year in 2020.
When you look at the smartphone market, one incredible statistic comes up: the top five companies hold close to 65% of the market share. Here are those companies, and what they're up to:
1. Samsung (SSNLF), the South Korean conglomerate, ruled the worldwide smartphone market for years with wide margins. With increasing competition from peers, its market share began to decline. It peaked during 2013 at 31% and was reported at 19.2% in 2019. Samsung experienced a 22% fall in shipments year-on-year, although it dominated close to 19% of the market share in Q2 2020.
Samsung’s market share in India—the world’s second largest smartphone market—was 26% in Q2 2020 (up from 23% in Q2 2019). Samsung is a popular brand in the U.S. and captures one-fourth of the market but is barely 1% of the Chinese market. Samsung plans to unveil new flagship smartphones, including the Galaxy Note and a foldable phone.
Its second quarter earnings press release read, “As for the second half, the number of 5G subscribers and launches of mid- to low-priced 5G smartphones are expected to increase while adoption of high-resolution and triple and quad camera for mobile devices is expected to grow.”
Samsung is the largest non-U.S. spender on research and development with $17.32 billion in 2019.
2. Huawei has challenged Samsung’s supremacy in the smartphone market in a short period of time. In 2015, Huawei joined Nokia, Apple, and Samsung to become the fourth mobile company to ship over 100 million smartphones in a year; its shipments in 2015 were at 106.6 million. Huawei has created a niche for itself, especially in emerging markets through its affordable price range, moving up from a 3% worldwide market share in 2011 to 15.6% in 2019.
Estimates by IDC suggest that Huawei topped the chart with its market share at 20% (Samsung at 19.5%) in Q2 2020 while Gartner reported a 18.4% and 18.6% market share for Huawei and Samsung, respectively.
Huawei dominates the Chinese smartphone market with a 47% market share and 60% of Chinese 5G smartphone market. Huawei believes that, “Innovation has been the very foundation for its survival and growth over the past 30 years.”
The company continues to invest in future-oriented, cutting-edge technologies and basic research, with an annual investment of $3 billion to $5 billion. Huawei has already embarked on 6G research.
3. Apple. While most smartphone manufacturers witnessed a fall in shipments, the demand for Apple’s (AAPL) most important product showed resilience amidst the global pandemic and recession. During Q2 2020, Apple captured 13% of market share while it experienced a 2% growth in revenue from iPhone, which was reported at $25.41 billion for Q3 FY2020 (April-June).
The iPhone 11 witnessed a continued momentum in growth and a good start of the iPhone SE, which is a more budget-friendly variable of the iPhone. During the Q3 FY2020 earnings call, CEO Tim Cook said that latest survey of consumers from 451 Research indicates iPhone customer satisfaction of 98% for iPhone 11, 11 Pro, and 11 Pro Max. Apple spent $16.21 billion on R&D in FY2019 and has spent $13.77 billion during the first nine months of the ongoing FY2020 (October–June).
Reports suggest that Apple has asked its suppliers to build at least 75 million 5G iPhones for later this year. Apple shipped around 69.55 million devices in Q42019 and a total of 193.47 million in 2019 (12.6% market share). To strengthen offerings, the company made a $1 billion acquisition of Intel’s smartphone modem business. Apple dominates the U.S. smartphone market with a 46% share.
4. Xiaomi, based in China, is currently the world's fourth-largest smartphone brand. In its initial years, it was hugely dependent on the Chinese market for its growth. However, it expanded rapidly in the past decade and has presence in more than 90 countries and regions around the world. With a sale of 70 million handsets in 2015, Xiaomi’s worldwide market share was below 5%. Today, it captures close to 9% of the global market, having shipped 126.05 million devices in 2019. Xiaomi is the market leader in India with an approximately 30% share. The company’s Q2 2020 global shipments stood at 26.09 million.
5. Oppo takes the fifth spot with around 118.69 million shipments in 2019 and a 7.7% market share. During Q2 2020, it shipped 23.61 million devices (a decline of 20% year-on-year), capturing 8% of the market. Oppo is closely followed by vivo. Over the years, these two brands have shown decent growth from under 5% market share in 2015. Oppo and vivo both dominate around 16% of the Chinese market each while in India, vivo scores above Oppo.
Going forward, the smartphone market is expected to witness intensifying competition amid a gradual recovery in demand and the roll-out of 5G devices.
Disclaimer: The author has no position in any stocks mentioned. Investors should consider the above information not as a de facto recommendation, but as an idea for further consideration. The report has been carefully prepared, and any exclusions or errors in it are totally unintentional. All facts and figures based on reports from IDC, Gartner, Canalys and Counterpoint and company financial statements. Apple Financial year: October – September.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Prableen Bajpai
Prableen Bajpai is the founder of FinFix Research and Analytics which is an all women financial research and wealth management firm. She holds a bachelor (honours) and master’s degree in economics with a major in econometrics and macroeconomics. Prableen is a Chartered Financial Analyst (CFA, ICFAI) and a CFP®.
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