FOR YEARS, THE TOP FIVE HANDSET VENDORS in the world took an ever-increasing slice of global market share. But something happened on their way to global hegemony.
Between 2007 and 2008, that trend reversed itself and the “other” category – all vendors outside the top five – began to grow again.
Between 2005 and 2007, the “other” group of vendors saw their aggregate global market share shrink from 24% to 16.2%, as the top five vendors grew their share to account for nearly 84% of global shipments, according to data from Strategy Analytics.
But between 2007 and 2008, the “others” rebounded by slightly more than 2%, according to the market analysis firm. IDC data differed slightly, showing only a 1% rebound, but even that is significant.
“Any point shift is significant in terms of volume,” said analyst Ryan Reith at IDC.
Yet the “other” category is a large and, until now, relatively stable place for many handset vendors. Neither Strategy Analytics nor IDC give up much data beyond the top five, citing the proprietary nature of the data. But Reith said that of the 70-plus vendors he tracks, the majority remain on the list from year to year, with only the occasional flameout or consolidation.
That may change in the coming year, which is forecast to deliver tough times.
“Others” is huge
Consider that 18.3% of the global handset market accounted for nearly 216 million handset shipments last year, according to Strategy Analytics’ numbers. While that’s less than half the units shipped by global leader Nokia Corp., it’s more than the No. 2 player, Samsung Electronics Co. Ltd.’s 197 million shipments. And it is a pie fought over by scores of vendors, perhaps as many as 100, including many small, local firms that slip under everyone’s radar.
Perhaps surprisingly, the long list of second-tier handset vendors is remarkably consistent, despite remarkably small market shares.
For instance, below Apple Inc. – No. 7 on IDC’s list – the next 65-70 vendors all have less than 1% global market share, according to IDC data.
Several forces are at play, according to Bonny Joy, analyst at Strategy Analytics.
First, the top five vendors lost some market share-grabbing momentum as they continued to largely focus on feature phones at a time when feature phones were capturing less of the market. Two years ago, perhaps 90% of the global market was in feature phones and that has dwindled to about 70%, Joy said.
“The inability of traditional vendors to capture the smartphone segment is why they lost momentum,” Joy said.
The rise in smartphones has given a boost to well-known brands – and smartphone pure-plays – such as Research In Motion Ltd., HTC Corp. and Apple Inc., which hover just outside the top five vendors by shipment volume and, thus, market share. But most of the top five vendors are moving relatively slowly to boost their smartphone offerings – an area in which Nokia has led in volumes (it has produced about half the world’s smartphones in a given year), but seen declining growth rates.
Secondly, Joy said, was that ultra low-cost handsets took off in 2006 and that market continues to boom today, particularly as operators, such as Vodafone, cuts deals for low-cost self-branded handsets from, say, ZTE Corp. or Huawei.
These trends may upset the consistency of the “other” vendors, as top-tier feature phone purveyors are likely to begin pushing lesser feature phone players out of business, Joy said.
“The top five vendors have, as a near-term solution, stepped up their efforts in feature phones, causing pain to the lesser players,” Joy said. “Some feature phone players will vanish from the market in the next 18 months.”
Moto’s descent left room
More room at the top has appeared, courtesy of Motorola’s contraction, said Reith at IDC. But that has largely benefited Nokia and Samsung.
What’s fascinating about the “other” handset category is its sheer size and the number of players toiling in it, according to Reith.
“We’re talking about a market with huge growth in large volumes that includes niche product segments and niche geographies,” Reith said, “and they’re still moving decent volumes.”
ZTE, for example, which has global-branding ambitions, sold about 5.5 million ZTE-branded handsets globally last year to rank No. 16 globally. Brazilian firm Gradiente, for instance, managed to sell 1.5 million prepaid handsets into Latin America last year – a profitable business, if you don’t want to play hardball with the big boys. But that’s what Gradiente does, jousting with Nokia and Motorola on its own turf.
“I’ve been in this industry for awhile,” Reith said, “and to be honest, I’ve never seen handsets from some of these brands. Some of them may only ship a few hundred thousand units each year.”