Smartphones forecast to represent over 50 percent of total cellphone sales for first time in 2013

USA: The smartphone is a subset of the total cellphone handset marketplace.  One basic difference between an enhanced cellphone and a smartphone is the ability of the smartphone to incorporate third-party applications.

Smartphones also typically connect to leading-edge cellular network services and are at the forefront of the convergence of data, telecom, and consumer-oriented functions (such as video games, camera, music player, mobile TV, etc.) in a single handheld device.

Most smartphones include touchscreens with built-in wireless modems and GPS/GNSS, and are capable of Web browsing, sending and receiving e-mail, voice recognition, video and audio streaming, running office applications, and over-the-air synching with a PC.

Many in the cellphone industry believe new smartphone designs are reaching the point where they have enough performance to become the primary computing device for many consumers.  If so, the market could be on the verge of entering into “the post-PC era,” as previously identified by the late Steve Jobs, who stirred up controversy with his provocative prediction in June 2010.

The new consumer/Web emphasis in the cellphone market has been a challenge for a number of top-ranked smartphone suppliers (e.g., RIM, Nokia, etc.), which have struggled to refocus their handset designs, software platforms, and business strategies to address the current phase of the fast-growing smartphone segment.

Fig. 1 shows that total smartphone shipments grew 47 percent in 2012 to 712 million units, after surging by 67 percent to 485 million in 2011. Moreover, smartphone shipments are forecast to grow by another 37 percent in 2013 and fall only 25 million units shy of 1 billion.

Smartphones are expected to account for over 50 percent of quarterly shipments for the first time ever in 2Q13. In fact, smartphone shipments are forecast to reach 300 million units in 4Q13 and represent 60 percent of total cellphones shipped that quarter. Smartphones are expected to surpass the 50 percent penetration level on an annual basis this year and hold 85 percent of total cellphone shipments in 2016.

In contrast to smartphones, total cellphone unit shipments grew only 1 percent in 2012 and are forecast to grow only 3 percent in 2013 (Fig. 2).  As shown, non-smartphone cellphone sales were flat in 2011 but showed a 17 percent decline in 2012. Moreover, IC Insights expects another 20 percent drop in non-smartphone handset sales in 2013.

Between 2011 and 2016, smartphone shipments are expected to rise at a very strong CAGR of 29 percent to 1,760 million units in the final year of the forecast period (the 2011-2016 CAGR for non-smartphone unit shipments is -24 percent). Overall, the smartphone 2011-2016 unit shipment CAGR is greater than 7x the expected CAGR for total cellphone unit shipments in that same five-year timeframe (4 percent).

Competition in smartphones intensified in 2012 as suppliers rolled out new handset designs with larger touch-screen displays, more powerful processors, better operating systems, higher-resolution cameras, and new radio-modem connections to the faster “4G” cellular networks, which were quickly spreading in the US, South Korea, Europe, and Japan. In the next few years, new high-speed “4G” networks are planned for China, India, Brazil, the Middle East, and other fast-growing developing markets.

Samsung and Apple dominated the smartphone market in 2012 and are expected to do so again in 2013.  In total, these two companies shipped 354 million smartphones (218 million for Samsung and 136 million for Apple) and held a combined 50 percent share of the total smartphone market last year. For 2013, these two companies are forecast to ship 480 million smartphones (300 million for Samsung and 180 million for Apple) and see their combined smartphone unit marketshare slip only one percentage point to 49 percent.

In 2012, smartphone sales from China-based ZTE, Lenovo, and Huawei surged.  Combined, the three top-10 China-based smartphone suppliers shipped about 80 million smartphones in 2012, more than a 3x increase from the 24 million smartphones these three companies shipped in 2011.
Moreover, these three companies are forecast to ship 142 million smartphones in 2013 and together hold a 15 percent share of the worldwide smartphone market.  In contrast to the success of the large China-based smartphone suppliers, IC Insights expects RIM and HTC to continue to struggle in the smartphone marketplace in 2013 with both companies forecast to show a double-digit decline in smartphone unit shipments as compared to 2012.

Smartphone suppliers under pressure include Nokia, RIM, and HTC, each of which registered steep double-digit year-over-year declines in smartphone sales in 2012. Until several years ago, Nokia held a 50% marketshare in smartphones, but in 2008 and 2009, the company saw its share fall below 40 percent due to increased competition from suppliers targeting consumers with interactive touch-screen handsets that are capable of running multimedia applications.

In 2012, Nokia’s smartphone shipments declined by 55 percent (to only 35 million units) and represented only a 5 percent share of the total smartphone market. Other smartphone producers that have fallen on hard times recently include RIM and HTC. While each of these companies had about a 10 percent share of the 2011 smartphone market, IC Insights forecasts that each of them will have only about a 3 percent share of the 2013 smartphone market.