Fears over declining high-end smartphone demand in key territories has long been doing the rounds now. With sales of premium devices having hit saturation point in established marketplaces, and consumers increasingly electing to purchase cheap handsets, tech giants are turning to developing regions to keep revenues moving higher.
So latest data from research house IDC this week would have made for worrying reading. This showed smartphone shipments in China the worlds number one mobile phone market dip for the first time in 6 years during the first three months of 2015.
China is often thought of as an emerging market but the reality is that the vast majority of phones sold in China today are smartphones, similar to other mature markets like the US, UK, Australia, and Japan, the IDC commented.
Total sales slipped 4% from the corresponding period in 2014 to 98.8 million units, the IDC said, and the body warned that growth is likely to flatline in the coming year.
Apple continues to grow
While these numbers may at first glance be cause for concern in Cupertino, California, the IDC added that Apple (NASDAQ: AAPL. US) had displaced Samsung as the countrys most popular brand. Indeed, the US firm now commands a 14.7% share in the Chinese market, fuelled by astonishing sales growth of 62.1% during January-March.
The colossal brand power of Apple is unrivalled, and last autumns blockbuster iPhone 6 and iPhone 6 Plus launch proved that the pull of the firms tech toys is as strong as ever. Indeed, the companys revenues leapt 27% during January-March, to $58bn, the business reported in late April, with Mac and iPhone sales hitting their highest ever for Apples second fiscal quarter. And critically turnover in China rocketed 71% during the period to a colossal $16.8bn.
Component builders face uncertain outlook
By comparison Samsungs crown in China has not just slipped; rather, it has been steamrollered by Apple as well as domestic manufacturers such as Xiaomi. The Korean firms sales collapsed by 53% during the first quarter, driving its market share to just 9.7% from 19.9% a year earlier.
But Samsungs troubles in China are merely a reflection of its performance in other key markets, and is a situation which Apple aside is affecting the entire industry. So not surprisingly the outlook for component manufacturers like Cambridges ARM Holdings(LSE: ARM) (NASDAQ: ARMH.US) is also a major worry.
Although the business can take solace from key customer Apples rising star, the growing popularity of cheaper devices across the industry is playing havoc with the parts builders royalties outlook. And with industry rivals like Intel increasingly eating into ARM Holdings dominance of the stagnating smartphone market, I believe that the British business is in severe danger of experiencing severe earnings deceleration looking ahead.
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