Editor’s Note: Welcome to our weekly feature, Analyst Angle. We’ve collected a group of the industry’s leading analysts to give their outlook on the hot topics in the wireless industry.
Already we’ve heard from Apple and Samsung that their future is not as rosy for smartphones as investors had hoped. In reality it is like expecting early automobile dealers to continue to grow sales after they have replaced all the buggy carts in the neighborhood. The saturation in smartphones will make it difficult to continue their past growth and open up threats to their dominance as the smartphone consumer fragments into niche segments clustered around unique specializations such as gaming or photography.
Apple definitely has to focus on Asia as the source for their future growth. We saw a significant slowdown in consumer demand for iPhones right before the holidays when in the past demand for the latest model would carry Apple through the holidays. Within western retailers we observed aggressive promotion of even the newest iPhones with the iPhone 5C being offered for free by Best Buy and others. Even the flagship iPhone 5S could be found for $99 at many carriers and retailers, a sure sign they were desperately trying to move inventory before year end. This cut in prices helped drive demand, but demonstrates how saturated the market is when only a “free” iPhone 5C will get consumers to commit to changing handsets.
Graph of Apple consumer response at western carriers and retailers.
In Asia we see a different story. Tracking the response to Apple at China Unicom, we saw a similar slow down post launch, an indication that after the early adopters snatched up their new iPhone 5S (there was a 30-to-one ratio between interest in 5S vs. 5C at China Unicom), Chinese consumers took a wait and see attitude. The past two months saw a resurgence of interest in China with the most recent week attracting more consumers to share their iPhone experiences than all carriers in the United States, Canada and United Kingdom combined.
Graph of Apple consumer response at China Unicom.
Samsung’s slow quarter and projected continued faltering growth is also evident in the data. You can see below that after the holiday boost, the consumer perception of Samsung handsets fell much lower than Apple iPhones. This does not bode well for Samsung as they prepare for the S5 launch later this year. During the S4 launch we saw boosts in both iPhone 5 and Galaxy S3, but slow adoption of the S4. Given how aggressively retailers pushed the S4 over the holidays, it is likely that any latent demand for the S5 has been muted.
Graph of Samsung consumer response at western carriers and retailers.
Samsung’s performance in China has also fallen relative to Apple. Buzz surrounding Apple handsets is 10-times greater than that of Samsung, showing less engagement with China Unicom customers relative to the new iPhones. In fact, after a burst of “me too” sales around the global iPhone 5S launch, Samsung consumer demand in China fell to levels not seen in months. There is traditionally a slow down in consumer demand when a new handset is anticipated. The sustained drop in interest is far too deep to be explained just by Chinese consumers waiting for the Galaxy S5. The availability of not only shiny new iPhones, but also extensive competitive offerings by native Chinese handset original equipment manufacturers put Samsung in a difficult defensive position in the world’s largest consumer market.
Graph of Samsung consumer response at China Unicom.
The western markets are saturated. Both Apple and Samsung are anticipating slack demand in future quarters as the market shifts to replacement over entry. With this market saturation also comes brand fatigue as we see the smartphone market fragmenting into niche experiences, such as the megapixel-heavy Lumia 1020 or the stylus savvy Galaxy Note 3. This fragmentation is creating opportunities for other handset manufacturers to regain mind-share and market share at the cost of Apple and Samsung.
