Apple is Still the #1 Smartphone Vendor

There has been quite a bit of interesting media and headlines this last week pointing to data related to Samsung’s latest earnings and smartphone shipments. Many are making the claim that Samsung is now the number one smartphone vendor by volume. However, when we dig deeper into the numbers we find a different story.

First (something that shockingly needs to be continually pointed out), the numbers released in Samsung’s earnings of 27.8 million smart phones shipped is product shipped into the channel not sold to consumers. In reality the carriers stores are Samsung’s customers since their goal is to sell phones to carriers who then try to sell them to consumers. This is called having a channel strategy, something Apple does very differently due to their rather large retail presence. Another differentiating point regarding numbers is that Apple actually releases the number of products sold to consumers where many other companies do not.

Second, the statement that Samsung is the largest “shipper” of smartphones can only apply to Samsung’s Q3 for 2011 not per annum. Apple still sells annually more smartphones than any other manufacturer.

It is tough to say exactly how many smartphones Samsung “shipped” into channel in 2011 to-date since they did not disclose smartphone shipment data in their Q2 earnings. That being said I’ve seen credible attempts to break down estimates and the most logical number I have found for “shipments” into channel from Samsung thus far in 2011 is 50.2 million. In that same period (since January of 2011) Apple SOLD 56.09 iPhones. This is why I am confident Apple is still the number one smartphone vendor. One last point here, we believe Apple will SELL north of 25 million iPhone’s (conservatively) in this upcoming holiday quarter.

We need to be much wiser if we are going to make headlines with market share claims. I understand to many market share is a big deal but I don’t believe it is as big a deal as people make it out to be.

Henry Blodget of Business Insider makes a point that I disagree with. In his column on why Apple should be worried about this Samsung data he states:

As the history of the tech industry has demonstrated again and again, technology platform markets tend to standardize around a single dominant platform. Although several different platforms can co-exist while a market is developing, eventually a clear leader emerges. And as it does, the leader’s power and “network effects” grow, while the leverage of the smaller platforms diminishes.

I don’t disagree that Henry’s observation is true, I simply don’t believe it will be true in the future. The flaw in this observation is that it is only true when a new product, technology or market begins and moves to maturity. As a market matures, it is true that a standard emerges. This standard helps drive the market to maturity. Once the market matures however it becomes saturated with many variations and departures from the standard.

For Henry’s statement to have absolute truth we would need to look farther back than just the technology industry to ALL consumer products. If we do that we find that what I pointed out is always true. Once a market matures it fragments and thus there is no longer a dominant market leader. Study consumer packaged goods, automobiles, consumer appliances and more and you will find this to be true.

This is why I am confident that Apple, Android and most likely Windows Phone will all compete for market mobile share but there will be no dominant leader like there was when Microsoft had 98% Windows share. That future will not happen, as all three platforms will co-exist and each have chunks of the market to themselves.

Smartphones are 5% of global handset shipments world-wide. If we think that this game is anywhere close to being over we would be deceiving ourselves. We have a long journey ahead and one hopefully filled with tremendous competition, because when that happens consumers always win.

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Ben Bajarin

Ben Bajarin is a Principal Analyst and the head of primary research at Creative Strategies, Inc - An industry analysis, market intelligence and research firm located in Silicon Valley. His primary focus is consumer technology and market trend research and he is responsible for studying over 30 countries. Full Bio

37 thoughts on “Apple is Still the #1 Smartphone Vendor”

  1. You could add that even in the PC market, where this was supposed to be most true, the dominant Microsoft has steadily been losing share to Apple in a mature market. PCs were unique for a time because application and file compatibility created extremely powerful network effects. The web has greatly weakened those effects, creating room for fragmentation.

  2. Good points, however, there is something even more basic which makes these Samsung #1 claims ring hollow. Samsung introduces several phones per year and likewise has relatively consistent sales. Apple releases 1 phone per year and their customer base understands that. Apple provided guidance in the previous quarter which indicated sales would be down due to “product transition”. Similarly, Apple also provided guidance that sales for this holiday quarter will be much higher than usual. Likewise, we should expect to hear stories like “Apple re-takes the smartphone lead” if the same clue-less media types… and so it goes.

      1. “The bottom line is the fact that it takes an army to compete with one single phone is amazing.”

        That’s something I always want to point out when people yell “Android is ahead!”

