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Smartphones sink feature phone shipments

In the first quarter of 2013, smartphones accounted for more than half of the mobile phones that were shipped.

In the first quarter of 2013, smartphones accounted for more than half of the mobile phones that were shipped.

The latest report by the International Data Corporation (IDC) reveals that more smartphones than feature phones were shipped in the first quarter of 2013.

According to the IDC’s worldwide quarterly mobile phone tracker, the worldwide mobile phone market grew 4% year-over-year. Vendors shipped a total of 418.6 million mobile phones in the first quarter of 2013, compared to 402.4 million units in the first quarter of 2012 and 483.2 million units in the fourth quarter of 2012.

In the worldwide smartphone market, vendors shipped 216.2 million units in the first quarter of 2013, marking the first time that more than half (51.6%) the total phone shipments in a quarter were smartphones.

Senior IDC research analyst, Kevin Restivo, says consumers have upped their phone needs and it’s showing in the figures. “The days where phones are used primarily to make phone calls and send text messages are quickly fading away. As a result, the balance of smartphone power has shifted to phone makers that are most dependent on smartphones."

Research manager with IDC's mobile phone team, Ramon Llamas, adds that the emergence of Chinese companies among the leading smartphone vendors contributed to the slowdown of feature phone shipments.

"A year ago, it was common to see previous market leaders Nokia, BlackBerry (then Research In Motion), and HTC among the top five. While those companies have been in various stages of transformation since, Chinese vendors, including Huawei and ZTE as well as Coolpad and Lenovo, have made significant strides to capture new users with their respective Android smartphones," notes Llamas.

Vendor race

Korean manufacturer Samsung maintained its position at the top of the smartphone market in the first quarter of 2013, selling more units than the next four vendors combined. While Samsung sold just over 70 million smartphones, its nearest contender, Apple, sold 37 million units.

Apple has occupied the second position for the past five quarters, growing by 6.6% in the first quarter of 2013 with the help of its iPhone 5. LG climbed its way back to third position after failing to make it into the top five for two quarters. Its record-high shipments were driven largely by its 3G smartphone portfolio – the L series and Nexus 4.

Huawei managed to nearly double its unit shipments to regions outside of Asia/Pacific compared to the first quarter of 2012, securing its place in the top five. Decreased dependence on rebranded feature phones and the growth of its Ascend portfolio have been cited as the biggest drivers for the manufacturer’s growth.

ZTE comes in at fifth place with just over nine million smartphones sold in the first quarter of 2013. The Chinese manufacturer plans to increase its smartphone revenue by 30% this year, seeking growth in North America and Europe. ZTE is also expected to be one of the first companies to launch a Firefox-powered smartphone this year.

Low-cost smartphones

One of the biggest drivers for the growth in global smartphone sales is the demand for the low-cost smartphone. The latest data from ABI Research’s Mobile Handset Markets Database indicates that low-cost smartphones already accounted for 28% of all smartphone shipments in 2012.

According to ABI, segmentation within the smartphone sector is increasing to three price tiers (low, mid, and high) and it expects shipments of sub-$250 low-cost smartphones to grow from 259 million in 2013, to 788 million in 2018. Mid- (sub-$400) and high- ($400+) cost smartphone shipments are expected to grow from 635 million to 925 million over the same period.

Senior ABI analyst, Michael Morgan, says the growth of smartphones in prepaid and emerging markets will be the primary driver of low-cost smartphone growth. “As the feature phone segment continues to lose its battle for relevance, the low-cost smartphone has become the tool for operators seeking to drive increased data revenues.”

In the last quarter of 2012, the IDC quarterly mobile phone tracker showed the lower-cost smartphones are finding their footing in the market.

Restivo says vendors focusing on lower-cost devices can rapidly gain market share, especially in emerging markets. “A good example is Huawei, which overtook LG as a top five vendor in the overall mobile phone market and passed HTC to become a top five smartphone vendor."

He adds that smartphone market leaders Samsung and Apple are both under increasing pressure as the low-cost smartphone starts to gain momentum.

World Wide Worx MD Arthur Goldstuck says the local feature phone market is set to shrink dramatically over the next two to three years. “We will see a dramatic drop in the price of the entry-level smartphones in the next two years as there is a growing demand for simpler phones.”

In this regard, he believes Samsung has already distinguished itself as the market leader in the low-cost smartphone category. “The Galaxy Pocket offers the Android experience at a fraction of the cost of premium smartphones.”

He adds that it remains to be seen whether South Africans will catch on to the lesser known brands.

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