Will a slowing smartphone market growth rate and the rise of low-cost devices negatively impact Apple (NASDAQ:AAPL) in the coming years? According to a new mobile phone forecast report from market research firm IDC, worldwide smartphone shipments will sharply drop off in the coming years.
Although smartphone shipments topped 1 billion units last year for a year-over-year growth rate of 39.2 percent, IDC’s Worldwide Quarterly Mobile Phone Tracker data suggests that shipments this year will only reach 1.2 billion units for a year-over-year growth rate of 19.3 percent. The growth rate decline is expected be even more severe in mature markets. According to the IDC, the growth rate in North America and Europe will likely drop to single digits in 2014. As a maker of high-end premium devices, Apple has traditionally performed best in mature smartphone markets. According to comScore, Apple held nearly a 42 percent share of the U.S. smartphone OEM market in the fourth quarter of 2013.
Smartphone volumes won’t be the only metric to decline in the coming years. According to IDC data, the worldwide smartphone average selling price (ASP) will also continue to decline in 2014 as growth increasingly shifts into emerging markets where low-cost devices currently dominate. The worldwide smartphone ASP in 2013 was $335 and is expected to slip to $260 by 2018.
The year “2014 will be an enormous transition year for the smartphone market,” wrote Ryan Reith, Program Director with IDC’s Worldwide Quarterly Mobile Phone Tracker. “Not only will growth decline more than ever before, but the driving forces behind smartphone adoption are changing. New markets for growth bring different rules to play by and ‘premium’ will not be a major factor in the regions driving overall market growth.”
Fortunately for Apple, the overall decline in smartphone unit shipments and worldwide smartphone average selling prices may have very little impact on the company’s ability to make a profit. Although Apple will likely not compete in the rapidly growing low-end segment of the smartphone market, IDC predicted that, “iOS will remain the clear number 2 platform behind Android and will have the highest ASPs among the leading platforms.”
Not only will Apple maintain its second-place ranking in the worldwide smartphone market, it will also continue to take the lion’s share of the smartphone market’s profits. In a note to investors obtained by Investor’s Business Daily, Raymond James analyst Tavis McCourt estimated that Apple took 87.4 percent of the mobile phone industry’s profits last quarter. According to data from market research firm Gartner, Apple only accounted for 17.8 percent of total smartphone sales in the December quarter. Thanks to Apple’s ability to charge a premium price for its devices, the California-based company will likely continue to maintain its dominance by remaining focused on the lucrative high-end market segment, despite the overall decrease in smartphone market growth and average selling prices.
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