  3. OK, A couple of points:

    First, to switch the order because of the distinction “shipped” and “sold” of something like 10M pieces (out of 27M pieces) would mean that Samsung has nearly one third of the quarter “in the channel” as you claim. That’s roughly a full month of supply, and I’m sure that the channels don’t keep that much unless something is not moving. would be interesting to see this by model since maybe there is some channel overhang on some models.

    Second, I don’t know how Apple counts their handsets sold through channels, which is not an insignificant number. Verizon stores, ATT stores, Best Buy, etc all sell Apple smartphones. Sure Apple can get sell-through data from them so do they count only those “sold through” as sold or do they count handsets sold to the channel like Samsung does? would be an interesting question for someone to ask at their next quarterly conference call.

    Third, the widely speculated Q4 iPhone 4S announcement surely had an impact on their numbers for Q3, how much we’ll see when the Q4 numbers are out.

    But that said, the growth of the Samsung smartphone business is nothing short of amazing. They are a force to watch in this game and it’s no surprise that Apple has now painted a pretty large patent target on Samsung.

    But as you say, competition will make things better for consumers, and that is a good thing!

    1. ” They are a force to watch in this game and it’s no surprise that Apple has now painted a pretty large patent target on Samsung. ”

      That and the fact that Samsung decided to do a poor rip-off of the iPhone… None of the other name brand Android manufacturers bothered, or even attempted, to do this.

      1. I happen to own both a couple of iphones and a Samsung Nexus S phone and would not consider the Nexus a “poor rip off” of the iphone. In fact, there are many things that I like about that handset and would prefer it to the iPhone if they would address some of the infrastructure issues that I’ve had with Android. So I continue to use iPhone and continue to be happy with it.

        On top of that, one could argue that many of the elements of IOS have been “ripped off” from others, including starting with the “app store” that came from the jailbreak community while Apple was continuing to tell us that there was no need for native apps on the phone.

    2. Yes Bill I completely agree. Samsung does make very good handsets and I do believe that in the Android camp they are a force to be reckoned with. What’s fascinating though is that they do this with half a dozen smartphone models where Apple only has one current generation product.

      To you channel point Samsung has a large presence in Asia so if you add up world wide channel volume in retail it would still amount to serious volume. But you are right they won’t keep what isn’t moving.

      That being said vendors can claim shipments and never have to report what is returned to them. So I still feel the shipments claims are disingenuous. I want to know how many products are in consumers hands not in the channel.

      And yes Apple claims all sales as actual sales. They actually report and have so in the earnings and in the calls after exactly specified how many products they still have in retail shelves separately. They do this however with the goal of putting investors minds to ease that they have enough product in the channel to meet demand.

      1. A couple of thoughts on why the “number of models” discussion isn’t valid:

        1: Apple now has “three” models in market, one priced at $0 (3GS), one priced at $99 (4) and one priced at and above $199 (4S) So it’s a bit disingenuous to say that they make these sales with one model. (yea, I know they were previous generations)

        2: Apple also has two more models when you consider that they have different memory capacity and then multiply that by two when you split black and white.

        So all-in Apple has 8 models in market today: 3GS, 4, three variants of the black 4S and 3 variants of the white 4S.

        Sure it’s the “same platform” for many of them, which is not inconsistent with the Samsung models either. The point is that any company make models to cover personal preference (i.e. color) and price points in market. Samsung does it one way by wrapping different plastic and a different screen around the same basic electronics, Apple does it another.

        1. True, but we haven’t seen the market effects yet of the newest lineup you mentioned, 3GS, 4 and 4S. This is actually very interesting because it shows us how Apple plans to have multiple offerings. That is however why I specified in my comment “current generation.”

          I do think this gives us a preview of how Apple plans to go after the low-end. They will do it with previous generation phones. This is important because they are not phones created for the low end they simply move to the low end. SO they are still high quality just not current gen tech. This observation should concern their competitors.

          1. yes, but this strategy is not new.

            The original iPhone remained after the 3G was announced
            The 3G remained after the 3GS was announced
            The 3GS remained after the 4 was announced

            It is their way of addressing multiple price points and one that has been effective over the past 4 years. Samsung just has another way (and more traditional) way to do the same.

            Apple also has the ability to do this because of their pricing power (unsubsidized) in the marke, they can take a haircut in margin$ and still make money where others may not be able to do it and have to design for lower-cost.

