Global smartphone market grew 23% to 292.4 million units in second quarter 2014
In the second quarter 2014 the world's largest smartphone market, mainland China, accounted for the majority of global shipments. Four of the top five vendors for smartphone shipments in the quarter in China were also Chinese, with niche player, Xiaomi, overtaking Samsung at the top.
Mainland China accounted for the majority of 37% of global shipments, or 108.5 million units, in the second quarter. Of the top 10 vendors in China, eight were Chinese, led by Xiaomi, which has risen from being a niche player to become the leading smartphone manufacturer in the world's largest market in just over one year, overtaking Samsung in volume terms in the second quarter.
Xiaomi took a 14% share in China, on the back of 240% year on year growth. With Lenovo, Yulong, Huawei, BBK, ZTE, OPPO and K-Touch, the eight Chinese vendors in the top 10 together accounted for a total of 70.7 million units and a 65% market share.
Samsung and Apple, the only international vendors in the top 10, together accounted for shipments of 20 million units, representing 18% of the overall smartphone market in China. Samsung's slide to second place in China for the first time since the fourth quarter 2011 and 15% year on year decline reflects rapidly shifting demand toward 4G handsets, helped by an ongoing push from China Mobile behind its 4G services, said Canalys.
Samsung's efforts to realign its channel inventory to meet changing demand during the quarter led to a reduction in its overall shipment numbers that is not expected to affect third quarter 2014 to a similar extent, though with the market in China becoming even more competitive, it will not be straightforward to reestablish leadership, the research firm noted.
Meanwhile, Apple had a relatively strong year on year performance, up 58%, helped by the iPhone's position as one of few high end device options available to consumers looking to use 4G services from China Mobile.
'This is a phenomenal achievement for Xiaomi,' said Shanghai-based Canalys research analyst, Jingwen Wang. 'Undoubtedly this was helped by an anticipated, temporarily under-strength Samsung performance during the quarter. But that is only half the story; Xiaomi has also executed on its strategy to grow volume shipments. It has delivered compelling products at aggressive price points, focused chiefly on its locally relevant MIUI software features and services, backed by effectively targeted marketing.
'In particular, its affordable RedMi range is booming and has been the driver for growth, despite attracting less global media attention than its flagship Mi products. But it does now need to deliver LTE products in China to address growing demand for 4G services if it is to retain its momentum,' added Wang.
Altogether, 97% of Xiaomi's second quarter shipments were into mainland China. It is now looking to expand into other markets, with Indonesia, Mexico, Russia, Thailand and Turkey in its sights for the second half of the year.
Worldwide, 292.4 million smartphones shipped in the second 2014, representing 23% year on year growth and 5% growth on the first quarter. Despite challenges in China, Samsung retained its global lead with a 26% share, though it was its lowest global share in two and a half years, down from 32% in the second quarter 2013 and 31% in the first quarter 2014. It nonetheless remained ahead of Apple (12%), Huawei (7%) and Lenovo (5%). Xiaomi's strong domestic performance brought it in to complete the global top five with a 5% share.
Said Singapore-based analyst, Jessica Kwee: '[Xiaomi's] aggressive pricing model will certainly resonate beyond China, but the challenge it faces in scaling its model for success on a global stage should not be underestimated. Xiaomi needs to build its international brand, and will need to localise its services offering with MIUI for the different markets into which it expands, else its differentiation, value proposition and service-oriented revenue streams will be eroded. And it must tailor its marketing and largely online sales channels accordingly. That said, Xiaomi does have the potential to be a disruptive force beyond China and international vendors should take note.'
Notably, a solid performance from Motorola, helped particularly by the success of the Moto G, saw it achieve a tenth place global ranking with a 3% share. Though Lenovo's acquisition of Motorola Mobility from Google is not yet complete, it is expected soon, and combining the two vendors' shipments gives an insight into the market position they could hold together in the coming quarters. Between them, Lenovo and Motorola shipped 24.1 million smart phones in the second quarter, equating to a comfortable third place position in the global market and an 8% share. And while mainland China absorbed 84% of Lenovo's worldwide shipments in the quarter, combined with Motorola, that figure drops to 54%, with Brazil, the US, India and Mexico all seeing significant shipment numbers.
