What’s Driving Smartphone Sector Growth

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Though the details vary, IDC and Juniper Research agree that the smartphone industry had a good third quarter. Less obvious, but perhaps more interesting, is that the success was enjoyed in a sector that is undergoing significant change.

IDC reported that the third quarter was the second highest ever in worldwide smartphone shipments. The firm said that shipments reached 355.2 million, which was up 6.8 percent from the year ago quarter (332.6 million). The highest quarter ever was the fourth quarter of last year, when 377.6 million units shipped, according to the firm.

IDC suggests that the numbers, as positive as they were, were a bit below the firm’s projections because of softness in iPhone sales and Android prices that were too high. The strength was in low- and mid-priced phones in emerging markets.

Juniper Research also released third quarter numbers last week. The firm was both more bullish and bearish than IDC. While it said that 342.5 million smartphone units shipped – almost 13 million less than IDC – it saw a percentage gain that was 1.6 higher than IDC’s (8.4 percent compared to 6.8 percent).

Beyond the market share race, the industry is in a long-term transition from a point at which people changed phones due to exciting new features to one in which people tend to hang onto their phones longer. A parallel change is growth in shipments of lower-cost devices to developing markets, as noted by IDC. That transition has a ripple effect on everything from margins to material purchases to distribution patterns.

This all leads to more direct competition among Android, Apple and, to a lesser degree, other operating system companies. It’s common sense: In an era in which people don’t have smartphones or are more willing to switch, direct competition is secondary. Once the low-hanging fruit is gone, however, that competition becomes more intense.

MacRumors’ report on Apple’s fourth quarter conference call last week paints a picture of a company that understands things have changed. CEO Tim Cook said, in essence, that the company had successfully turned its fire on Android:

According to Cook, 30 percent of customers who purchased an iPhone were upgrading from an Android-based smartphone, the largest number of switchers it had seen in the three years since it started measuring switching rates. “It’s a huge number and we’re very proud of it,” said Cook.

Attention is, and should be, paid to top-line numbers. What is interesting and perhaps more important is the dynamics driving those numbers.

Carl Weinschenk covers telecom for IT Business Edge. He writes about wireless technology, disaster recovery/business continuity, cellular services, the Internet of Things, machine-to-machine communications and other emerging technologies and platforms. He also covers net neutrality and related regulatory issues. Weinschenk has written about the phone companies, cable operators and related companies for decades and is senior editor of Broadband Technology Report. He can be reached at cweinsch@optonline.net and via twitter at @DailyMusicBrk.