    3. You’re WRONG! PlayBook’s, Xoom’s, “original” Galaxy Tabs, Galaxy 10.1’s + several other tablets have ALL been collecting dust on inventory shelves!! The only tablet that hasn’t spent all of its time on the shelves was HP’s TouchPad & that’s only because Best Buy couldn’t sell any + demanded HP come get their units. These companies (like RIM), will just sit there & pretend every things fine if the media doesn’t highlight their failures. They’ll just let inventory sit there, praying that some “miracle” happens. Look at how RIM left all of the under ordered components at Quantas, so the ODM made a deal with Amazon & now their new tablet the “Fire” looks exactly like the PlayBook, with fewer functions & a much cheaper price. Believe me, inventory sits on the shelves SO long sometimes, the dust is so thick, you can’t even read what’s on the box. lol

  4. Amen, Ben.

    Ship does not equal sold.

    Profit is KING.

    Samsung’s profits went down. Apple’s profits went up and up and up.

  5. In the grand scheme of things if analysts are going to talk about ‘technology platforms’ then they can’t talk about iPhone sales and forget about iPad and iPod Touch, and possibly Apple TV in the future, because they are ALL members of the ‘iOS platform.’ What else does Samsung sell that is a member of the ‘Android platform’ and how well are those items selling? How well is the ‘Android platform’ doing in relation to the ‘iOS platform?’ How much profit do the various Android players make on the ‘Android platform,’ how much does Google make?

  6. everyone takes the wrong lessons from Windows dominance of desktop PC OS. what simply happened was an overwhelming necessity for a single OS in the first era of mass use of computers – the 90’s into the 00’s – because it was not yet possible to share essential files – text, graphics, data – across different OS platforms. in fact, not even between different brands of software on the same OS. so Windows and its MS Office seized that moment and dominated the market.

    but those circumstances are totally gone now. file conversions now are trivial, and the web is a universal super platform anyway. what has really happened is now the scale of mass use of computers has expanded tremendously to include smartphones, tablets, and soon televisions. we are in a second era of mass use of computers.

    looked at this way, computer OS’ are indeed rapidly fragmenting, and the % of Windows computers is dropping quickly when iOS and Android are counted too. this trend is even stronger in the consumer market, if enterprise stats are not included, where change comes much slower.

    the world no longer needs a standard OS like it once did for a relatively short while. we are instead seeing the rise of “ecosystems” … but that’s another topic.

    1. Extremely well said and I couldn’t agree more. We talk often of Ecosystems as a topic here at Tech.pinions. There is still much to be said and fleshed out but ecosystems are the correct way to think about this market going forward.

      Thanks for sharing.

    2. Instead of Microsoft seizing the moment, I tend to look at it as IBM handing them a golden egg. Computing was mostly business and IBM was business computing. IT bought IBM and established the PC. Now, normal ordinary consumers are making their own tech decisions and IT has to accommodate. Different circumstances, different eras. History will not repeat.

  7. It seems rather obvious that Wall Street and investors don’t see the iPhone as having any dominant position in the smartphone industry. If that’s the case, I’m sure the share price would be much closer to $500 than $400. The company would be as highly valued as Amazon is as an online retailer for having a dominant position. I’m getting the message that Wall Street sees iPhone and iOS as a long-term also-ran with future lower market share than either Android and Windows Phone. You can’t imagine how many articles I saw that covered Samsung’s smartphones definitely beating the iPhone to death.

    Despite Apple making more money from its smaller market share than all of Android smartphone vendors combined, Wall Street doesn’t see this as being important enough and Apple stock is being punished for not having the largest market share. So, iPhone numbers missed by a few million units and investors bailed. Seeing that, it appears that Apple doesn’t inspire much faith from investors. Recovery from the tiny “miss” has been slow taking place.

    This is merely my observation based on Apple’s current conservative share price and remarks heard from a few hedge fund managers.

    1. Apple’s down ONLY because the same investors you speak of own over 70% of the stock. That means they have an incentive to keep the price down so they can build capital & buy more, knowing that the stock’s value is really undervalued by at least $140. In the 80’s, we called it manipulation, in the 90’s they called it “insider-trading”, in the 2000’s, they call it “shorting”!!! Either way, it’s a “calculated” bet against a stock’s success. Apple is pretty much “flawless” at the moment, yet analyst/investors are betting against them??! Amazon’s makes millions, NOT billions & has a stock price of $215+ & rising. Google’s entire business (ads, NOT mobile, which makes $0), makes less than iPhone 4!! But their stock price is near $600. Apple with REAL value & a successful quarter-by-quarter company, will eventually go up toward $600. The investors know this & want to make as much money as they can before it gets that high! $400/share is expensive, no matter how you look at it! Obviously, their the one’s that create the sentiment that “something’s wrong” & then sell to the guy next to them, only to buy it back + more, once the value drops. SMART!!

