Smartphone vendors face saturated market

Smartphone vendors are facing a saturated market, with consumers less likely to swap brands and little room for players from China.

Smartphone vendors are facing a saturated Australian market, with consumers less likely to swap brands and little room for new players from China.

Australian research firm Tel­syte said the days of manufacturers depending on converting consumers from feature phones to smartphones were over.

About 75 per cent of Australians used smartphones — the remainder were too young, too old or faced other problems using a smartphone.

Telsyte managing director Foad Fadaghi said the smartphone market was dependent on population growth to expand. “We’re looking at population growth as being one of the key drivers now for handsets, while in previous years it was a lot about replacing feature phones.”

Mr Fadaghi said with Windows and BlackBerry having a low market share, the handset market was a two-horse race between Apple (43 per cent) and Android (50 per cent) devices, and 7 per cent for the rest, as at the end of last year.

Telsyte’s figures show, across five years, the take-up of Apple and Android devices has exploded at the expense of companies such as BlackBerry and Nokia, which once dominated the market.

In 2010, three years after the iPhone launched, those brands still dominated with 55 per cent market share. The iPhone had 39 per cent and Android just 6 per cent. But within a year the picture was radically different, with Android and other non-Apple smartphones level-pegging on 29 per cent.

A further year later the ig­nited Android market gained 44 per cent, while BlackBerry, Nokia and others were reduced to 13 per cent.

New figures by Gartner paint an undulating picture globally. Samsung (20.9 per cent) outsold Apple (10.2 per cent) last year, but the lead changed in Q4 with the release of iPhone 6 and 6 Plus — 20.4 per cent to 19.5 per cent in favour of Apple.

The availability of Samsung’s Galaxy S6 hopefully will mean less skewed figures.

Full review – Samsung Galaxy S6 & Edge

There is good news for Microsoft in Telsyte’s Australian figures — its present install base of 5 per cent could double in four years.

“We do expect Microsoft to have a bit of a run over the next four years. We think Windows 10 and some innovations around HoloLens (a holographs viewer) and some of the peripheral devices might attract people to that platform,” Mr Fadaghi said.

Of two million new smartphone users last year, he said, Apple added more than half while Android snared about 900,000. Larger screen sizes, such as on the iPhone 6 Plus, were increasingly popular in Australia.

He said one in four iPhones sold in the second half of last year were the Plus model. “We expect this kind of trend to continue for Apple.”

By 2019, Telsyte predicted, a quarter of local smartphones would be phablets — phones with screen sizes of 5.5 inches (14cm) or more. When asked why they preferred larger phones, users told Telsyte these phones delivered better battery life and were better suited to work-related uses.

Those already using tablets wanted the same versatility on a larger-screen smartphone.

Mr Fadaghi said Telstye’s research showed Australian users were not deterred by the increasing price of smartphones because of the falling Australian dollar. Consumers were using smartphones to manage more aspects of their life and appreciated their increasing role and value.

“The second factor is that the increase in handset prices is drawing people into looking at repayment plans with the carriers,” he said, adding there was a shift back towards consumers buying handsets on telco plans, although the long-term trend was still towards outright purchases. About 55 per cent of phone purchases last year were on contracts.

One rider: smartwatches might steer consumers to certain brands and improve phone sales but it was unlikely this year. Users needed to become familiar with smartwatch products and know what features and devices they wanted first.

Telsyte’s figures showed Apple’s market share was stable — iPhone users intended to keep buying Apple phones, and user satisfaction was the highest among smartphone manufacturers. This had been the case for three to four years.

“Apple users are unlikely to change their handset and have even less reason to given the larger form factors and the better battery life on iPhones,” Mr Fadaghi said.

He said 55 to 64-year-olds were the largest group of new Apple customers in the second half of last year because of the larger handsets.

The 16 to 24 Apple market also grew because of people passing down discarded older-model ­iPhones to younger family members. Passed on or second-hand iPhones accounted for 28 per cent of older iPhones in use.

“The fact older iPhones run the most recent operating system on one or two previous generation models has helped keep older iPhone models in use longer than might have been the case.”

Mr Fadaghi said Android vendors were continuing to feel the heat from Apple “but that is not a new feeling”. He said users in both camps appeared satisfied; most iPhone users would buy another iPhone next time. But Android vendors faced a challenge to keep customers coming back.

“The battle is within the Android market rather than across the market, and it’s heating up.”

Mr Fadaghi said for Samsung phones, consumers liked the screen sizes, price and the dustproof and waterproof nature of the Galaxy S5. (Samsung has dropped offering a dustproof, waterproof handset in the S6, launched yesterday in Australia.)

He said the S6 should be another Samsung success.

“Samsung customers have a high repeat purchasing (behaviour) and we think the product should do quite well.”

When it came to HTC handsets, local consumers liked the sound quality, battery life and video recording functionality.

Mr Fadaghi said HTC lacked the brand strength and marketing power of competitors; for example, Sony’s ability to nudge PlayStation users towards its Xperia phones with cross-compatibility.

On present trajectories, Telsyte has forecast Sony to overtake HTC as No 2 Android phone brand in Australia this year.

Such a forecast will be tested as these players reveal more of their 2015 line-up.

Mr Fadaghi said Sony had momentum, although it had been late to develop its popular premium Xperia waterproof smartphone range. “You can’t accuse Sony of copying other products, they tend to be unique in their look and feel.”

LG was “a dark horse” in the smartphone market.

“Their heritage is more in the low-range market and the cheaper products.

“However, the G3 is the first hero product that has been received well by the Australian market. They’re getting their act together and getting better at marketing their products.”

He said switching activity between Android handsets was less than before. And there was a trend towards removing “bloatware” from Android models.

Some vendors, including Samsung and HTC, overlay Google’s standard Android software with an OS layer sporting their own, richer features, but this can affect performance.

Telstye predicted the arrival of China-branded vendors in the Australian market would not be successful.

Mr Fadaghi said in terms of price and features, including some of their built-in apps, these vendors were rating well.

While Huawei and Oppo weren’t rating too poorly, with good customer satisfaction levels, there was a lack of accessories, and third-party support was lower here than in China.

He said Telstye was predicting China phone vendors would “eventually exit the market”.

“There’s just not enough room for six or seven vendors producing the same product at low prices.”