GLOBAL SMARTPHONE SALES – ANNUALISED VOLUME Q4 2013 – Q1 2024
The smartphone market has long been the “go-to” place for updates on consumer market trends, and Q1 provided plenty of valuable insights:
- The market has gone ex-growth, as the chart based on IDC data shows
- Annualised sales were down 25% versus the 2017 peak of 1.55bn
- And that was despite an 8% rise versus Q1 2023
This suggests a major change in consumer demand patterns is now underway.
GLOBAL SMARTPHONE MARKET SHARES % 2013 – 2024 (Q1)
One of the key issues is that many consumers no longer feel the need to buy the latest model. As analyst Counterpoint reports:
“Consumers are holding on to their smartphones for longer periods because upgrades are offering limited differentiation in features.”
In turn, the market is continuing to segment into Premium and Value offerings, as the chart above shows. And the Middle Market continues to be squeezed:
- Apple is moving steadily upmarket and focusing on premium sales of Pro models
- As a result, Apple’s share dropped from 20.7% in Q1 2023 to 17.3%
- Samsung continues to be squeezed as the Middle Market declines
- Samsung’s share also dropped from 22.5% last year to 20.8%
- Meanwhile Chinese Value models (Xiaomi, OPPO, Transsion) jumped from 27.4% to 32.7%
APPLE Q2 FY24
Income Statement
APPLE IS UNDER MAJOR PRESSURE
For a long time, Apple could do no wrong as Steve Jobs’ genius carried it forward. But today, the main news from its Quarterly Results was that iPhone sales fell 10%, as the chart above shows.
And instead of innovation, the market cheered news of a planned $110bn share buyback. Yet share buybacks usually indicate that a company has run out of ideas for new products and revenues.
Apple is also suffering in China, where it is losing market share to a resurgent Huawei. It is a high profile target as the US-China trade war develops:
- Apple’s sales fell 19% in China in Q1, forcing it to offer major price cuts in January and March
- As state-owned Global Times highlighted, Apple’s value proposition is weakening “The gap between Chinese smartphone brands and iPhones is narrowing. I’d like to buy a local smartphone at a much lower price.”
And yet Apple’s share price has recently been trading at an extraordinary valuation of 6.3x sales to 8.2x sales. By comparison, its valuation was only 2.2x sales to 4.6x sales between 2010-2019, when the market and its sales were in major growth mode.
A NEW DIRECTION IS EMERGING FOR SMARTPHONE SALES
Mobile phone ownership
% of U.S. adults who say they own a …
Three core conclusions stand out from the data:
- As the chart from the Pew Research center confirms, most people who want, and can afford a new smartphone now own one. “The vast majority of Americans – 97% – now own a cellphone of some kind. Nine-in-ten own a smartphone, up from just 35% in Pew Research Center’s first survey of smartphone ownership conducted in 2011.“
- The smartphone market is segmenting into Luxury and Value. Apple is moving upmarket to avoid competition with Chinese Value offerings. Samsung’s Middle Market positioning continues to be squeezed.
- This suggests that most potential buyers are tending to take a more pragmatic approach to buying a phone. Cost rather than image is becoming important.
Dutch company Fairphone is now targetting these buyers. Its Model 5, which costs €499, comes with an extra battery and aims to operate for at least eight years, with software updates included. And most key parts are repairable.
These conclusions are confirmed by developments in the used phone market. As discussed in my Q4 update, this is now the fastest-growing segment of the market:
- In richer countries, parents will routinely now buy a used phone for their kids
- In poorer countries such as Kenya, used phones are everywhere. Analyst Canalys reports that 80% of all used phones are priced below $100, with the most popular models costing $45
Q1 data showed that many consumers are tightening their belts and focusing on value for money. But investors don’t yet seem to have noticed, and are bidding up Apple’s share price to euphoric levels.