  8. I am glad to see this analysis. Some very valid points and some a bit biased towards Apple at the cost of other manufacturers. From a branding perspective it is clear that a company with one product name iPhone seems to outperform all of its competitors who have 100s of names like HTC, Samsung and Motorola. Samsung is trying to take a page out of Apple when it uses Galaxy SII as its basis for many new smartphones and trying to keep the same brand. However, as the carrier pressure mounts it keeps giving up that branding as it doesn’t control branding as well as Apple does.

    Generally the sales of smartphones seem to be somewhat related to the new models introduced by manufacturers. Apple’s lack of new smartphone last quarter did influence its numbers while HTC and Samsung who had many new models benefitted from it. The test will be what happens when the full year numbers are tallied.

  9. Ben, Apple’s “sold” number is in fact “shipped”. Apple execs routinely detail in their earnings conference calls how channel inventory changes quarter-to-quarter, and it’s clear from those numbers that Apple’s “sales” are not measured as sales to end users. For the fourth fiscal quarter of 2011, iPhone channel inventory declined by 180,000 units as Apple began to draw down in advance of the iPhone 4S. The company explictly said that this meant that Apple actually sold 17.3 million iPhones, instead of the 17.1 million reported in its official figures.

    The reverse happened in the prior quarter when Apple “sold” 20.3 million iPhones but channel inventory went up by 700,000. Consequently, Apple actually sold only 19.6 million to end users.

    1. Yes, I pointed that out to a commenter earlier that Apple does on their call distinguish between channel shipments and actual sell through. The numbers I am going off are sell through as real time as possible using my colleagues, NPD data to track actual retail sales not shipments.

      My main point though is that with other vendors we don’t actually know sales. Regardless I think profit matters more than market share but it is important to know actual install base. With Apple we do know with others its sketchy.

      1. I guess the question is how close “shipments” and “sales to end users” really are. Shouldn’t they be pretty close given that the smartphone industry and its distribution channels are fairly well established? I mean, you see some fluctuation with drawdown ahead of new products and perhaps shortages of new models, and then refilling of channel as production catches up. But in general, I’d think sales and shipments should be pretty close, especially for a company like Samsung that is frequently releasing new models and would have less of that drawdown-refill effect than a company like Apple.

        Consequently, assuming that the 27.8 million Samsung shipments is accurate (and that is an assumption given that Sammy no longer releases exact numbers), I’d think sales wouldn’t be a whole lot different that. Certainly not so much lower that they would drop below Apple’s sell-through of 17.3 million.

        The tablet market is where we’ve seen such a huge disparity in shipments and sales because it’s a brand new market. Companies are filling the channel, but the units aren’t moving. That’s not the case in phones, where you’ve got established channels that are emptying out as they’re being refilled from the backend.

        1. Yes I agree that the disparity is probably not 10 million. Their Galaxy S II phones are very nice device and selling quite well. That is why I brought the point out that the title of most smartphones shipped can only apply to Samsung Q3, which is Apple’s Q4.

          My overall point on the subject of the crazy headlines from the media was that to-date Apple has sold more smartphones than any vendor. Even if we just look at calendar 2011 (not fiscal years) Apple Still has them beat by volume.

          Q4 will be interesting and I think Apple will still keep the lead. A point that I think is worth mentioning though is that, Apple has one current gen product on the market and 2 previous gen devices. Samsung has currently more than half a dozen current gen devices on the market. It is interesting how the difference on strategy is playing out.

          And yes with actual numbers not being reported it is hard to know. Vendors aren’t required to disclose how many devices got shipped back to them because they didn’t sell through.

        2. you’re right in overall theory. but even then a lot of discontinued model smartphones wind up in the discount stores of the world – not in the US or Europe, but Asia and other markets that no “analyst” ever tracks. you can’t assume 100% sell through at the initial list, or intial wholesale price telcos pay.

          so define “market sales” and resulting market share. does that include dumping unsold inventory when a model is discontinued? in any corner of the world? technically, yes. but the way it’s being used commonly, not really.

