Low-cost smartphones are the catalyst for a significant worldwide economic phenomenon that you'll hear more about in 2015. According to the latest market study by International Data Corporation (IDC), smartphone vendors shipped a total of 375.2 million units during the fourth quarter of 2014 (4Q14), resulting in 28.2 percent growth when compared to the 292.7 million units shipped in 4Q13 and 11.9 percent sequential growth above the 335.3 million units shipped in 3Q14.
But here's the big news. For the full year, the worldwide smartphone market grew to a total of 1,301.1 million units shipped -- that's up by 27.6 percent from the 1,019.4 million units shipped in 2013.
Having spent 11 quarters prior to 4Q14 as the number two smartphone vendor in terms of shipments, Apple managed to close the gap to a near tie with Samsung in 4Q14. Led by the success of its newer, larger iPhone 6/6+ models, Apple reduced the volume gap to just 600,000 units in the fourth quarter.
Despite being far more profitable for quite some time, Apple's shipment volumes trailed Samsung's by more than 33 million units during the same quarter a year ago. Samsung's challenges have not only come from Apple, but also from the increasing number of low-cost Google Android OEMs that are putting out products at much lower margins.
IDC believes that in order for Samsung to regain its share at the top, it will either have to accept lower margins -- by selling lower cost smartphones -- from here forward, or revamp its high-end product strategy to compete better 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 at IDC.
In 2013 IDC talked about the smartphone industry topping the 1 billion unit milestone, and while year-over-year growth did slow from 40.5 percent in 2013 to 27.6 percent in 2014, the market clearly still has some upside growth potential.
This past year volumes surpassed 1.3 billion units and the vendor scenario has witnessed continued shakeups. Growth is forecast to decline to the mid-teens in 2015, but opportunity exists as much of the world's population is either not a wireless subscriber or has yet to move to a smartphone.
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. With Lenovo acquiring Motorola, and Xiaomi having greater aspirations beyond China, the competitive pressure will come more from below and less from above.