Smartphone Wars Pay Off in Q2
Global handset shipments in the second quarter grew 13 percent from the previous year to 308 million units, according to Strategy Analytics Inc. , which says the growth is helping drive higher volumes, but pinching margins as the vendors engage in intense competition.
Among the top five market leaders, BlackBerry and Samsung Corp. saw the strongest growth, thanks to their focus on qwerty keypads and touchscreen phones. Otherwise, there weren't many surprises or vendor shakeups in what was an overall solid quarter for the handset makers, says Strategy Analytics senior analyst Bonny Joy.
At 13 percent, the quarter showed slower growth than the 17 percent average of the previous two quarters, but was still well above the negative 8 percent annual rate of this time last year -- the height of the recession. (See our massive chart below for the vendor break down.)
Table 1: Handset Makers' Q2 Earnings
|Handsets Shipped||11 million||111.1 million units total(24 million smartphones)||30.6 million||8.3 million||63.8 million (19 million touchscreens)||8.4 million iPhones, 3.27 million iPads|
|Handset Sales||$2.3 billion||$12.8 billion||KRW3.373 trillion||$1.7 billion||$6.78 billion||$3.1 billion (total earnings)|
|Average Selling Price||$206.93||$79.68||Did not disclose||$207||Did not disclose||iPhone: $595|
|Most Notable Launch||Android-based Xperia X10||none||LG Ally, its first Android phone in the US||Droid X||Galaxy S on all 4 US carriers||iPhone 4, iPad|
|Most Anticipated Launch||Yendo, its first full touchscreen Walkman phone||N8 and family of Symbian^3 devices||Android Optimus series||The remaining 12+ Android devices promised for 2010||An Android-powered tablet||An LTE iPhone|
|Global Market Share||3.6 percent||36.1 percent||10 percent||Included in "others" at 26 percent||20.7 percent||2 percent|
|Source: Handset makers, Strategy Analytics|
Motorola Inc. (NYSE: MOT) and Sony Ericsson Mobile Communications are in the process of transitioning into smartphone specialists, which has been key to their just-beginning recovery, Joy says. Both handset makers are shipping devices with an average selling price (ASP) around $200. (See Sony Ericsson Ramps Its ASP and Sony Ericsson Reports Q2.)
This is the opposite strategy of vendors like Nokia Corp. (NYSE: NOK), Samsung, and LG Electronics Inc. (London: LGLD; Korea: 6657.KS) that have been pushing their ASPs down to the $100 range. (See Nokia Reports Q2.)
"One key factor is players who have a strong proposition in smartphones are showing increases in revenues as a result of higher ASPs and are on track for higher profitability," Joy says. "Players focusing on mid-tier smartphones, like Nokia, are showing pressure on operating profits."
Smartphones made up one third of Moto's total handset shipments in Q2, and while Moto is still in the red, smartphones are on their way back up, Joy says. All of the vendors have to strike a balance between competing effectively on price and increasing the ASP to drive revenues. (See Motorola Posts $162M Q2 Profit and Moto Posts Q2.)
For some "super-phones" like the Droid X and iPhone 4, prices are even being driven above $400. It's a smart strategy if vendors can sustain it, Joy says, and so far they are proving successful.
Apple Inc. (Nasdaq: AAPL), for example, had a quarter rife with criticism, but it was also its best yet. It shipped 8.4 million iPhones worldwide, a 61 percent increase year-on-year. It is currently capturing 2 percent global market share. (See iFail: Mixed Signals and Apple Explains iPhone 4 Troubles.)
Vendors will have to continue to increase their focus on the high-value smartphone market, where the ASPs might consequently continue to fall. Nokia and Samsung are among the only vendors benefiting from having a feature phone and smartphone mix, Joy says. For everyone else, it's all about smartphones.
"The margin pressure is very visible," Joy says. Overall, growth in the global mobile phone market will slow slightly to 12 percent in the third quarter, but it won't experience a major slowdown as it has in years past, Strategy Analytics forecasts.
— Sarah Reedy, Senior Reporter, Light Reading Mobile