The third quarter of 2011 marks a shift in the cell phone biz as Samsung takes the smartphone crown from Apple and China’s ZTE rises to become the world’s fourth-largest cell phone vendor by volume and Apple slides to fifth place. The bad news for Cupertino arrives just as the company for the first time in years missed Street expectations after shipping 17.07 million iPhones in the September quarter, a modest 21 percent annual growth and a notable 16 percent quarterly decline in units. As you recall, Apple in the June quarter sold 20.34 million iPhones, allowing them to beat Nokia and Samsung and become the world’s leading smartphone vendor, prompting Samsung to stop divulging smartphone and tablet shipments for competitive reasons.

Everyone was waiting for the new iPhone 4S.

Samsung today posted their quarterly earnings and they passed iPhone by an estimated ten million units. According to Reuters which cited a Strategy Analytics survey, Samsung shipped about 27.8 million smartphones, up nearly four times annually and 44 percent sequentially. This gave Samsung a 23.8 percent global market share in smartphones vs. 14.8 percent for Apple. Such a strong growth is attributed to their Galaxy smartphones, particularly the Galaxy S II model which sold ten million units in the five months since its introduction. Strategy Analytics attributed Samsung’s success to “a blend of elegant hardware designs, popular Android services, memorable sub-brands and extensive global distribution”, adding:

After just one quarter in the top spot, Apple slipped behind Samsung to second position and captured 15 percent share. Apple’s global smartphone growth rate slowed to just 21 percent annually in Q3 2011, its lowest level for two years. We believe Apple’s growth during the third quarter was affected by consumers and operators awaiting the launch of the new iPhone 4S in the fourth quarter, volatile economic conditions in several key countries, and tougher competition from Samsung’s popular Galaxy S II model.

Apple also slid to fifth place in Strategy Analytics’s worldwide cell phone rankings as ZTE shipped 18.5 million handsets for a five percent global market share. Apple CEO Tim Cook said at the October 4 iPhone 4S introduction that iPhone had five percent share of the global cell phone market, hinting at Apple’s phone strategy:


via Fortune

I could have shown you a much larger number if I just showed you smartphones. But that’s not how we look at it. We look at the entire market of handsets because we believe over time that all handsets become smartphones. This market is one and a half billion units annually. It’s an enormous opportunity for Apple.

Of course, Apple remains the mobile industry’s money-making machine. As noted by Philip Elmer-DeWitt for the Fortune blog, “Apple is selling iPhones as fast as it can make them and socking away more profit than all of its competitors combined”. Indeed, Sprint CEO Dan Hesse told analysts on a conference call that “iPhone is worth every penny” and Reuters reveals the carrier pays a 40 percent higher subsidy to Apple than the industry average, amounting to $200 more per device. Apple is also very successful at monetizing users post-sale through its broad ecosystem comprising apps, music, books, TV shows and more.

Apple is in it for the long run. While the company slipped this quarter as folks postponed their purchases ahead of a new iPhone model, its iPhone 4S has hit the ground running with four million launch weekend sales, more than double the iPhone 4 launch. Taking a step back and looking at the big picture, this is really about ecosystems rather than unit sales. We’ll see what the future holds, but if the iPhone 4S performance thus far is an indication, Samsung may not keep its title long.

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s