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Friday, May 30, 2014

Global Smartphone Shipments Driven by Price Reductions

According to the latest global market study by International Data Corporation (IDC), worldwide smartphone shipments will reach a total of 1.2 billion units in 2014, marking a 23.1 percent increase from the 1.0 billion units shipped in 2013.

From there, total volumes will reach 1.8 billion units in 2018, resulting in a 12.3 percent compound annual growth rate (CAGR) from 2013–2018.

"What makes smartphone growth so amazing is where the growth will be taking place," said Ramon Llamas, Research Manager at IDC. "Smartphone shipments will more than double between now and 2018 within key emerging markets, including India, Indonesia, and Russia. In addition, China will account for nearly a third of all smartphone shipments in 2018. These and other markets will offer multiple opportunities to vendors and carriers alike, but the key will be balancing affordability with expectations."

On a worldwide basis, IDC expects the average selling price (ASP) of smartphones to reach $314 in 2014, that's down 6.3 percent from the $335 ASP in 2013.

From there, ASPs are expected to reach $267 by 2018. While these prices point to a definite decline, users still expect top-notch experiences regardless of what smartphone they purchase.

Until recently, low cost has equaled poor quality in the smartphone space. Given the competition at the high end, vendors like Motorola are trying to skate to where the puck is going by offering extremely affordable devices like the Moto E, which offer a ‘good enough’ experience that will suit the needs of many.

This goes to show that components that were used 2-3 years back in high-end smartphones are still sufficient in many aspects, and ultimately will allow vendors to come to the table with viable low-cost solutions.


Why Only Two Smartphone Ecosystems Matter

Android will undoubtedly remain the clear market leader among smartphone operating systems with share expected to hit 80.2 percent in 2014. Looking forward, IDC expects Android to lose a minimal amount of share over the forecast period, mainly as a result of the marginal growth of Windows Phone.

Android has been, and will continue to be, the platform driving low-cost devices. ASPs of Android smartphones were well below market average in the first quarter of 2014 and are expected to be $254 for full year 2014, dropping to $215 in 2018. Growth of Android phones is expected to outpace the market in 2014 -- rising 25.6 percent with volume just shy of 1 billion units.

Despite rumors of a larger screen iPhone, IDC expects share of iOS to drop from 14.8 percent in 2014, to 13.7 percent in 2018. Apple continues to be a strong player in mature markets, where devices are heavily subsidized, but emerging markets are expected to drive overall market growth, and appetite for smartphones in these markets is at the sub-$200 level, significantly below Apple's typical selling prices.

Apple  iOS volumes are expected to reach 184.1 million in 2014, growing to 247.4 million in 2018. Growth of 20 percent this year will slowly drop to year-over-year growth of 6.1 percent in 2018, more in line with overall market growth. Apple's potential upside could continue to be reduced by further price erosion.