Sony squeezed in Q2 smartphone shake-up July 31 2014

Huawei and Lenovo snap at the heels of the big two, as Apple and Samsung see their lead eroded

By Caroline Gabriel

The second quarter smartphone market figures are coming in, and they indicate that trends, seen in recent months, are continuing - erosion of the Samsung/Apple near-duopoly, rising share taken by Chinese vendors, and heavy pressure on other players such as Sony.

According to IDC figures, Samsung and Apple lost some share, while Huawei and Lenovo were elevated to third and fourth positions, respectively, in the Q2 league tables by unit sales. LG was in fifth place. Its share was virtually stable year-on-year, but slid by a significant 0.1 percentage points - taking it below the 5% mark which is often seen as psychologically critical for mass market success.

Only four suppliers are above that level now, as the market consolidates around a few big brands, among which the Chinese majors are increasingly important. Below the water line, there is an increasingly fragmented picture, however, with a host of emerging market vendors taking advantage of the overall market shift towards emerging economies, featurephone transition and low end smartphones.

In the quarter, Samsung still held 25.2% of total sales, but this was down 7.1% year-on-year, while Apple slipped from 13% to 11.9%. Huawei was up from 4.3% to 6.9% and Lenovo from 4.7% to 5.4%, in a segment which grew by 23.1%, to reach a record shipments level of 295.3m units.

"As the death of the featurephone approaches more rapidly than before, it is the Chinese vendors that are ready to usher emerging market consumers into smartphones," commented IDC analyst Melissa Chau in a statement. "The offer of smartphones at a much better value than the top global players but with a stronger build quality and larger scale than local competitors gives these vendors a precarious competitive advantage."

This causes problems not only for the big two - at their lowest market share levels for years - but for former giants such as Sony, now relegated to the 'others' category. Some are resorting to selling themselves - Motorola will soon be part of Lenovo, Nokia has gone to Microsoft - but Sony's CEO Kazuo Hirai has put mobile devices, along with content, at the heart of his plan to restore profitability.

In fact, some of his plans are coming to fruition, as Sony reported a surprise profit in its fiscal first quarter. But this was driven by strong demand for the PlayStation 4 console and improved performance at its movie business, not by smartphones. The company posted net income of ¥26.8bn ($261m), where analysts had been expecting a loss of about ¥11bn. Operating profit almost doubled year-on-year to ¥69.8bn.

However, Sony reduced its sales forecasts for smartphones, as well as TVs, while announcing a joint venture in displays with three Japanese partners - Panasonic, Japan Display and Innovation Network. The mobile products unit recorded a loss of ¥2.7bn, compared with a profit of ¥12.6bn a year earlier. Sony expects to sell 43m smartphones this year, down from its previous forecast of 50m.