According to Gartner, Huawei and Xiaomi were the only vendors in the top five to experience growth in the fourth quarter.
It had to happen at some point. The number of feature phone users moving to smartphones has slowed. Also, people are extending the life of their smartphones by owning them for longer durations.
According to data generated by Gartner Inc, global sales of smartphones to end users totaled nearly 408 million units in the fourth quarter of 2017, a 5.6 percent decline over the fourth quarter of 2016. This is the first year-on-year decline since Gartner started tracking the global smartphone market in 2004.
"Two factors led to the fall in the fourth quarter of 2017," said Anshul Gupta, Research Director at Gartner. First, upgrades from feature phones to smartphones have slowed down due to a lack of quality in "ultra-low-cost" smartphones and users preferring to buy quality feature phones. Second, replacement smartphone users are choosing quality models and are keeping them longer, lengthening the replacement cycle of smartphones. Moreover, while demand for high quality, 4G connectivity and better camera features remained strong, high expectations and few incremental benefits during replacement weakened smartphone sales."
Samsung retains the number one spot in the fourth quarter of 2017.
It saw a year-on-year unit decline of 3.6 percent in the fourth quarter of 2017, but this did not prevent it from defending its number one global smartphone vendor position against Apple.
Despite the start of a slowdown in sales of Samsung's Galaxy S8 and S8+, the success of those models has helped Samsung improve overall average selling price. Samsung is poised to announce the successors to its Galaxy series of smartphones at Mobile World Congress (MWC) this year. The launch of its next flagship devices is likely to boost its smartphone sales in the first quarter of 2018. Although Samsung's significant sales volumes lean toward midprice and entry-level models, which now face extreme competition and reducing contribution, its profit and average selling price may further improve if these next flagship smartphones are successful.
The case for Apple
Apple's market share stabilised in the fourth quarter of 2017. Compared to the same quarter in 2016, iPhone sales fell by five percent. "Apple was in a different position this quarter than it was 12 months before," says Anshul. "It had three new smartphones — the iPhone 8, iPhone 8 Plus and iPhone X — yet its performance in the quarter was overshadowed by two factors. First, the later availability of the iPhone X led to slow upgrades to iPhone 8 and 8 Plus, as users waited to try the more-expensive model. Second, component shortages and manufacturing capacity constraints preceded a long delivery cycle for the iPhone X, which returned to normal by early December 2017. We expect good demand for the iPhone X to likely bring a delayed sales boost for Apple in the first quarter of 2018," he adds.
Huawei and Xiaomi — the big winners
Huawei and Xiaomi were the only smartphone vendors to achieve year-on-year unit growth (7.6 percent and 7.9 percent , respectively) in the fourth quarter of 2017, and grew market share in the quarter. With Huawei's new smartphone additions in the quarter, including Mate 10 Lite, Honor 6C Pro and Enjoy 7S, the vendor broadened the appeal of its smartphones.
Xiaomi's competitive smartphone portfolio, consisting of its Mi and Redmi models, helped accelerate its growth in the emerging Asia/Pacific (APAC) market. It also helped Xiaomi win back lost share in China.
"Future growth opportunities for Huawei will reside in winning market share in emerging APAC and the US," says Gupta. "Xiaomi's biggest market outside China is India, where it will continue to see high growth. Increasing sales in Indonesia and other markets in emerging APAC will position Xiaomi as a strong global brand."
In 2017 as a whole, smartphone sales to end users totaled over 1.5 billion units, an increase of 2.7 percent from 2016. Huawei, ranked number three, raised its share in 2017, continuing to gain on Apple. At the same time, the combined market share of the Chinese vendors in the top five increased by 4.2 percentage points, while the market share of top two, Samsung and Apple, remained unchanged.