In recent quarters, the handset market has bifurcated, with manufacturers that produce the inexpensive smartphones favored by consumers in emerging markets growing their shipment volumes at a rapid pace.
At the end of 2010, smartphone handsets priced at less than US$300.00 accounted for slightly more than one-quarter of the global market, compared to 50 percent today. Meanwhile, the share of high-end handsets that retail for more than US$550 has remained roughly flat at about one-quarter of all smartphone shipments.
Shifting competitive dynamics mean that Apple no longer dominates the market for high-end smartphones, thanks to inroads made by Samsung’s Galaxy series of handsets. Meanwhile, Apple has ceded low-end handset volumes in emerging markets to the competition, preferring to address this market with older iPhones rather than new, cheaper models. And even if Apple does introduce a cheaper iPhone this quarter, this handset would face intense competition from established local players in China and other emerging markets. Profit margins on a lower-end iPhone would also likely be lower relative to the company’s premium products.
Don’t Enter the Handset Warzone
Trying to pick a winner in the increasingly competitive handset and tablet market is a risky endeavor. Instead, investors should focus on names that benefit from growing demand for mobile devices regardless of which handset maker comes out on top.