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Winners and Losers in the US Smartphone Replacement Market

by David Kerr | 8月 26, 2019

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 As we enter the 5G era in the US market,  the gap between market leaders Apple and Samsung and the chasing pack in the form of LG, Motorola, ZTE and Google could be set to widen. The battleground for the predominantly replacement driven US market will most likely be in the sub $600 retail price tier as Apple and Samsung dominate the premium tier. In reality, we believe that consumers cumulative experience with other brands simply don’t support $800 or $1000 retail price points. Even on a 3 year EIP, the bump to the average user bill of $25-30 per month is too high in our view for all but the two brand leaders.

While Samsung and Apple enjoy repeat purchase intention rates in the 70%+ range as noted in our recent analysis US Smartphone Replacement and Brand Dynamics, trailing vendors LG and Motorola are below 50% in this critical metric leaving them susceptible to brand switching with each new generation and new model introduction.

 

Google has significantly improved its position and perception with its Pixel series and has gained share rapidly in the US and in fact has seen its share double in Q2 2019.

Google Pixel Smartphones Hit Record High in US.  

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Beyond Google, who else will challenge? New entrants including Nokia and OnePLus as well as many others from China are likely to target users in the sub $600 retail price tier as this is a) where they  have the best  chance of being ranged by US operators and b) where consumer in the more frugal Boomer and Gen X segments which are under served by the top two tend to buy.  Samsung and Apple are juggernauts with whom the chasing pack cannot hope to compete given their marketing muscle and loyalty build up over the last decade or more.

Apple and Samsung’s cumulative brand expenditures and user experience history means that targeting them would be suicidal for most other vendors.

But, how does the brand funnel compare for the three vendors in Samsung and Apple’s rear view mirror?

 

 


Within a few short years (compared to multiple decades for LG and Moto), Google has already passed Motorola on consideration and is within striking distance of LG in terms of both consideration and purchase intent. Google is of course a special case given its Android asset base and indeed its market scale. However, the relative weakness for both LG and Motorola must be a concern and is certainly viewed as an opportunity for emerging players.  Of course, careful investigation into the strength and weaknesses of each vendor in each specific market cluster is needed before developing a go to market approach and action plan.

Without doubt LG and Motorola have benefitted greatly from the politically inspired ban of Huawei and the self-created chaos from former #4 in the US, ZTE. Without the political and trade war undercurrents the challenge to LG and Motorola would have been huge.

Challenging these incumbents will naturally be the mission of new entrants or re-entrants. Our research suggests that US customers continue to have awareness and would consider yesteryear brands like Sony, HTC, Nokia, Sharp, Blackberry for their next smartphone.  US consumers also don’t rule out consideration new players in the smartphone world.  8% of smartphone owners noted they would consider Amazon for their next device.

The recent lengthening of replacement cycles in the US and worldwide shows that customers are not in a rush to upgrade in general and are willing to consider a range of brands for their next device. While flagship devices at or above $800 retail are seeing significant softness, the softness and longer replacement cycles are dropping down to mid tier with potentially devastating impact on second tier brands.

No longer can device brands just launch and wait for customers knowing they will come. The US market looks set to see intensified competition in 2020 with new entrants and greater diversity of 5G devices available.

dkerr@strategyanalytics.com

 

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