Both Apple and Samsung reported a drop in their market share

Samsung shipped 89 million smartphones worldwide and captured 31 percent marketshare in Q1 2014, dipping slightly from 32 percent a year earlier. Meanwhile, Apple shipped 43.7 million iPhones worldwide for 15 percent marketshare in Q1 2014, falling from the 17 percent level recorded during Q1 2013.

The reason behind the dip could be due to market saturation and competition. While things are slowing down at the high-end of the smartphone market, there is intense competition from the lower-tier smartphone brands.

Saturation – In need of product innovation

Consumers are become more reliant on their smartphones as days go by. While both Apple and Samsung have been launching new models, each new model comes more as an “enhancement” rather than with “ground-breaking technology”. This lowers the motivation to upgrade or switch to another phone.

Consumers are seeking for a better entertainment experience – for viewing and gaming. Perhaps a 3D experience (be it in area of viewing or printing) would create a big buzz. Also, the society is moving towards a cashless society. Hence, it will be beneficial if the smartphone which they are holding could allow consumers to experience easier in-store transactions, example “scan to pay” or “click to pay” within premises. Wearable gadget is also another area to explore.

Consumers are expecting a lot more and companies that pursue innovations will thrive in this smartphone war.

Competition – Price factor

While smartphones are common in our everyday life, smartphone adoption is very much still on the rise in fast growing emerging markets like China, India and Latin America. There are many consumers who will be shopping for their first-ever smartphones. Hence, a lack of presence in the entry-level category continues to cause both Apple and Samsung to lose volumes in this area.

Strong competition in the emerging markets include Huawei and Lenovo. And Lenovo continues to grow aggressively outside China into new regions such as Russia. If the recent Lenovo takeover of Motorola gets approved by various governments in the coming months, this will eventually create an even larger competitive force that both Samsung and Apple must contend with in the second half of this year."

Strong support for operator subsidies in these markets is also important as this will determine the price factor for smartphones. Having low-priced smartphones are particularly critical for generating growth in the market and fuelling a switch from even lower-cost feature phones.