The same iPhones that fly off American shelves are losing ground in key markets abroad—an example, in case one was needed, that what works in the U.S. doesn’t automatically succeed overseas. This is no temporary stumble, according to new data, but an illustration that we’ve reached the end of the beginning for smartphones and a sign that Apple’s ways of appealing to customers could prove less effective in the future.
IDC released first-quarter numbers on smartphone shipments in Western Europe, and Apple’s share dropped to 20 percent. A year ago, by contrast, iPhone shipments had 25 percent of the market. Much Apple’s lost business went to Samsung, which accounted for 45 percent of shipments (up from 39 percent). But companies like Sony and LG, seen as also-rans in the United States, also saw big gains.
People who want high-end smartphones have likely already bought them, said Francisco Jeronimo, IDC’s director of European mobile device research. New buyers have less disposable income and are buying smartphones only because they have become cheap. “We are now entering the second wave of smartphone adoption, which will be driven by those users with no need for a smartphone,” he said.
These customers have less money to spend and less reason to splurge when there are cheaper products available. In addition, European phone carriers are much less generous when it comes to subsidizing their customers’ phones. IPhones don’t seem much more expensive than other smartphones in the U.S., but the difference can be significant for those who are paying for them out of pocket.
The problem for high-end smartphone makers looks even more bleak when you look beyond the richest markets in the world. Asian and Pacific markets, excluding the wealthy Japanese, accounted for half of the total market for smartphones in the first quarter. Chinese smartphone makers have been serving these customers just fine, potentially gathering expertise that could help them make a move for budget-minded Europeans in the future.
The prospects, Jeronimo argues, aren’t so bright for upscale companies like Apple trying to move into cheaper markets. IDC recently reported that Apple is no longer one of the top five smartphone sellers in India. And the cheapest Asian markets might as well be off-limits, because customers demand products whose prices don’t come close to anything Apple or Samsung is willing to sell. “Those are products that they cannot provide or are not eager to provide, because they don’t want to damage their brands,” said Jeronimo.
This dynamic is not only playing out in the developing world, however, as IDC’s European market-share numbers show. This explains why smartphone companies have been working to release pared-down versions of their premium products. New smartphone sales are going to be increasingly cheap smartphone sales. Despite rumors of inexpensive iPhones, Apple’s main strategy to reach down-market to date has been to sell older versions of its products at lower prices.
But when it comes to actually making cheaper phones, Apple may have more to lose than its competitors. It has always been a luxury brand. Samsung and HTC have a history of selling relatively inexpensive phones; Apple has a history of selling products that indicate membership in an exclusive club. That has played really well in the United States. But things are different abroad.
