Samsung's and Apple's global smartphone shipment
market share will decline to around 25% and 14%, respectively, by 2015
(2013 31% and 15%), says Fitch Ratings.
The decline will be due largely to rising competition in emerging markets,
where lower-priced handset models from local competitors should continue to gain
market share at the expense of the big two. In these markets, where cost is
relatively more important than global brand strength or cutting-edge technology,
competitors' devices retailing at USD100-300 can offer most of the key features
of more expensive phones from
Samsung and Apple.
Fitch said that it expects the big two's combined smartphone shipment volume
to stagnate at around 450 million-460 million units in 2014 (2013: 467 million),
even as the global smartphone market rises by around 20% to 1.2 billion.
Fitch estimates that smartphones account for roughly two-thirds of the global
handset market, and we believe growth will come largely from emerging markets.
India and China together are expected to account for over 60% of growth in
smartphone shipment volumes. Local handset makers including China's Xiaomi,
Lenovo, Huawei and India's Micromax Informatics are the principal large
competitors for
Apple and Samsung.
According to data from IDC, global smartphone shipment volumes increased by
5% in 2Q14 to 295 million units (1Q14: 281 million units). In China, Xiaomi took
the lead with 15 million devices with a market share of 15% - ahead of Samsung's
12%, which shipped 13.2 million smartphones.
Concurrently, developed markets' smartphone profitability should also
continue to decline, as market saturation and the lower incremental benefits of
new models has lengthened the replacement cycle and slowed growth. Competition
has also intensified as more manufacturers have been able to produce devices
which exceed most consumers' design and technical requirements.
Apple's next iPhone, rumoured to be launched in September 2014, is likely to
have a larger screen, and developments are likely to be incremental rather than
revolutionary. Fitch believes that the innovations - which include curved
screens and compatible wearable devices - are unlikely to change the trend
facing Samsung and Apple.
Nevertheless, Fitch does not expect these trends to affect Samsung's credit
rating. Their analysis has always assumed that smartphone margins of the last
few years were unsustainable in the long term. For some time, Samsung's ratings
have been constrained by its long-term exposure to cyclical businesses and
investment-intensive markets, despite very strong financial metrics.
