Chinese smartphones hot on Apple's heels in 2017

Asian researcher Trendforce tracks the orders for, and supply of, components used in smartphones and tablets – memory, SoC, screens, and more.

Its reports may differ from IDC that uses sell-in (shipments to resellers), GfK that uses sell-out (reported sales), Apteligent that uses phone activations (from measuring apps) but in the end, these all tend to paint an accurate picture. The exception is Kantar World Panel Comtech that uses consumer panels to measure sentiment and buying habits – its predictions are different from all others.

The bottom line is that 136.81 billion smartphones were shipped in the calendar year 2016 and Trendforce estimates this will grow by about 5.5% to 144.38 billion in 2017. Samsung’s position will remain at 22.6%, Apple will stay second with 15.7%, Huawei will increase slightly to 11.7%, and OPPO/vivo (owned by BBK) will skyrocket and hit 15.3% combined.

What this means is that despite the innovation frenzy expected in 2017 to counter the effects of an iPhone 10th anniversary model, brand loyalty, value, and ecosystem status quo will remain. Those in the iOS ecosystem will stay put while Android will continue to grow slowly.

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Trendforce also released its tablet report that shows tablet shipments will decline by 6.1% from 157.4 billion to 147.8 billion. Trendforce counts any >7” slate form factor regardless of whether it has an optional keyboard. Therefore, it includes the iPad Pro in the figures. But it does not include 2-in-1 Hybrid PC (with a keyboard like Surface Pro and Book) so one is unsure what the Microsoft listing is for and clarification has been sought.

Apple is the clear leader in the tablet space and its market share remains relatively stable – there is always room for a tier one tablet in business and perhaps a tier two at home. Its mini outsells all other models. Similarly, Samsung in number two position remains stable with most of its volume coming from the lower cost Galaxy Tab A series and less from the Premium Galaxy Tab S2, much like its smartphone strategy.

I don’t think you can read too much into the figures except that iOS will have 26.6% of the tablet market and Android 73.4%.

Comment/analysis: Smartphones

Because of the different release dates for brands and models e.g. Samsung in February/March (called the Mobile World Congress effect) and Apple in September, with everything else in between, Apple users can rightly say that Trendforce estimates only include one quarter of iPhone 8 sales and four quarters of iPhone SE, 6S/Plus, 7/Plus sales. They are technically correct, but that also applies to Samsung and the others – the fact is that phones are sold all year round and various models simply create a demand “blip” when launched.

Trendforce says that Apple will sell 227 million handsets in 2017 and has previously reported that Apple expects 100 million of these will be iPhone 8/Plus (40/60% ratio - over four quarters, so say 25 million in Q4). Its then lower cost SE, 6S/Plus and will be discontinued or phased out (selling about 102 million) and 7/Plus (which Apple also expects to sell 100 million in total) will become entry level totalling 227 million.

Apple is playing it safe. Its main smartphone markets (Europe/UK, US, Japan, China and ANZ) are over-saturated, replacement times are now longer thanks to telco subsidies generally being phased out revealing the true handset price, and people buy a new model when they need to, not because a contract runs out or because it is chic to queue overnight for one. Apple’s ecosystem is established with little defection to/from Android so it focuses on making more average revenue per unit (ARPU).

Smartphone markets in the BRIC nations (Brazil, Russia, India and China with an emerging middle class), Africa/Middle East and the rest of Asia have succumbed to price over brand snobbery. While Apple is doing well in the premium segments (those that can afford it), overall volumes in numbers of handsets are way down in favour of lower-cost, often locally produced brands. Ironically, there is a greater market for lower cost factory refurbished/repaired/recycled iPhones there – it is a cost thing resulting in far lower ARPU for these sales.

There are more than 30 brands and hundreds of models in China alone, India has about 15 brands, Russia 10, Japan 8, Taiwan 8, and South East Asia 15, all catering for local needs.

Samsung is interesting – while we all know of the premium Galaxy S Series it accounts for less than 10% of its sales, it produces more than 40 different models to gain market share leadership. Its ARPU is not anywhere near Apple but it can claim 22.6% market share over Apple's 15.7%.

Now for some wild cards.

Moto (a Lenovo company). Danny Adamopoulos stated in an iTWire interview this week that “Our chief executive has stated that Motorola will be a solid number three in China and Western markets – no timeframe has been given, but let’s assume within two years.”

They are bold words meaning the displacement of probably Apple, Huawei and BBK, but knowing the resources and power of Lenovo I can see a bloody market share leadership fight looming and it being a winner. It will be a global assault – and it can only be good for the consumer.

BBK that owns “clones” OPPO/vivo (essentially similar specified product sold to different online and offline markets) also owns the highly successful One Plus (usually a little more “out there” product) and is, in fact, China’s largest smartphone maker. Through brand segregation, different go to market strategies in China and Western countries, and gaining significant popularity in the US (Apple’s staple market) it makes more phones than Apple though it sells them from US$100 to US$400. I suspect its position will only get stronger.

Then we have the re-entry of Nokia via HMD Global that has stated its ambition is to be a most significant player in the global smartphone market. Its strategy is initially via lower-cost feature phones with buttons at a cost of well under US$100 (could be as low as US$50). This is going to sell well to those who want a basic, small, pocketable, phone with long battery life, email, calendar and other capabilities and do not want data/battery hungry smart features. HMD claims it can sell 100 million units per annum – that is 7% of the market with one model! There are strong rumours that this once largest selling global brand will also re-enter the Android smartphone market.

And to finish up, don’t write off ZTE, Huawei, LG, Alcatel, Sony, HTC, Foxconn (in its own right, and as Sharp), Google, and some other emerging Chinese makers who realise that 2017 may be the bloodiest smartphone war ever – the weak will not survive and the clever will get stronger.

Everything will be revealed over the coming days as MWC announcements are released.