Samsung loses its crown as world's top smartphone vendor

Samsung loses its crown as world's top smartphone vendor. February. 02, 2017 06:59. by Dong-Jin Shin shine@donga.com. Samsung has lost its crown as the world's top smartphone vendor to Apple in the last quarter of last year, the first in five years since the fourth quarter of 2011. The discontinuation of Galaxy Note 7 just two months since launch in August was the decisive factor.

According to Strategy Analytics on Wednesday, Samsung Electronics sold 77.50 million smartphones in the last quarter of 2016, a 4.7 percent decrease year-on-year. Apple sold 78.30 million, which is 800,000 units more than Samsung. Samsung had maintained its top position for 19 straight quarters since surpassing Apple in the first quarter of 2012. Samsung stayed behind Apple in operating profit but had kept No. 1 position thanks to premium smartphones including the Galaxy S and Note series as well as lower cost lines.

The reversal in five years is mainly due to the overheating batteries catching fire in its Galaxy Note 7 smartphone. Samsung decided to recall the Note 7 in early September and it ultimately decided to pull out of the market by mid-October.

Apple's iPhone7, which was launched in September, benefited from the recall. Samsung particularly lost position in the North American market where consumers are highly royal to Apple. In the third quarter last year, Samsung's market share in North America declined by 8.3 percentage points to 24.4 percent, from the previous quarter's 32.7 percent. In contrast, Apple's market share rose by 8.6 percentage points, from 24.5 percent to 33.1 percent.

As Apple posted a record-high earnings in its fiscal 2017 first quarter, its revenue rose by 3.3 percent year-on-year to 78.35 billion dollars. "We sold more iPhones than ever before and set all-time revenue records for iPhone, Services, Mac and Apple Watch," Apple CEO Tim Cook said.

Electronics sector analysts say Samsung's strategy to market various devices failed to sufficiently absorb the Note 7 debacle. Lower price smartphones, which were supposed to make up for the absence of a premium phone, were lagging behind Chinese counterparts.

Samsung Electronics' annual smartphone sales reached 309.4 million units last year, down by 10 million from 319.7 million in 2015. Samsung was still the top vendor in annual unit sales, but market share fell from 24.7 percent in 2014 to 22.2 percent in 2015 and to 20.6 percent last year. The main culprit is its falling share in China, which fell to 4.6 percent in the third quarter last year (No. 8 ranking) from 14.3 percent in the second quarter in 2014 for No. 1 ranking. Samsung lags behind local Chinese makers including Huawei (14.9 percent), Oppo (14.1 percent), Vivo (13.6 percent) and Xioami (9.4 percent). It also is behind Apple's 6.2 percent. Samsung is being squeezed by Apple in the higher end and by Chinese companies in the lower end.

Experts say this year's first quarter will be the barometer to gauge the battle between Samsung and Apple. "Samsung's losing its lead position to Apple could be temporary, but its first quarter earnings results will be a barometer of how much its brand image has been hurt," said Ju Won, a researcher at Hyundai Economic Research Institute.

Samsung Electronics plans to make active push into emerging markets including Russia and Latin America with new products such as Galaxy A series it recently released in Korea. It will then try to reverse the trend in the second quarter with the new Galaxy S8 line. Apple is expected to release iPhone 8 in September.

"This year's winner in the premium segment will be determined by who puts out innovative technologies," an electronics sector source said.