Apple, Samsung Smartphones Projected To Suffer Significant Drop In Market Share By 2015

Rising competition from emerging players in new growth markets like India and China is expected to pose greater challenges for Apple Inc. (NASDAQ:AAPL) and Samsung Electronics Co Ltd (KRX:005935), according to a new report from Fitch Ratings on Tuesday. And, both market leaders are expected to cede market share to newcomers by 2015.

Lower-priced handsets from local vendors in emerging markets are expected to draw more customers by the end of next year. And the worldwide smartphone market share of Apple and Samsung is expected to decline to around 14 percent and 25 percent, respectively, with both companies’ combined smartphone shipment expected to stagnate at around 460 million units in 2014. At the same time, the global smartphone market is estimated to grow by nearly 20 percent to reach 1.2 billion units during the same period, according to the report.

In emerging markets, “where cost is relatively more important than global brand strength or cutting-edge technology, competitors' devices retailing at USD100-300 can offer most of the key features of more expensive phones from Samsung and Apple,” the Fitch report said. In 2013, Apple and Samsung shipped about 15 percent and 31 percent of all devices.

The report expects India and China to drive growth in smartphones, accounting for more than 60 percent in shipments in 2015. Local handset makers, including China's Xiaomi, Lenovo and Huawei, and India's Micromax Informatics, are expected to be the main competitors for Apple and Samsung in these two countries.

According to a recent report released by International Data Corporation, Apple and Samsung witnessed a drop in their smartphone market share -- 1.1 percentage points and 7.1 percentage points, respectively -- in the second quarter of 2014, while smaller Chinese vendors helped lead the industry's growth during the same period.

In China, local brand Xiaomi beat Samsung to take the top spot in the second quarter with a 14 percent share of the Chinese smartphone market, compared to the South Korean company’s 12 percent, which was down 6.3 percentage points from the same period last year, a Canalys report said.

A similar scenario unfolded in India, where Micromax, a local smartphone manufacturer, became the country’s leading mobile-phone vendor for the first time with a 16.6 percent share of the market, surpassing Samsung, which came in second with 14.4 percent, according to a report from Counterpoint Research.

“Apple's next iPhone, rumored to be launched in September 2014, is likely to have a larger screen, and developments are likely to be incremental rather than revolutionary,” the Fitch report said. “We believe that the innovations - which include curved screens and compatible wearable devices - are unlikely to change the trend facing Samsung and Apple.”