Is the golden age of smartphone profits coming to an end?

Is the golden age of smartphone profits coming to an end?

Summary: Even as smartphone sales close on one billion declining profits could force the big players to shift focus to wearables.

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TOPICS: Mobility
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According to the latest numbers from the mobile phone analyst Juniper Research, 980m smartphones were sold in 2013 which was a 39 percent year-on-year growth. These figures were helped by a particularly strong fourth quarter which saw sales reach 280m.

These figures were more conservative than those issued by IDC which said that sales for the whole of 2013 went over the magic 1 billion units for the first time. 

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Samsung is seen as the biggest winner here, having shipped some 300m units in 2013 — almost a third of the market at 30 percent. Juniper noted that Samsung's sales represented 40 percent year-on-year growth compared to 2012.

But what was perhaps more remarkable for Samsung was that it had record figures despite the fact that its sales dropped to 81m in the fourth quarter.

Apple was one of the stars in the market as it posted a record quarter of 51 million iPhone sales, which was 51 percent growth quarter-on-quarter.

Nokia was another smartphone suppler to take a hit as its handset sales dropped by nearly 30 percent in the fourth quarter with sales of the Lumia range falling to 8.2 million in the fourth quarter, compared to 8.8 million in Q3 2013. Around 30 million Lumia smartphones were sold throughout 2013, compared to 13 million in 2012, according to Juniper's figures.

The South Korean supplier LG was another big winner as it posted another record quarter with quarterly smartphone sale exceeding 13 million for the first time, representing an increase of over 50 percent compared to Q4 2012.

Commenting on the research, Nitin Bhas, senior analyst with Jupiter Research, said: "The future for smartphone shipments will, naturally, follow a bright trajectory globally, although shipments will begin to stall in the mature European and North American regions."

In the longer term, Bhas said he sees the market splitting across the world. "The shift in the smartphone market away from focusing on the high margin, mature North American and European markets to the far less saturated emerging markets, and a growing split between the mature and emerging markets, will become evident," he said.

Samsung is unsurprisingly likely to remain the smartphone leader in 2014, but the analyst warned that all smartphone vendors will be experiencing an enlarged market which will come at the cost of much lower margins compared to the current "golden age" of very high margins.

"This discomfort with the new markets may see these vendors shift their investments to newer, high-margin growth areas (Juniper feels wearables would be a likely candidate) which could potentially mean a decline in the share price and market capitalisation of the major vendors, a situation that is perhaps starting to occur with Apple and Samsung," Bhas said.

Further reading

Topic: Mobility

About

Colin Barker is based in London and is Senior Reporter for ZDNet. He has been writing about the IT business for some 30-plus years. He still enjoys it.

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11 comments
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  • If not peaked it will soon be peaking

    If not smartphone sales, profit and probably iPhone and Galaxy have probably peaked this last quarter.
    Commoditization is happening and with it hardware profits will decrease, also emerging markets are much more price conscious than markets of Europe and mainly the US.
    Google with android allowed that without huge resources many small players can make smartphones, it's a similar strategy MS used when IBM was making huge profits from hardware. I believe a similar trend will happen again - the profits will shift from hardware to added services, hardware will be mainly the support used to distribute those services.
    Apple will keep good margins, based on a good design and the sense of fashion that products carry - but even Apple will feel the smaller hardware margins... or sharp market share fall.

    What I expect to happen in resume - profit shift to software and added services, brands like Samsung, Apple and others trying to release new type of hardware (wearables, glasses, smart watches, ...).
    AleMartin
    • Everything peaks

      If it's too good to last then it cannot last. Market principles at work.
      LBiege
      • market ahbors a vacuum

        Or is that nature? Or anarchy? What be the difference. ..
        HypnoToad72
  • competition is a wonderful thing

    (for consumers, not for OEMs)
    theoilman
    • tey becoming5 an oem

      Then you'll see a whole new perspective closer to a grim reality...
      HypnoToad72
  • Thanks to 1 or 2 year upgrades...

    ...it's more likely to have plateaued rather than peaked, which would imply everyone gives up on smartphones and goes back to feature phones.

    And, of course, I'm only talking about developed markets here. There's still an awfully long way to go for the rest of the world.
    Englishmole
  • Mature markets will go for style

    Motorola's tack with the Moto X is brilliant here. Luxury real wood components and build to order customization are premiums that deliver in a mature market.

    Once again emerging markets get the benefit of late adoption, not having to bear the costs of failed designs and poor economy of scale. As they adopt the mobile revolution it comes to them fully evolved.

    What a great time to be in tech!
    symbolset
    • Motorola: Somebody there has some native smarts

      I'm thinking they will become a major 'player' going forward.
      Much 'playing catch-up' going on.
      Like most, I enjoy watching the show from the cheap seats.
      Philoskinner
    • in a technician? sounds kinky

      Or do you mean 'technology'? And which country are you in because it's not good place to be in depending on country
      HypnoToad72
  • Smartphones are rapidly becoming commodities

    Just look at the number of unlimited talk & text programs out there today. Carriers know exactly how much money they need from each and every customer. Customers are clamoring for bandwidth for streaming media and the carriers coming up with gimmicks to get customers to buy ever more expensive smartphones - using ridiculously inflated prices so they can collect every cents of off of unwitting customers.

    Expect the insanity to continue until carriers and device makers are no longer permitted to fix prices and lock smartphones onto a particular network.
    M Wagner
    • until unlimited data is included

      It's just obfuscation and drivel.
      HypnoToad72