The winners and losers of the smartphone industry 2014

2014 was a heady year as far as smartphone sales went. Apple released two new handsets, Samsung struggled to make any headway, and Chinese upstarts like Xiaomi made waves with lots of great new devices and impressive sales.

According to new data from research firm IDC, Apple closed the gap on Samsung in the fourth quarter last year, as worldwide smartphone shipments topped 1.3 billion for the full year.

Propelled by holiday seasonality, strong demand from users, and a wide variety of smartphone models, the end of year quarter was exceptionally strong. Based on information from IDC’s Worldwide Quarterly Mobile Phone Tracker, smartphone companies managed to ship more than 375 million units in the holiday season alone, which represents 28.2% growth compared to the year-ago quarter in which 292.7 million units shipped. The quarter also saw 11.9% growth compared with the previous quarter (335.3 million units). As for the full year, the entire market saw 1,301.1 million devices shipped – a significant increase from the 1,019.4 million in 2013.

Apple and Samsung battle it out

Apple has been relegated to second position for the previous 11 quarters in terms of shipments, but in Q4 last year, the Cupertino-based company managed to close the gap with Samsung, ending the period with almost a tie. The stellar quarter that Apple had was largely thanks to the new, larger iPhone 6 and 6 Plus, which helped the company to just shy of Samsung’s volumes by 60,000 devices.

Even though Apple has been much more profitable than Samsung over the past few years, Apple has always trailed Samsung by millions of units – 33 million in the same quarter a year ago, to be precise. Apple has enjoyed huge successes with its new models, selling 10 million in the launch weekend alone, and could even manage to overtake Samsung during 2015. Samsung for its part has struggled in 2014, not only in the face of stiff competition from Apple, but also from the large number of low-cost Android OEMs who create products at much lower margins. For Samsung to get back on top, it will be forced to accept lower margins or perhaps come up with a new high-end strategy to compete with Apple.

“Most of the industry expected an extremely strong holiday quarter from Apple, especially with regards to the iPhone. However, worldwide shipments of 74.5 million units beat everyone’s expectations,” said Ryan Reith, Program Director with IDC’s Worldwide Quarterly Mobile Phone Tracker. “Beyond the record- setting quarter, a few impressive things stand out with regard to Apple. First, at a time when average selling prices (ASPs) for smartphone are rapidly declining, Apple managed to increase its reported ASPs in the fourth quarter due to higher-cost new models. Second, the growth of iPhone sales in both the U.S., which is considered a saturated market, and China, which presents the dual challenges of strong local competitors and serious price sensitivity, were remarkable. Sustaining this growth and higher ASPs a year from now could prove challenging, but right now there is no question that Apple is leading the way.”

A billion smartphones and counting

As far back as 2013, IDC stated that the smartphone industry may top the milestone of 1 billion units, and even though the overall growth year-on-year slowed from 40.5% in 2013 to 27.6% in 2014, it’s clear that the market hasn’t run out of steam just yet. The past year saw mobile volumes beat 1.3 billion units, and the industry has experienced continued shakeups at all levels. This year, it’s forecast that growth will decline to the mid-teens, but considering that much of the world’s population don’t yet subscribe to a wireless carrier or own a smartphone, there are still many opportunities at every end of the smartphone spectrum.

“That the worldwide smartphone market grew by 27.6% in 2014 is noteworthy, but it also represents a significant slowdown compared to 2013,” said Ramon Llamas, Research Manager with IDC’s Mobile Phone team.

“Mature markets have become increasingly dependent on replacement purchases rather than first-time buyers, which has contributed to slower growth. In emerging markets, first-time buyers continue to provide a lot of market momentum, but the focus has shifted toward low-cost devices, creating a different dynamic for both global and local vendors…What remains to be seen is how the vendors beyond Samsung and Apple will assert themselves,” added Llamas.

“With Lenovo acquiring Motorola, and Xiaomi having greater aspirations beyond China, the competitive pressure will come more from below and less from above. This will make the smartphone race continuously competitive as 2015 shapes up.”

Smartphone highlights in 2014

In 2014, Samsung remained the undisputed leader in market share. With more pressure in the high-end market from Apple, and in the low-end to midrange from Chinese manufacturers Xiaomi, Huawei, ZTE, and many more, Samsung faced a battle on many fronts. To counter this, Samsung streamlined its operations and product portfolio to become more competitive in the market. It remains to be seen in 2015 whether the strategy has worked.

Apple reached a new shipment record in Q4 2014, and fell a little short of surpassing Samsung in terms of overall leadership in the smartphone market. Increased consumer appetite for large-screen devices, as well as Apple’s massive push into China and other countries saw iPhone sales rise 44% in the U.S. and 97% in the BRIC countries (Brazil, Russia, India, China). The company’s sales doubled year-over-year in China, Brazil, and Singapore. But there are now questions over whether Apple can sustain this impressive growth.

Here’s the breakdown of smartphone sales in 2014:

Chinese company Lenovo came in at third place in the fourth quarter, just beating Huawei thanks to the acquisition of Motorola earlier in the quarter. But Lenovo continued to dominate the sub-$150 handset market in China with an enormous selection of devices including the popular Golden Warriors S8 and its flagship Vibe Z2 pro. Lenovo also recently announced that it will bring the Motorola brand back to China in 2015, starting with the Moto X.

Good news for Huawei, as it returned to the list of top 5 worldwide vendors, focusing on its midrange and high-end smartphones (the P Series and Mate Series), and saw continued success with its Honor line (the Honor Holly was budget Android phone was also launched in the UK this week).

Huawei attributed its 2014 success to improved brand awareness and customer experience, which it will no doubt continue to improve upon in 2015.

Xiaomi fell from third position to fifth in the fourth quarter, which placed the company ahead of LG for the final spot in the top 5. Even though its shipment volumes fell slightly from 3Q14 levels, Xiaomi posted the largest year-over-year growth the main vendors, mainly thanks to solid demand in China and a steady release of popular new devices including the Mi4 LTE.

2015 looks like it’s already shaping up to be an even more interesting year in the smartphone industry. And with Mobile World Congress just around the corner, things are already starting to hot up…

SOURCE: IDC

Let us know in the comments below who you think the winners and losers were in the smartphone industry…