Full-year global smartphone market declines for the first time

For five consecutive quarters the global smartphone market has registered year-on-year decline, marking the first time it has shrunk on annual basis since the first iPhone defined the category in 2007.

The size of the contraction is believed to be around 4-5%, according to some research firms. Among the leading smartphone makers, Huawei was the only one that has bucked the trend by increasing its sales volume and vastly improving its market share. By some estimate it is almost neck and neck with Apple.

“Huawei grew 35 percent and shipped a record 205.8 million smartphones globally in full-year 2018,” said Woody Oh, Director at Strategy Analytics. “Huawei is now just a whisker behind Apple, who shipped 206.3 million iPhones last year. Huawei is massively outgrowing the iPhone and we expect Huawei to overtake Apple on a full-year basis worldwide for the first time in 2019.”

In general, the leading Chinese brands, including OPPO, vivo, and Xiaomi (in addition to Huawei) have been aggressively expanding overseas to compensate the weak domestic market. According to the estimates by Counterpoint Research, 46% of the Chinese brands’ total volume was shipped outside of China, up from 33% a year ago. “The collective smartphone shipment growth of emerging markets such as India, Indonesia, Vietnam, Russia and others was not enough to offset the decline in China, which was responsible for almost 1/3 of global smartphone shipments in 2018. With China showing little or no sign of recovery due to various politico-economic factors, Chinese brands are looking to expand overseas,” said Shobhit Srivastava, an analyst from Counterpoint. “To increase market share, Chinese brands have been aggressive in both hardware/software design and marketing.”

Despite being badly hit in the smartphone market in 2018 (and foreseeing continued difficulties in 2019), Samsung was still able to hold on to the overall market leader position. “Samsung shipped 69.3 million smartphones worldwide in Q4 2018, dipping 7 percent annually from 74.4 million units in Q4 2017. Samsung remains the world’s number one smartphone vendor, despite intense competition from Apple, Huawei and others across core markets of India, Europe and the US,” commented Neil Mawston, Executive Director at Strategy Analytics.

Calculating Q4 was made further complicated as this was the first quarter that Apple would not publish the iPhone shipment volume (though it continues to publish iPhone revenues). We sampled three research firms’ published numbers on the market size and vendor share, each of them making their judgement call on Apple as well as other firms that do not publish their shipments.

Both Counterpoint Research and Strategy Analytics believed Apple sold 66 million iPhones in the final quarter of 2018, presumably by applying the announced year-on-year 15% decline of iPhone revenues directly on the volume. This is a crude methodology, as it would assume the average selling price (ASP) of the iPhones has remained constant from a year ago. The new models released in 2018 were sold at much higher price points than their predecessors from 2017. To couple this with Apple’s decision to discontinue some older, cheaper models, the iPhone ASP should only go up, which means its volume decline should be bigger than 15%, though by how much is anyone’s guess.

On the other hand, Canalys estimated that 71.7 million iPhones were sold in Q4, or a 7% decline from Q4 2017. As a matter of fact, the firm, based on this estimate, declared that Apple overtook Samsung to be the market leader in Q4. This calculation implies Apple must have vastly discounted the iPhones to drive up volume. This is not entirely impossible, but it has not been reported broadly.

Smartphone 2018

Apple iPhone sales plunged by 20% in November – Counterpoint

Facing more affordable competition from the Chinese brands, the iPhone’s total sales suffered a 20% decline in November, with the cheaper XR model outselling the more expensive models, according to an update from Counterpoint.

The research firm published its monthly update on iPhone sales for November, estimating that the decline was across the board. In Europe and North America, replacement cycles are getting longer while operators are reducing their subsidies, both trends playing to the decline of iPhone sales.

One exception was China, where the sales held largely thanks to the 11.11 (“Single’s Day”) sale, where all online channels would hand out discounts. However, the China market is expected to go down in December. On one hand the Single Day sales already satisfied much of the demand; on the other hand, the ongoing trade war with the US has pumped anti-American sentiment into some consumers, which Tim Cook also employed to explain away the weakness in its phone business.