        3. It’s simple: SALES = swiped at the cash register & taken home!! SHIPPED = piled on a “skid” in an isle of an inventory section of the stock room (while it gets dusty). Even if the company has already gotten a check from the retailer, they CAN’T count them as SOLD, because if they don’t sell over a period of time, the retailer can call the company & tell them to come get their stuff + bring a check! You’re assumptions don’t make any sense!! Apple’s numbers go up every quarter, except for the “1” quarter where pundit/blogger hysteria was at an all-time high! They’ll surely make up for any missed numbers next quarter. Samsung has NEVER sold more than the iPhone since Nokia fell out of the picture. They also NEVER report sales or shipments. So, speculating on their numbers is pointless! All you have to do is go to the local Best Buy, Wal-mart, Costco or Future Shop & ask the workers how the phones & tablets are selling. They can’t lie, so they’ll tell you the truth. Most of the stores I’ve checked out this year ALL say the same thing: “these THINGS are NOT selling well”, while iOS devices can’t stay on the shelves (“We get shipments from Apple everyday!!!”). Stop living in the world’s you create for yourself, they are NOT reality!

        4. Since Apple claims to maintain four to six weeks of inventory in the channel, the difference between shipped and sold is likely four to six weeks worth (33 to 50%) of the difference in sales numbers from the previous quarter.

          Then again, the four to six weeks of channel inventory could be based on projected sales for the coming quarter.

    2. You’re SO wrong! If what you’re saying is true, Apple would’ve included the 4 million iPhone 4S’s they sold in 3 days! They didn’t & they never do! Plus, any ACTUAL sales or shipping numbers reported, have to actually be true, or the overall figures won’t add up (business 101)! Usually NONE of the other tech-companies, NONE, report sales & sometimes they DON’T report shipment numbers either! Apple ONLY counts sales at the register, that’s NOT a secret! That’s also why they make the most money. Their financial practices are open to the public, which is surprising since their competition steals everything except what makes them ACTUALLY successful financially. lol! They pay practically NOTHING for components (screens, flash, chips) & finance factories for component manufacturers, while learning how to manufacture their own chips, yet they contract it out to suppliers while simultaneously teaching them how to make them better & making the competitor irrelevant (Intel). Plus, Apple gets an “exclusivity” deal for the finance + once the deal ends, they get a MUCH cheaper price for the components & usually buy them ALL! Usually enough to last years (e.g. touch-screens glass: Apple bought enough ’til 2014 + the “lathes” that press the aluminum into “unibody” chassis. Apple bought ALL of the aluminum available + bought ALL of the worlds lathes. NONE will be ready for sale ’til 2016!!) lol! Their cash goes up while everything else costs them NOTHING! That’s GENIUS & is completely credited to their current CEO: Tim Cook. He’s the COO genius that has Apple dominating components & mobile while competitors struggle to compete & are forced to make smaller, cheaper devices (7-inch/anyone, lol). Apple’s success ONLY highlights their so-called “competitions” failures! lol

    3. The inventory decline is simply and indication that Apple pumped 180,000 fewer units into the channel than would have been required to keep the same level of inventory.

      In the previous quarter Apple simply pumped more (unsold) units into the channel in preparation for production and assembly line changeovers.

  10. Henry Blodget has to be the most mistaken tech finance writer in the world. The guy gets the wrong end of the stick almost every time he puts word on the page.

    I avoid Business Insider like the plague.

  11. I’m not sure why, but you’re ignoring reality! Apple will obviously be the last man standing, once they get rid of the so-called “competition”. Releasing ICS was a major misstep for Google/Android. Directly competing with iOS will erode any lead they have in a very short period of time. iOS currently has more users than a “merged” Android OS. Plus, as Apple gains more carriers, Android’s OS & their OEM partners will become more & more irrelevant. Microsoft’s WP7 is a DUD!! Plain & simple! No matter how they dress it up, it will always be a “Windows” product in the collective “mind-share” of consumers. Like Android’s OS, WP7 is another example of a confusing, un-simplified OS that has NO apps or useful function that the leading OS (iOS) has already! Neither company brings anything significant to the table & iPhone 4S + “Siri”, just highlight another subset of functions that they’ll eventually try to “steal” & copy (in the NEAR future). Apple’s road map is hidden & well thought out, while these two companies are reactionary, undisciplined & just don’t get it. The irony is that these “duds” are quickly destroying their own business’ by competing with Apple in mobile! Who knew that the mobile business would in-rich Apple & “gut” the industries leading tech-companies at the same time!

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