Samsung's Galaxy S7 is currently shipping. Image source: Samsung.
While Samsung (NASDAQOTH: SSNLF) is the largest smartphone manufacturer in the world, Apple (AAPL 1.27%) is the most profitable. Samsung offers a variety of phones at different price points to compete in both developing and developed markets. Apple, on the other hand, continues to make only high-end, profitable units with a focus on developed markets.
The divergence between the two business models is on display when looking at the United States' smartphone market. While Samsung leads Apple in worldwide shipments, Apple commands a larger user base in the largest developed market, according to recent comScore data. Out of the 198.5 million smartphone owners in the United States, 43.6% of those had Apple phones, while 28.5% sported a Samsung unit, according to January 2016 data that comScore released last week..
Is this the start of market consolidation?
A common characteristic in mature, developed markets is consolidation due to slowing growth rates discouraging new entrants. Additionally, market headwinds lead to a shakeout among current participants, where weaker participants either exit the industry fully, or significantly transition their focus to higher-growth endeavors.
The remaining companies, particularly those with brand awareness and strong value propositions, grow revenue by taking a larger percentage of industry market share. That appears to be what's happening in the U.S. smartphone market. To get a feel for how much larger their respective user bases have grown during the last year and the last quarter, respectively, here's comScore's data of percentage of smartphone market and number of smartphones comprising Apple and Samsung's U.S. user base:
| Jan '15 (%) | Jan '15 (Units) | Oct '15 (%) | Oct '15 (Units) | Jan '16 (%) | Jan '16 (Units) | |
|---|---|---|---|---|---|---|
| Apple | 41.3% | 76.0 | 43.3% | 84.0 | 43.6% | 86.5 |
| Samsung | 29.3% | 53.9 | 27.9% | 54.1 | 28.5% | 56.6 |
| Total (all vendors) | 100% | 184 | 100% | 193.9 | 100% | 198.5 |
Data source: comScore. Unit figures in millions.
On first glance, it's easy to dismiss the percentage growth totals. Apple only grew its user base 2.3 percentage points, from 41.3% to 43.6% during the period. However, comScore's user-base figure includes both new smartphone sales and existing smartphone users, making small percentage changes much larger than they appear. For example, Apple has increased its user base 10.5 million during the period.
Samsung actually decreased its user-base percentage on a year-on-year basis, but has seen its share noticeably appreciate in the last quarter. The company increased its user base percentage 0.6 percentage points from October to January, and increased its number of units by 2.5 million in the quarter.
Apple and Samsung increased their user bases by more than the total
The most interesting takeaway for the entire market came from the last quarter. Apple and Samsung grew their combined user-base totals by 5 million, while the overall market added only 4.6 million. More than 100% of total smartphone user-base growth came from these two vendors. The other top-five vendors, LG, Motorola, and HTC, all lost market share in the process.
While it's early, this trend should be watched going forward. In the future, it's possible Apple and Samsung will grow their user bases more in upcoming reports, as both have positive catalysts in the offing. Samsung's high-end Galaxy S7 unit is starting to ship, and Apple's smaller iPhone 5se is all but confirmed to be introduced in Apple's March event. Both phone releases could further add to the trend of an increasingly duopolistic smartphone market.
