Apple and Samsung feel pressure from emerging Chinese smartphone players

Chinese smartphone players like Huawei and Lenovo are outpacing market growth, putting pressure on established leaders Samsung and Apple.

The latest figures from IDC show the smartphone market grew 23.1pc year-over-year in the second quarter of this year, resulting in a record 295.3m smartphones shipped.

IDC forecasts smartphone shipments will surpass 300m for the first time ever in the third quarter.

“A record second quarter proves that the smartphone market has plenty of opportunity and momentum,” said Ryan Reith, programme director with IDC’s Worldwide Quarterly Mobile Phone Tracker.

“Right now we have more than a dozen vendors that are capable of landing in the top 5 next quarter. A handful of these companies are currently operating in a single country, but no one should mistake that for complacency – they all recognise the opportunity that lies outside their home turf.”

They came from the East

However, the real seismic shifts in the market are occurring due to the abundance of low-cost smartphones from emerging players Huawei and Lenovo.

Huawei nearly doubled its share of the market compared with last year.

“As the death of the feature phone approaches more rapidly than before, it is the Chinese vendors that are ready to usher emerging market consumers into smartphones,” said Melissa Chau, senior research manager at IDC.

“The offer of smartphones at a much better value than the top global players but with a stronger build quality and larger scale than local competitors gives these vendors a precarious competitive advantage.”

Samsung saw the Galaxy S5 ship millions of units this quarter, while S4 and even S3 volumes remained strong as more affordable alternatives.

Collectively, Samsung lost 7pc market share compared to a year ago, despite having one of the largest smartphone portfolios of all OEMs. To maintain its position at the top, Samsung will need to focus on building momentum in markets dominated by local brands.

Apple’s second quarter is always its seasonal low of the year, but even more so this time in advance of the so-called iPhone 6, with consumers holding their collective breath for bigger screens.

Apple enjoyed continued success in the BRIC markets, a good sign it is building its footprint in emerging markets. Given the pent-up demand, the third quarter could be a drought or a flood, depending on the timing of the next launch.

Huawei’s story centred on 4G LTE pick up, particularly in China, as all three national carriers subsidised 4G handsets like the P7 to encourage consumers to upgrade from 3G. Outside of China, large volumes of its lower-cost Y series fuelled growth across most regions. The company continues to focus on broadening its global reach and the second quarter 2014 results show the momentum is undoubtedly there.

Lenovo had a record quarter in China despite tremendous pressure from local brands. During the quarter, Lenovo saw increased success from the A788T, as well as the 3G A388T. And while its Motorola acquisition is undergoing approval, Lenovo continued to gain traction in international markets.

While less than 5pc of Lenovo’s shipments were registered outside of China in the second quarter of 2013, this share nearly tripled in the second quarter of 2014, with emerging markets, particularly BRIC countries, picking up the largest volumes.

LG volumes were largely driven by its L series, helped by models like the L70, which performed well in many markets, including the United States. With the G3 launched at the end of the quarter in Korea, greater volumes are expected to show up in the third quarter.