Looks like another tipping point in mobile progress was reached in Q2 this year: IDC says that shipments of smartphones outstripped those of feature phones for the first time in Western Europe. But that’s not the whole story…
Sales of feature phones in developed markets like the U.S. and Europe have been in decline for some time already, impacted not just by the pull of high-end devices like the iPhone, but the rush of less expensive smartphones from those companies developing handsets based on Android, and those, like Nokia (NYSE: NOK), looking to shift stock to make way for its next line of devices.
Now IDC says that the inevitable changeover has happened: in Q2 more smartphones entering the sales channel than feature phones. Shipments of feature devices declined by 29 percent to 20.4 million units, while smartphones grew by 48 percent to 21.8 million units. That works out to a ratio of 48:52 in favor of smart devices.
A note on shipments versus sales. I asked Francisco Jeronimo, an analyst with IDC, about how these shipment numbers relate to actual sales. You may recall that last week there was a bit of a hubub over whether Samsung was pumping up shipments of its Galaxy Tab device, when in actual fact sales were significantly lower. Jeronimo says that this is not usually the case in smartphones. “Usually the gap [between shipped and sold] is not that big and the reason for that is because when a retailer buys a specific volume he doesn’t want to keep it that long,” he said. “Of course it exists, but what’s happneing with the Tab is not happening with smartphones, [specifically] Samsung smartphones.”
But while you might think a growth in smartphone shipments underlies a strong market for mobile overall, think again: IDC says overall shipments in Q2 shrunk by three percent in the quarter compared to the year before, the first time that has happened in seven consecutive quarter of growth. There are a number of reasons for the decline:
» It could be because, as people move to more expensive smartphones — as they have been doing for some time now — they are less inclined to renew their devices as frequently as before.
» The majority of operators who offer discounts on smartphones tend to bundle them with two-year contracts, which could also drive people to buy less frequently. And, as IDC notes, those same operators have largely stopped offering subsidies on feature handsets to get more people onto pricier data plans with smartphones.
» IDC’s also believes that the decline was partly due to deteriorations in the economic environment in the Eurozone. And the “sharp decline” for Nokia did not completely get offset by shipments of competitors’ devices.
» And, as this is a report on shipments and not sales, it could also be because operators are focusing on clearing stock before the autumn and holiday device rush, in which we may well see a new iPhone 5, as well as new Windows Mango devices from Nokia and others — in addition to the now-regular onslaught of Android models.
As you can see from the table below, Samsung was the clear winner for smartphone shipments in the last quarter, with 13.9 million devices shipped, representing a third of all smartphones. That underscores what kind of a competitive threat the company poses to Apple (NSDQ: AAPL). On the horizon, though, the biggest growth came not from Samsung but from HTC, which saw quarterly shipments rise by 121 percent over the year before.
Adding together HTC and Samsung, you can see that Android completely dominated the board in smartphone shipments, taking 48.5 percent of all shipments.
Apple has carved out a decent third position, with a healthy growth of 64 percent in the region. Jeronimo notes that in the last quarter this was mainly driven by shipments of the white iPhone (pictured).
Nokia’s shipments have dropped drastically, 60 percent in overall mobile shipments and 44 percent in smartphones alone — the biggest drops in both categories. What’s interesting is that Jeronimo thinks that this could turn around quite a bit in the year ahead:
“Operators are looking at Microsoft (NSDQ: MSFT) and Nokia as a way of not being so dependent on Android,” he told me — not the first time I’ve heard this sentiment, with one of the last coming from a mobile operator directly. As the main resellers of smartphones, operators could theoretically drive up shipments of these new Nokia devices and really get behind the brand by way of subsidies if they think they could get consumers actually buying the things.