Smartphone vendors shipped a total of 375.4 million units during the fourth quarter of 2018 (4Q18), down 4.9% year over year and the fifth consecutive quarter of decline. The challenging holiday quarter closes out the worst year ever for smartphone shipments with global smartphone volumes declining 4.1% in 2018 with a total of 1.4 billion units shipped for the full year.
With challenging market conditions continuing into the first quarter of 2019, the likelihood of a declining market this year becomes more of a reality.
"Globally the smartphone market is a mess right now," said Ryan Reith, program vice president with IDC's Worldwide Mobile Device Trackers. "Outside of a handful of high-growth markets like India, Indonesia, Korea, and Vietnam, we did not see a lot of positive activity in 2018. We believe several factors are at play here, including lengthening replacement cycles, increasing penetration levels in many large markets, political and economic uncertainty, and growing consumer frustration around continuously rising price points."
Despite all the challenges the smartphone market is facing, the largest focal point remains the China market as recovery continues to get pushed further forward. Accounting for 30% of the world’s smartphone consumption, China had an even worse 2018 than the previous year with volumes down just over 10%.
High inventory continues to be a challenge across the market as is consumer spending on devices, which has been down overall. At the same time the top 4 brands, all of which are Chinese – Huawei, OPPO, vivo, and Xiaomi – grew their share of the China market to roughly 78%, up from 66% in 2017. Guess who lost out?
On a worldwide basis, the top 5 smartphone companies continue to get stronger and now account for 69% of smartphone volume, up from 63% a year ago. If vivo is included, which is currently number six and has been in and out of the top 5 in recent quarters, the share of the top companies is 75% and growing. While the market faces some very serious challenges in general, none are greater than the challenges facing the brands that continue to lose market share and channel positioning.
"With replacement rates continuing to slow across numerous markets, vendors will need to find a new equilibrium that balances the latest smartphone features, compelling design, and affordability," said Anthony Scarsella, research manager with IDC's Worldwide Quarterly Mobile Phone Tracker.
Ha cautioned that the anticipation around 5G and foldable devices may not necessarily translate into new shipments. He cites the anticipated higher bill of material (BOM) of these devices to be passed on to consumers.
"To combat this, carriers and retailers will need to fully maximize trade-in offers for older devices as a type of subsidy to push upgrades throughout 2019," suggested Scarsella.