So the Digital Jamboree Year 3 of the Smartphones Bloodbath continues, and the earnings season brings us more news. We already had the devastating Nokia news. Now what happened with the world's largest smartphone maker of last Quarter? Apple's iPhone sold 37 million iPhones in Q4 (we talk in Calendar Quarters here in this blog, not the Fiscal Quarters, so obviously I meant the Christmas Quarter with Q4). Now for Q1 how did Apple do? I expected growth because of the pattern Apple established 2 years ago with the Chinese New Year sales. But it didn't happen. Apple actually declined in iPhone unit sales from Q4 and only sold 35.1 million iPhones now in Q1.
Why? I think mainly one reason two reasons - partly Q4 was exceptionally big sales because the iPhone 4S was delayed from June launch to September launch so Q4 was the first full Quarter of iPhone 4S sales. Thus Q4 was 'unusually strong' above average annual sales for iPhone.
And now Q1, China was unusually meek in iPhone sales. (Normally, past 2 years, iPhone sales have grown sequentially from Q4 to Q1, powered explicitly by China sales. This year breaks that strong iPhone sales growth pattern. As Apple CEO himself pointed to a 5-fold increase YoY on iPhone sales in the Greater China region, the decline was not caused by any weak China sales, as I originally thought. I had good 'excuses' to explain why not to worry about the unanticipated China decline. But there WAS no China decline. I am puzzled. It means suddenly there are other iPhone regional problems that were significantly bigger than expected. I will have to go hunt for where those might be. This is surprising, but is not cause for alarm for the future. There were exceptional reasons why China iPhone sales in 2012 were unusually meek. And don't post comments here talking about how great China overall Apple results were. That is not the point. I read the same reports, obviously Apple had a phenomenal Quarter, also in Greater China region. But in iPhones, they disappointed China performance. That is my only point. And I am here as your mobile industry analyst to tell you why this is not permanent loss to Apple, only a one-year special occasion).
So what happened in China this time to the iPhone. Why were iPhone sales so meek this time? That was for many coincidences and reasons. The Chinese New Year gift-giving season was unusually early in January due to the Chinese Lunar Year (sometimes its well into February) and worse for Apple, the iPhone 4S was not approved until very late before the gift-giving season peak sales. I think Apple had just one week of iPhone 4S sales at the peak time. Plus there were initial store opening problems with some mobs and security fears.
What does this mean in terms of market share? My preliminary market share for iPhone is 22% for Q1, down from 24% in Q4. Not bad, but it is down. And usually the pattern then follows into Q2 with a further decline, unless Apple can launch its next iPhone model (rumored as iPhone 5) in the last few days of June. That was also what Apple CEO Tim Cook said in his guidance for Q2 performance.
I know Apple is the most valuable company on the planet and made so massive profits in just one quarter, that it could go and buy all of troubled Nokia with just its quarterly profit now haha. So its truly difficult to be honestly critical of this level of massive performance excellence. But lets be honest here. Apple did see declining market share and very likely will see more of a decline in market share again for Q2 before the next iPhone starts to sell. I have been urging Apple to split its product line, it would help a lot to expand Apple's unit sales, market share and profits. Nonetheless, Apple did generate a very healthy profit in its smartphones unit, this is very good performance for Apple's Q1. Not perfect, but very good.
And why do we care about the modest decline over this Quarter? Because Apple's reign at the top, as the world's biggest smartphone maker has been a few temporary blips. Apple toppled Nokia in Q2 of last year. Then in Q3, Samsung lurched past Apple. Apple retook that position in Q4. But now with the decline in sales and with the already promised numbers from Samsung that its handset unit has had phenomenal growth in Q1 (the full Samsung numbers are not out yet) means Samsung has again retaken the lead once again, as the world's biggest smartphone maker, but now it may be for good. Because Samsung offers a wide range of smartphones on various price points, at far more carriers/operators and on more technologies including China Mobile's TD-SDMA standard of 3G, Samsung has far more ability to capitalize on the market opportunity than the iPhone on one new model per year, and on only two technologies and not on all carriers/operators.
These numbers do mean, that Samsung is now in Q1 again the world's biggest smartphone maker. Quite a big month for ole' Sammy, as they also have toppled Nokia as the world's biggest handset maker for the first time ever, this same Q1. But with iPhone sales down, and Nokia catastrophic collapse, and HTC sales decline and Blackberry woes, just how darn good will Samsung's Q1 be? We may be in for a Quarterly Results press conference of a lifetime haha..
UPDATE - after that China mistake, I wanted to go try to find where the lost iPhones are (if the industry grew only by 60% in a year, but iPhone China grew 5x, then there are many millions of excess iPhones which should have pushed Apple to iPhone growth, not decline. As iPhone total shipments fell by 5% and China grew so strongly, it means some other regions have had very big drops in iPhone sales. In the range of 20% to 40%. And now the first obvious answer comes from AT&T which reports that in Q1 they saw a 40% drop of iPhone sales from the Christmas Quarter, down from 7.6 million to 4.3 million. That 2.3 million would explain the overall decline for Apple, but not the huge jump in China that still needs to be explained. Another clear case is Verizon, which saw a 25% drop, down from 4.3 million to 3.2 million. I will go hunt for more info. The US market seems to be taking it heavily on the chin. That is not the full picture yet, but at least partially an answer is starting to form. I would now guess, that European carriers/operators will have similar after-Christmas blues for the Apple..