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Lenovo, Xiaomi Drop

Global Q1 Smartphone Shipment Growth Was Smallest on Record, IDC Says

Worldwide smartphone sales were flat in Q1, inching ahead by 600,000 over the year-ago quarter to 334.9 million, said IDC’s quarterly mobile phone tracker Wednesday. IDC attributed the smallest year-over-year quarterly growth rate on record to saturation in developed markets and year-over-year declines from market leaders Samsung and Apple.

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The most notable changes in the smartphone market in Q1 were the rise of lesser known Chinese brands Oppo and Vivo, which replaced fourth- and fifth-place companies Lenovo and Xiaomi, said IDC. In the maturing China market, the appetite for smartphones has “slowed dramatically,” with shipments growing 2.5 percent over Q1 2015. In Q1 2013, by contrast, smartphone sales leaped 62 percent, said IDC.

Companies selling higher end smartphones are having the most growth in China, said analyst Melissa Chau. Lenovo was selling phones with average selling prices below $150 in 2013 and Xiaomi’s ASPs in 2014-2015 were below $200, Chau said. But in 2016, third-place Huawei, along with Oppo and Vivo, play mostly in the sub-$250 range and are positioned for a “strong 2016," she said. The up-and-coming vendors should be wary, said Chau, as even “cult brands” such as Xiaomi have had a tough time maintaining customer loyalty.

The up-and-coming Chinese brands are “virtually unknown” outside of China and will need to penetrate mature markets such as the U.S. and Western Europe if they want to compete with market leaders Samsung and Apple, said analyst Anthony Scarsella. Huawei is recognized as a premium brand, but it's going head to head against the Nexus 6P, available worldwide, he said. Selling high volume out of the China market is a challenge for the Chinese brands because their ability to drive growth “no longer applies when it comes to international expansion, where premium branding quickly turns to price competition,” said Scarsella.

Samsung remained the worldwide smartphone shipment leader in Q1 with 24.5 percent share, despite a 0.6 percent year-over-year decline in shipments, said IDC. The Galaxy S7 and S7 edge “sold vigorously” in March, propped up by “enticing” carrier offers, IDC said. The S7 brought back the microSD card slot and added waterproofing, which “paid off” in sales, said the research firm. Samsung has “performed well” with its more affordable J-series smartphone in emerging markets targeted to budget consumers and first-time buyers, it said.

The iPhone’s first year-over-year decline -- to 51.2 million units in Q1 -- may be a sign that current iPhone 6/6 Plus owners feel that a 6S upgrade isn’t warranted yet, said IDC. Apple’s iPhone SE could challenge similarly priced Android options in emerging markets where Apple has traditionally been seen as too expensive, IDC said, but at $399, the SE is priced higher than competing smartphones, especially in India and China. The SE will begin having an impact on iPhone shipments this quarter, it said (see separate report, this issue). Apple's Q1 share worldwide was 15.3 percent, IDC said.

Huawei smartphone shipments jumped 58 percent in Q1 to 27.5 million on a two-pronged strategy combining premium and entry-level phones in China and in developed European markets, IDC said. The recently launched P9 smartphone with Leica optics is an “additional weapon” to take on Apple and Samsung, it said. Premium devices including the P9, Mate Series, and Nexus 6, along with entry level devices from Huawei’s Honor brand, should help the company gain global traction, said IDC.

Oppo, shipping internationally since 2012, is focused on fostering channel partnerships by boosting visibility through hefty marketing budgets and entertainment sponsorships, said IDC. Twenty percent of Oppo’s 18.5 million shipments in Q1 were outside of China and represented 153 percent growth. The company’s expansion in China has been via offline channels and a “strong push” to secondary markets, it said.

Vivo, focused primarily on the domestic China market since shipping its first smartphone in 2011, expanded to Southeast Asia and India, which accounted for 10 percent of shipments last year, said IDC. The premium X5Pro, at $300, is among the most expensive smartphones in the China market. Vivo has a strong presence in lower-tier markets and differentiates on audio offerings, IDC said. The smartphone maker shipped 14.3 million units in Q1, representing 124 percent year-over-year growth, and it's in “tight competition” with the other top 10 players, IDC said.