Six in ten smartphones sold in Q2 2015 were 4G-enabled

Kevin Walsh, Director of trends and forecasting, GfK, comments: “India is expected to be the largest contributor of absolute smartphone unit growth globally this year. The main reason behind this is the currently low smartphone penetration in the market together with a significant intensification of the competition amongst the smartphone vendors, which will drive ASP erosion allowing more affordable devices in the market.”

There are significant regional differences in 4G take up: price polarisation in North America, saturation in Western European markets, local brands tackling global players in India and China, and intense price competition in emerging markets.

Walsh continues: “The first half of the year has seen macro events providing headwinds to topline demand in regions like Central & Eastern Europe, LATAM and China. However, the underlying trend of consumers optimising their digital consumption by screen size, within affordability constraints, continues in all regions. This trend can be seen from TV’s down to smartphones. In smartphones, it manifests in trends like price point polarisation in the US, the rapid screen-size increases in emerging markets and phablet market development. These trends are forecast to continue to the end of year but we see new inflection points and market drivers for 2016.”

North America

In this market, which like Western Europe is nearing saturation point, we see a price polarsation as sales of high and low end devices grew at the expense of mid-ranged devices. Smartphones in the high end captured 43% of smartphone unit share in Q2 2015, up from 38% in 2Q 2014. North America and China were the only regions to see an increase in high-end smartphone unit share on a YOY basis.

Western Europe

Unit sales of smartphones grew 9% YOY in Q2 2015, but sales value declined, due to a mix shift towards the low-end observed in the quarter capturing almost 50% of the smartphone unit mix, up from 37% in Q2 2014. This region had very high LTE penetration levels in smartphones in Q2 2015, with the Nordics taking the top three places: Norway at 90%, Denmark at 89% and Sweden at 88%.

China

Unit sales fell 10% YOY in China to Q2 2015, which follows the previous quarter’s decline of 14% YOY. However, strong demand for high-end smartphones pushed smartphone value up 17% YOY to $26.8bn in the quarter. The high-end smartphone market now accounts for 17% of the market, up from 10% in Q2 2014, and is growing at the expense of the low-end. In 2015, GfK forecasts high-end unit demand in China to grow 28% YOY, the strongest growth in this price band of any region this year.

Central & Eastern Europe

Despite unit sale declines of 11% YOY in Russia and 34% YOY in Ukraine driven by macroeconomic factors, the total regional smartphone demand grew 3% YOY in Q2 2015, buoyed by strong growth in Poland and Romania. GfK forecasts smartphone unit demand in Russia to decline to 14% YOY, and 23% YOY in Ukraine in 2015.

Latin America

A significant slowing of growth in this region has been caused mainly by the macroeconomic situation in Brazil. Q2 2015 saw 1% YOY unit growth, compared to 28% in Q1 2015 and 72% rise in Q2 2014. In 2015, GfK forecasts total smartphone unit demand and sales value to drop in Brazil for the first time ever, with unit sales expected to fall 3% YOY, and sales value to decline 15% YOY.

Emerging APAC

In emerging APAC, smartphone unit demand increased by 23% YOY in Q2 2015, with all major countries growing. India in particular has seen strong unit growth of 40% YOY, with local brands accounting for three of the top five smartphone vendor spots in the quarter. A number of Chinese smartphone brands have entered the Indian market this year, intensifying the already fierce competition between international and local vendors. The resulting price war is forcing ASPs down in a market where more than 80% of sales are in the low-end. In Q2 2015, smartphone ASP in India declined 12% YOY. In 2015, GfK forecasts smartphone prices in India to fall 11% YOY and 4G unit demand to more-than-triple, capturing 6% of the smartphone unit demand.

Developed APAC

Unit sales in developed APAC grew 6% YOY in Q2 2015, driven by Japan, which benefitted from an easy comparison with low sales in Q2 2014. GfK forecasts smartphone unit demand in the region to grow by 1% YOY in 2015. A 6% smartphone demand decline in South Korea will be offset by Japan, which is forecast to see a 3% YOY increase.

Walsh concludes: “Weak macroeconomic trends will continue across a number of major countries such as Brazil, Russia and China, but recoveries when they come are often faster than expected especially for tech sectors. In addition, we are still a long way from saturation in emerging market while adjacent industries to the smartphone fuel the next round of growth generally complementing and in some cases cannibalising smartphone growth.”