Apple beats smartphone market slump

9 May 2011

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Apple has bucked a rare downturn in the burgeoning smartphone business, achieving double-digit percentage growth for iPhone shipments and posting the best performance among its top five competitors.

Ranked No 2, Apple in the first quarter of 2011 shipped 18.6m iPhones, up 14.9pc from 16.2m in the fourth quarter of 2010.

Apple’s increase represented the highest percentage growth among the world’s top 5 smartphone brands, with No 5-ranked HTC coming in a distant second given its 6.2pc growth. It also marked a standout performance in a smartphone market that suffered a 1.5pc sequential decline in shipments during the first quarter.

“Apple’s smartphone market share in the first quarter was boosted by the introduction of its first iPhone model with code division multiple access (CDMA) as well as by the addition of Verizon Wireless as a carrier in the United States,” said Tina Teng, senior analyst, wireless communications, for IHS.

“Not only did this allow Apple to expand its target market and boost shipments, it also placed additional pressure on rival smartphone brands – including Motorola, Samsung, LG and HTC – that focus on Verizon Wireless as a major customer.”

With its concentration on the US market, Motorola was the one most impacted by Verizon’s addition of the iPhone, a factor contributing to Motorola’s 16.3pc decline in shipments in the first quarter.

Gunning for No 1

With shipments from Nokia, the No 1 smartphone brand, declining by 14.5pc during the first quarter, Apple made major strides toward achieving market leadership. Apple in the first quarter trailed Nokia by just 5.7 percentage points, compared to 12.2 points in the fourth quarter of 2010.

Nokia’s smartphone shipments declined to 24.2m units in the first quarter, down from 28.3m in the fourth quarter.

The company’s agreement with Microsoft Corp to make Windows Phone 7 its principal operating system over the long term is having a negative near-term impact on its smartphone shipments. With the announcement of the deal, Nokia eliminated the incentive for consumers to buy its existing smartphone products, which are based on its Symbian and MeeGo operating systems. Meanwhile, the Microsoft deal is unlikely to yield any products for nearly one year.

A bump in the smartphone road

The decline in smartphone shipments in the first quarter represents the first sequential decrease since the beginning of 2009. While many electronic products typically suffer a sales slump during the beginning of the year following the peak selling sales season in the fourth quarter, the fast-growing smartphone has been immune to this phenomenon during most years.

However, IHS iSuppli does not believe the first-quarter results represent a long-term trend for the smartphone market.

“The reduction of shipments reflects inventory control efforts in the smartphone market, rather than weakening consumer demand,” Teng said. “This decline does not change the IHS iSuppli forecast of 60pc growth in worldwide smartphone shipments for the entire year of 2011.”

No 3 smartphone brand Research in Motion (RIM) in the first quarter outperformed the overall market, with its shipments rising by 4.2pc. The company benefited from success by expanding sales in regions outside North America. It also capitalised on the trend toward cell-phone-based monetary transactions with the announcement of several smartphone models that integrate near-field communications (NFC) technology. Furthermore, RIM continues to appeal to business customers who value the company’s focus on its service package and security as the key selling points.

Despite RIM’s above-average performance, the company lost ground on the No 2 smartphone ranking to Apple. RIM in the first quarter trailed Apple by 4 percentage points, up from 2.1 points in the fourth quarter of 2010.

Editor John Kennedy is an award-winning technology journalist.

editorial@siliconrepublic.com