Apple Inc. (NASDAQ:AAPL) and QUALCOMM, Inc. (NASDAQ:QCOM) are two major players in the smartphone industry. Of course Apple makes the iPhone, although Qualcomm’s exposure to the industry is a bit veiled. Raymond James analysts have looked closely at smartphone industry trends, particularly in relation to Chinese smartphone makers.
Apple largely unaffected so far
In a report dated July 31, 2014, analysts Tavis C. McCourt, Simon Leopold and Daniel Toomey said unit growth in the smartphone industry is slowing down and the share is shifting toward Chinese manufacturers. The result is pressures on the revenues and average selling prices of the traditionally popular manufacturers like Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930).
They say that currently, Apple is a “bastion of stability” and that Qualcomm will continue seeing pressure on its royalty growth in the near term.
Smartphone industry with and without Apple
The analysts demonstrate that average selling prices fell for the first time in five years in the most recent quarter due to pricing pressure.
When removing Apple from the picture though, the Raymond James team notes that average selling prices have plunged much more dramatically than it first appeared. Average selling prices fell 7% year over year when removing Apple.
The analysts say this shows just how much pressure there is within the Android market and also impacts from increasing smartphone sales in emerging markets.
Apple, Samsung lose to Chinese vendors
The Raymond James team found that Samsung lost the most market share in the second quarter, although they believe most of it was because of adjustments in channel inventory. Chinese manufacturers were the main beneficiaries of other companies’ losses in market share.
Looking at the broader smartphone market, they found that growth will likely continue slowing because of market saturation. Currently they estimate that the global handset market is about two-thirds smartphones. As a result, growth is expected to keep slowing down until the transition from feature phones is finished. They’re projecting between 20% and 25% growth for the next few quarters and then a slowdown to 15% next year.
