Apple and Samsung see smartphone declines in full year 2016

First-ever down year for Apple in a 'roller coaster' market, IDC says

iphone galaxy
Apple iPhone and a Samsung smartphone

Apple iPhones beat out Samsung smartphones both globally and in the U.S. in the final quarter of 2016, even though both vendors saw declines in shipments for the entire 2016 calendar year, research firm IDC reported Wednesday.

It was the first full year that Apple has seen a decline in the iPhone shipments since it was launched in 2007, the analyst firm said.

Up-and-coming Huawei, based in China, finished third globally for both the quarter and the year.

The numbers were also in line with a report released by research firm Strategy Analytics on Tuesday.

"The roller coaster year of 2016 proves that no manufacturer is safe in their position in the smartphone market, especially as some markets crash and others rise," said IDC analyst Ryan Reith in an email.

Even though Apple and Samsung were down for the year, growth is still predicted for smartphones in 2017 and beyond, Reith said.

"The smartphone continues to be the go-to device for computing across all age brackets and forms of economies globally," he said. "As long as consumers continue to replace their phones every two years or so, the industry growth should remain positive."

Reith said IDC hasn't seen any indication that smartphone customers are lengthening their replacement cycles "despite the notion that the industry is stale."

Annual global smartphone growth was 10.4% in 2015, but dropped to 2.3% in 2016, with signs of a turnaround expected in 2017, IDC said. The yet-to-be announced 10th anniversary iPhone will push a rebound in iPhone shipments this year, IDC said.

For Apple, 2016 marked the first full year of declining shipments for the iPhone, with a 7% decline over all of 2015. That meant that Apple shipped 215 million iPhones globally in 2016. Even so, Apple shipped 78.3 million iPhones in the fourth quarter, a record for the quarter, giving it a strong 4.7% increase over the same quarter in 2015.

Samsung finished first for all of 2016 with 311 million smartphones shipped globally, but just barely fell behind Apple for the quarter, with 77.5 million shipped globally. The South Korean company's recall of 3 million Note7 smartphones because of overheating batteries had an impact, but the Galaxy S7 and J-series phones were nonetheless successful, IDC said, without giving shipment figures for either. Samsung's fourth quarter share fell below 20% for the first time in four years.

Huawei was third with 45 million smartphones shipped in the quarter and 139 million for the year. The fourth quarter was the first time Huawei captured double-digit market share with 10.6% of total shipments.

Oppo and Vivo, both based in China, finished in fourth and fifth place, respectively, for both the quarter and the year. Both companies saw smartphone shipment growth above 100% for 2016, with Oppo gaining 133% and Vivo gaining 103%.

IDC analyst Anthony Scarsella said that for the Chinese vendors to knock off Apple or Samsung at the top, they must increase their markets beyond their home turf.

Samsung will not be announcing its Galaxy S8 smartphone at Mobile World Congress in late February, the company revealed last week. The company does intend to show tablets and other devices at MWC, a spokeswoman said Wednesday.

Several reports, including from the normally reliable VentureBeat, have pegged the launch of the Galaxy S8 to March 29 in New York City. Shipments are then expected to start in April.

Meanwhile, Huawei and LG Electronics reportedly plan to show off smartphones at MWC on Feb. 26, as usual. Several reports have revealed mockups of the upcoming LG G6, but a spokesman said Wednesday that nothing official has been released.

LG has done fairly well in the U.S. market, finishing third for the fourth quarter behind Apple and Samsung, Reith said. But LG finished seventh globally in the fourth quarter. LG has positioned itself as a competitor to Samsung phones, with both running the Android OS, but Reith said, "LG is losing ground on the industry, not just to Samsung."

Because the U.S. is LG's biggest market, it gets compared to Samsung often, he said.

In an apparent jab at the Note7 overheating disaster, LG told the Korea Herald in January that its upcoming G6 will use "heat pipes" made of copper to disperse heat away quickly from the G6. Similar technology is already used in many laptops.

"We will significantly improve the safety and quality of our new flagship smartphones as more consumers seek safe smartphones," an LG official was quoted as saying at the time.

Reith said if LG tries to argue its phones "won't burn you," in comparison to Samsung devices, the tactic won't stick with consumers.

Roger Entner, an analyst at Recon Analytics, said both Apple and Samsung will continue to "outmuscle" other smartphone vendors, including LG, with expensive marketing and advertising in 2017 and beyond.

"Their message [at Apple and Samsung] is so loud that nobody else breaks through," Entner said. "LG builds excellent devices, but that's no longer enough. You have to market them."

Copyright © 2017 IDG Communications, Inc.

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