When it comes to the model breakdown, Counterpoint said the best-selling model was XR, the cheapest among the three new models recently launched. More specifically, the 64GB version, the one with the smallest memory, was selling the best. This is in stark contrast to a year ago, when the best-selling model was the then newly launched iPhone X, the most expensive one in the new line-up. The research firm also concluded that when looking at the performances of the two most expensive models of the two years, the “iPhone XS Max, when compared to iPhone X during the same month last year, shows a 46% decline in sales.”

iPhone-November-Sales-2017-vs-2018

The decline should not come as a surprise though. In all markets the Chinese brands are gaining momentum, not the least in emerging markets like India, where smartphone market is still expanding. “iPhone has never achieved a significant share of the Indian market because it’s just too expensive. It rarely makes it above 1% of the overall market or 2% of the smartphone market. Recent changes to import taxes made the cost even more prohibitive. Apple has now decided to start assembling in India through Foxconn. This should help offset the import taxes it currently has to pay. This move may also be a hedge against potential damage from the ongoing China/US trade war.” Peter Richardson, research director and partner at Counterpoint told Telecoms.com. “However, while Apple’s brand is certainly well-regarded, Indian consumers have become accustomed to the quality of Chinese Android products, from players such as Xiaomi, Vivo and Oppo. It is questionable whether they will see the value in iOS relative to these Chinese players that are innovating much faster. Huawei (and Honor) has also been a marginal presence so far, but is expected to grow relatively quickly, adding to the market’s competitive landscape,” Richardson added.

Even in the more advanced markets Apple has shown weakness for a while. Earlier we reported that Apple was compensating the Japanese operators to offer discount and considering reviving iPhone X in Japan to boost sales.

Jio leapfrogs Idea and Vodafone for second place in India

The Telecom Regulatory Authority of India (TRAI) has unveiled the monthly growth statistics for July and India is still the market which keeps giving.

Looking at the wireless segments to start with, Jio is once again dominating. Overall, the market grew by 10.5 million subscriptions taking the total to 1.15 billion. This number is already pretty staggering, though when you consider the total population of the country is over 1.3 billion there is still room for growth. In most developed markets the mobile penetration (the total number SIM cards) exceeds 100% of the population, while there are numerous cases of this percentage going north of 110%. Looking at these statistics in the simplest of terms, there is still potential for another couple of hundred million subscriptions in the country.

Of course, Jio is capitalizing most from the insatiable appetite of the Indian digital society. When looking at the total number of subscriptions secured by the telcos, Reliance Jio captured roughly 91% of the new customers, boosting its subscription base by 11.7 million. Amazingly, the 609,000 subs captured by Vodafone or the 313,000 attributed to Bharti Airtel are nothing more than footnotes; how many markets are there were you could say that!

The end result is continued momentum for Jio. As you can see below, Jio has leapfrogged both Vodafone and Idea in the market share rankings. That said, with the much-anticipated merger on the horizon it won’t be long before the combined entity hits top spot.

Telco Net Adds Market Share
Reliance Jio 11,796,630 19.62%
Vodafone 609,974 19.3%
Bharti Airtel 313,283 29.81%
BSNL 225,962 9.8%
Idea 5,489 19.07%
MTNL -9,914 0.3%
Reliance Communications -31,814 0.004%
Tata -2,357,690 2.1%

Perhaps the most amazing aspect of these statistics is in the broadband market however. The staggering growth of the mobile segment will continue for at least the short- to mid-term future, though with a total of 22.2 million broadband subscribers there is an incredible opportunity for the right offering.

Just to put these numbers in perspective, the broadband would have to grow 50-fold to even come close to the same scale as mobile. Admittedly, it significantly more expensive to invest in infrastructure for a future-proofed broadband network in comparison to mobile, but this is an area which seems primed for the right disruption.

Of course, with disruption comes uncomfortable truths. Jio might be on an upward trend, collecting subscriptions and hiring generously, though the consequence of this disruption has been market consolidation. In the most general terms possible, consolidation is never a positive for the job market, while the Financial Express is reporting job losses of 50,000-75,000 in the Indian telco market across 2018.