The earnings season brings us more news. What happened with the world’s largest smartphone maker of last Quarter? Apple’s iPhone sold 37 million iPhones in 4Q’11 (we talk in Calendar Quarters here, not the Fiscal Quarters). Now for the first quarter of 2012 (January-February-March), how did Apple do? I expected growth because of the pattern Apple established two years ago with the Chinese New Year sales. But it didn’t happen.
Even though the company had record results in other fields, Apple actually declined in iPhone unit sales from Q4 and only sold 35.1 million iPhones.
Apple iPhone loses smartphone market share? why?
Why? I think mainly two reasons – Q4 was exceptionally big sales because the iPhone 4S was delayed from June launch to September launch and 4Q 2011 was the first full Quarter of iPhone 4S sales. Thus 4Q’11 was ‘unusually strong’ above average annual sales for iPhone.
Normally, in the past two years, iPhone sales have grown sequentially from Q4 to Q1, explicitly driven by sales in China. This year breaks that strong iPhone sales growth pattern. As Apple CEO himself pointed to a 5-fold increase YoY on iPhone sales in the Greater China region, the decline was not caused by any weak China sales.
The second and most important reason for the unit decline can be found on the west. If the global mobile industry grew only by 60% in a year, but iPhone in China grew by 500%, then there should be many millions of excess iPhones which should have pushed Apple to iPhone growth, not decline. As iPhone total shipments fell by 5% and China grew so strongly, it means some other regions have had very big drops in iPhone sales. And those drops aren’t small, we’re talking about 20% to 40% decline.
U.S. Fells out of love with Apple iPhone?
The first obvious answer comes from AT&T which reports that in first quarter 2012, they saw a 40% drop of iPhone sales from the Christmas Quarter, down from 7.6 million to 4.3 million. Another clear case is Verizon Wireless, which saw a 25% drop, down from 4.3 million to 3.2 million. Two of the largest providers of Apple iPhone to the market recorded a 4.4 million sales drop in just a single quarter. When we take a look at a newcomer Sprint, the company sold 1.5 million iPhones and we come to the number 4Q11 to 1Q12 of 2.9 million. Given the figures for U.S. market, it is obvious that Samsung, HTC and Motorola are all growing versus the iPhone decline.
That is not the full picture yet, but at least partially an answer is starting to form. I would now guess, that European carriers/operators will have similar after-Christmas blues for the Apple.
What does this mean in terms of market share? My preliminary market share for iPhone is 22% for 1Q2012, down from 24% in 4Q2011. Not bad, but it is down. And usually the pattern then follows into second quarter with a further decline, unless Apple can launch its next iPhone model (rumored as iPhone 5) in the last few days of June. That was also what Apple CEO Tim Cook said in his guidance for Q2 performance.
I know Apple is the most valuable company on the planet and made so massive profits in just one quarter, that it could go and buy all of troubled Nokia with just its quarterly profit now. Thus, it is truly difficult to be honestly critical for this level of massive performance excellence. But let’s be honest here. Apple did see declining market share and very likely will see more of a decline in market share again for 2Q’12 before the next iPhone starts to sell. I have been urging Apple to split its product line, it would help a lot to expand Apple’s unit sales, market share and profits. Nonetheless, Apple did generate a very healthy profit in its smartphones unit, this is very good performance for the first quarter. Not perfect, but very good.
Why does this matter? Ask Samsung
Why do we care about the modest decline over this Quarter? Because Apple’s reign at the top, as the world’s biggest smartphone maker has been a few temporary blips. Apple toppled Nokia in second quarter of 2011. Then in third quarter, Samsung lurched past Apple. Apple retook that position in fourth quarter. But now with the decline in sales and with the already promised numbers from Samsung that its handset unit has had phenomenal growth (the full Samsung numbers are not out yet) means Samsung has again retaken the lead once again, as the world’s biggest smartphone maker, but now it may be for good. Because Samsung offers a wide range of smartphones on various price points, at far more carriers/operators and on more technologies including China Mobile’s TD-SDMA standard of 3G, Samsung has far more ability to capitalize on the market opportunity than the iPhone on one new model per year, and on only two technologies and not on all carriers/operators.
These numbers could mean that Samsung is again the world’s biggest smartphone maker. Quite a big month for ole’ Sammy, as they also have toppled Nokia as the world’s biggest handset maker for the first time ever, this same Q1.
With iPhone sales down, and Nokia catastrophic collapse, and HTC sales decline and Blackberry woes, just how darn good will Samsung’s Q1 be? We may be in for a Quarterly Results press conference of a lifetime… don’t say we haven’t warned you.