Calm before the storm: Australia holds its breath in declining smartphone market

The Australian smartphone market is holding its breath as the market slide continues, with new figures from IDC revealing shipments dropping to 1.8 million in Q216.

According to the analyst firm, the drop represented a fall of 18- year-on-year, down from 2.2 million units the year before. The drop is the third consecutive quarter of double digit YoY decline.

However, IDC says the decline may just be the calm before the storm, as vendors get ready to launch new releases of their phones.

"The market has reached its saturation point for a while now and shipments are driven more and more by refresh cycles rather than first-time purchases," says Bilal Javed, market analyst at IDC Australia.

Faced with intense competition, market leader Apple continued to struggle as market share plummeted from 48% in Q116 to 40% in Q216. Recently, Apple experienced its slowest quarter in over two years. According to Javed, slow down at the top has allowed other vendors to join the playing field, with mid-range vendors benefiting the most.

Samsung consolidated their second spot in Australia as they rode on the success of the highly rated flagship handsets, Galaxy S7 and Galaxy S7 Edge and closed in on Apple to grab 33% of the market as compared to 31% in Q116. According to IDC, features of the flagship device such as removable storage, waterproofing and faster processer grabbed consumer attention and accounted for over 63% of Samsung's shipments.

"Whilst the Galaxy S7/S7 Edge was locking horns with Apple devices, the refreshed J series (J1, J1 Mini and J3) along with the still successful Galaxy S5 was Samsung's answer to the other Android vendors in the low/mid-market space" explains Javed.

Alcatel controls just over 5% of the smartphone market as they consolidated their hold on the low-end space. The targeted strategy of pre-paid phones exclusive to telco providers is the key driving force behind Alcatel shipments, IDC says.

Huawei took fourth spot with 4% market share as they launched the much anticipated flagship P9 as well as the Mate 8 towards the end of the quarter. However, Huawei's majority shipments came from Y series models in the sub AU$100 price bracket. Javed says Huawei is struggling to build momentum as they lack brand awareness amongst Australian consumers.

ZTE rounded out the top 5 in Australia as they push into the market through a variety of channels and attractive price points. Vendors such as LG Electronics and HTC had a disappointing quarter as the much hyped flagship LG G5 and HTC 10 respectively did not live up to expectation, the report shows.

"Australian consumers are becoming increasingly aware of alternative buying options in smartphones and the lack of innovation, minimal marketing and high price point of the device forced HTC out of the top 5," says Javed.

"A major surprise came from OPPO who experienced triple digit growth and could move onto challenging the likes of HTC, Huawei, LG and Microsoft in the near future," he adds.

Javed says the recent slowdown may simply be the calm before the storm, as major launches from Apple, Samsung and the new Google Nexus device are pending in the coming quarter.

"These product launches are likely to return the market to positive growth YoY and shipments are expected to break the 2 million barrier," he says.

"Vendors following the big 2 will need to continue to innovate and provide attractive value propositions to gain market share.