Apple and Samsung both announced a decrease of market share recently, what are the consequences of this loss of market share for themselves, competitors??

Year 2014 is expected to cause a lot of stir in the Smartphone market for the manufacturers and users for several reasons:

1.       The number of smartphones shipped will go up to 1.2 billion in 2014 from 1 billion in 2013 – a YOY (year-on-year) growth of 19.3%, down from 39.2 % in the previous year. In Q1 of 2014, Samsung and Apple have seen their market shares slide down by 1.7% & 1.6% respectively, whereas brands like LG, Huawei, Lenovo and Others are gaining market shares in the range of 0.3% to 2%, as compared to Q1 of 2013 (Source: IDC)

2.       Last year saw 322.5 million smartphones under $150 being shipped. Many smartphone announcements in this Price Range have been made for this year, with some prices going as low as $25.

3.       Microsoft’s acquisition of Nokia last week for $7.2 billion has made marketers wonder on their strategy. Microsoft’s initial strategy while acquiring Nokia was to change its ‘horizontal’ strategy of selling software to hardware makers to ‘vertical’ strategy like Apple’s, to manufacture software as well as hardware

4.       Lenovo acquired the Motorola Mobility business from Google at $3 billion earlier this year

The consequences of these developments are following:

1.       6 countries are contributors of 50% of the mobile phone market. Even though their total mobile phone penetration is high, there is a large opportunity in the Smartphone market. As worldwide growth slows and mature markets become saturated, the price of the smartphones will be the primary driver to gain market shares in these emerging markets. Average smartphone price has fallen from $443 in 2011 to $335 in 2013 and is expected to reach $260 in 2018 (Source: IDC)

	Country	Mobile Phones	Population	Penetration (%)
		Total		Mobile Phone	Smartphone
-	World	6,800,000,000	7,012,000,000	97.00
1	China	1,227,360,000	1,349,585,838	89.20	46.90
2	India	1,104,480,000	1,220,800,359	90.47	16.80
3	United States	327,577,529	317,874,628	103.10	56.40
4	Brazil	273,583,000	201,032,714	136.45	26.30
5	Russia	256,116,000	142,905,200	155.50	36.20
6	Indonesia	236,800,000	237,556,363	99.68	14.00
	Total	3,425,916,529
	% Contribution	50.38

2.       Local manufacturers will pose a threat to the international giants – Samsung & Apple in the emerging markets. This is an interesting graph showing how 7 Local Smartphone manufacturers in China & India together (Huawei, ZTE, Lonovo, Coolpad, Xiaomi from China and Karbonn, Micromax from India) have had their market share go up continuously to achieve 11 times growth in 3 years’ time, thus overtaking Apple’s share and closing in on Samsung’s share.

3.       Sony, Xolo, Micromax and Archos are set to enter the Windows Phone smartphone market starting this year. Considering the fact that Nokia is already under Microsoft, it would be interesting to see if Windows Mobile leverages on these brands with an enhanced OS.

4.       Lenovo is growing aggressively into new markets outside China such as Russia. Its acquisition of Motorola mobility would give its market share a major boost, as Motorola is no. 3 manufacturer in USA.

So, what should Samsung and Apple do to maintain their foothold in the Smartphone industry:

1.       Work with network operators to offer bundle deals in emerging markets like they do in mature markets.

2.       Breakthrough in OS – to retain their edge and position of leadership

3.       Enter the Phablets market with a bigger screen size – Iphone started off as a large screen device but features nowhere now in the Phablets market with screen sizes ranging from 5.5 to 7 inches

4.       Low end products – While Samsung has a full range of smartphones, Iphone may need to launch a low priced smartphone to maintain its market share in emerging markets in long run.

5.       Smartwatches and other wearable devices may be the right way to go to upset the balance in the smartphone market.