Six out of the top ten smartphone model SKUs were from Apple with iPhone 8 & X 64 GB versions the most popular. Surprisingly, the US market saw a weaker prepaid segment during the post-holiday season quarter.

   San Diego, Buenos Aires, London, New Delhi, Hong Kong, Beijing, Seoul
May 22, 2018

According to the latest research from Counterpoint’s Market Pulse program, the US market sold-through 38.7m smartphones during the first quarter of 2018. This is a 11% decrease from Q1 2017 when sales were 43.7 million smartphones. Sales had not dropped below 40 million for the last 3 years.

Commenting on the quarter, Research Director Jeff Fieldhack stated, “Dips in sales coming off a holiday period are to be expected, however there are several other factors that make this the weakest Q1 in recent years. For one, postpaid device promotions were not as enticing in the first quarter—most requiring a new line.  In addition, prepaid did not receive its usual February and Q1 bump as prepaid service promos cooled. The ramp-down of government subsidized ‘Lifeline’ programs have cut into prepaid device volumes. BYOD and refurbished devices also continue to impact new device sales.”

Exhibit 1: Monthly Market Pulse - OEM & Market Sales Growth (YoY %) Trends

Counterpoint’s Market Pulse service tracks OEM-level smartphone sales monthly.

• Apple growth percentage is declining during launch periods. However, it has gained overall US market share because of its increasing installed base and B2B and prepaid channel improvements.
• Samsung growth curve is slipping. There is increased difficulty maintaining momentum through product lifecycles.
• During periods of prepaid weakness, ‘others’ performance declines. Others saw a drastic dip during the first quarter.
• The overall US market growth is on a downward slope outside of Apple launch periods.

Fieldhack added, “With the weakness within prepaid, there was weakness from brands catering to prepaid services such as Alcatel, Coolpad, and to a lesser extent ZTE. Many of the secondary brands selling unlocked online also saw volumes decrease year-over-year. Finally, the prominent prepaid services reduced the amount of core brands carried. Instead, opting to carry full portfolios of major handset brands which are easier sells due to their brand recognition.”

Research Analyst Maurice Klaehne commented, “Another factor for the decline may be attributed to the current China-USA trade war adversely affecting the sales of Chinese devices. The situation has intensified with the suspension of ZTE’s license to use US-sourced components under EAR rules. However, the full extent of the damage to ZTE’s business is currently unclear as new developments seem to arise every day.  Huawei is also under scrutiny by the US Justice Dept for violating trade terms and selling to North Korea and Iran.”

Klaehne added, “The prepaid channel will see the most shake up over the next few months if pressure on ZTE does not ease up. ZTE has a strong presence within prepaid and held 11% share of the total US handset market in Q1. We expect the OEM to sell off its remaining inventory over the first half of 2018, leading to a sizeable chunk of the prepaid market up for the taking. Alcatel and Motorola are two potential OEMs that might move in and fill the void.”

Exhibit 2: Monthly Market Pulse - OEM Market Share Q1 2018 (%) 

Further commenting on OEM trends for Q1 Klaehne added, “Apple shipped a record 16 million iPhones for the first time ever in a Q1 in the US. This is a 16% YoY increase, with the OEM showing continued success in taking share away from Samsung in the premium market space. It now commands 80% of the +$800 price band. Samsung’s sales declined 4% YoY which indicate weaker sell-through of their premium Galaxy models. Overall, Apple’s super-premium segment ($800 and above) accounted for 20% of US total sales during Q1. Samsung contributed 8%. The $800 and above price segment grew to 28%,  an additional 3% share, over what we reported during Q4 2017. Google Pixel 2 models are solid sellers when on promo within Verizon. Sales dip considerably when off promo. Volumes would be much higher if the Pixel was offered within carrier retail channels outside of Verizon.”

Exhibit 3: Monthly Market Pulse - Best Selling Smartphone Model SKUs Ranking by Sales - Q1 2018 

Commenting on the top sellers of Q1 2018, Fieldhack noted, “Overall we see Apple’s continued dominance in the top sellers for Q1 as the X and 8 series hold the top spots with the older Galaxy devices not far behind. S9 pre-sales were sluggish compared to S8 sales last year but will probably pick up sales momentum in the following months as carriers are offering good trade-in deals. Motorola has been doing well with the E4 due to its low cost and solid specs for the price point—very dependable within prepaid and national retail channels.”

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Analyst Contacts:

Jeff Fieldhack
+1 858 603 2703
[email protected]

Maurice Klaehne
+1 617 336 8383
[email protected]

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