Apple, Samsung battle it out for top spot

Top-line smartphones face stiff competition in emerging markets, where the focus has shifted toward low-cost devices.

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Holiday sales, strong end-user demand, and a wide selection of models propelled smartphone volumes to a new record level for the fourth quarter of 2014, and for the year.

This is according to preliminary data from the International Data Corporation (IDC) Worldwide Quarterly Mobile Phone Tracker. The new data reveals smartphone vendors shipped a total of 375.2 million units during the fourth quarter of 2014 (4Q14), resulting in 28.2% year-on-year growth when compared to the 292.7 million units shipped in the last quarter of 2013.

The figures also represent 11.9% sequential growth on the 335.3 million units shipped in 3Q14.

For the full year, the worldwide smartphone market saw a total of 1 301.1 million units shipped, up 27.6% from the 1 019.4 million units shipped in 2013.

Having spent 11 quarters prior to 4Q14 as the number two smartphone vendor in terms of shipments, Apple managed to close the gap to a near tie with Samsung in the last quarter of 2014. Led by the success of its newer, larger iPhone 6 and 6+ models, the company reduced the volume gap to just 600 000 units in the fourth quarter.

Despite being far more profitable for quite some time, Apple's shipment volumes trailed Samsung's by more than 33 million units during the same quarter a year ago. Continued success from Apple, coupled with the ongoing challenges facing Samsung, could enable Apple to overtake Samsung during the 2015 calendar year, says IDC.

"Samsung's challenges have not only come from Apple, but also from the increasing number of low-cost Android original equipment manufacturers that are putting out products at much lower margins. In order for Samsung to regain its share at the top, it will either have to accept lower margins from here forward or revamp its high-end strategy to compete with Apple."

Ryan Reith, programme director with IDC's Quarterly Mobile Phone Tracker, says the majority of the industry expected an extremely strong holiday quarter from Apple, especially with regards to the iPhone. "However, worldwide shipments of 74.5 million units beat everyone's expectations."

In 2013, IDC talked about the smartphone industry topping the billion unit milestone. The firm says, while year-over-year growth did slow from 40.5% in 2013 to 27.6% in 2014, the market clearly still has legs.

"This past year, volumes surpassed 1.3 billion units and the vendor scenario has witnessed continued shakeups. Growth is forecast to decline to the mid-teens in 2015, but opportunity exists as much of the world's population is either not a wireless subscriber or has yet to move to a smartphone."

Ramon Llamas, research manager with IDC's mobile phone team, says the fact that the global smartphone market grew by 27.6% in 2014 is noteworthy, but it also represents a significant slowdown compared to 2013.

"Mature markets have become increasingly dependent on replacement purchases rather than first-time buyers, which has contributed to slower growth. In emerging markets, first-time buyers continue to provide a lot of market momentum, but the focus has shifted toward low-cost devices, creating a different dynamic for both global and local vendors."

What remains to be seen, says Llamas, is how the vendors beyond Samsung and Apple will assert themselves. "With Lenovo acquiring Motorola, and Xiaomi having greater aspirations beyond China, the competitive pressure will come more from below and less from above. This will make the smartphone race continuously competitive as 2015 shapes up."

Top Five Smartphone Vendors, Shipments, Market Share and Year-Over-Year Growth, Q4 2014 Preliminary Data (Units in Millions)