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Smartphone Sales: Xiaomi Gains Most, Apple's Share Up In Q1

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Apple’s (AAPL - Free Report) smartphone market share improved in first-quarter 2018, while Samsung’s slowed, per a recent report from research firm Gartner. Chinese handset makers like Huawei and Xiaomi gained most, while OPPO’s share declined.

Chinese brands like OPPO and VIVO suffered from a sluggish mobile phone market in the Greater China. OPPO’s market share was 7.3%, down 70 basis points (bps) from the year-ago quarter.

Xiaomi benefited the most primarily due to refreshed portfolio of smartphones and aggressive pricing strategy. Per Gartner, Xiaomi gained 330% growth in Emerging Asia/Pacific region. Xiaomi’s market share was 7.4%, which soared 400 bps on a year-over-year basis.

Huawei also gained from a refreshed smartphone portfolio. The company’s market share improved 150 bps to 10.5%.

Per Gartner, overall smartphone sales increased 1.3% to 384 million in first-quarter 2018. Growth can be attributed to increased demand for entry-level (below $100) and low mid-tier phones (below $150) which fully offset weakness in demand for premium and high-end smartphones.

Apple-Samsung Market Share Gap Narrowed

Apple’s market share expanded 40 bps from the year-ago quarter to 14.1%. The improvement can be attributed to solid demand for iPhone X that surpassed iPhone 8 and iPhone 8 Plus.

Apple Inc. Price and Consensus

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In second-quarter fiscal 2018, total iPhone unit sales of 52.2 million increased 3% year over year. Double-digit growth in several markets including Japan, Canada, Switzerland, Turkey, Central and Eastern Europe, Mexico and Vietnam was a tailwind.

Revenues from iPhone (62.2% of sales) grew 14% from the year-ago quarter to $38.03 billion. The upside was due to higher iPhone average selling price (ASP), which increased to $728 from $655 a year ago.

However, Samsung’s market share contracted 30 bps primarily due to stiff competition from Chinese vendors in the first quarter. Gartner anticipates Samsung’s smartphone growth rate to remain under pressure owing to Chinese brands expansion into Europe and Latin America markets.

Apple is set to launch three iPhone models in 2018. Two out of the three iPhone models — a 5.8-inch second-generation iPhone X and a larger 6.5-inch iPhone X Plus — are expected to offer organic light-emitting diode (OLED) displays. The low-cost third one is likely to be a 6.1 inch LCD (liquid crystal display) variant.

Moreover, Apple is reportedly planning to offer OLED in all three new iPhones in 2019. The company’s improving iPhone display is seen as the differentiator when compared with other rival products including Samsung’s Galaxy product line in the market. This can further narrow the gap between the two smartphone makers going forward.

Android Dominates OS Market, iOS Enriching Ecosystem

Alphabet’s (GOOGL - Free Report) Android operating system continued to dominate the worldwide smartphone sales to end-users by operating in the first-quarter. However, Android’s market share declined 20 bps from the year-ago quarter to 85.9% in the first quarter.

Apple iOS market share improved 40 bps to 14.1% in the first-quarter. The improvement in iOS market share can be attributed to strong demand for iPhone X.

In its second-quarter conference call, Apple stated that iPhone X has been its top-selling phone every week since launch in November 2017. The company mentioned that the device was the most popular smartphone in China in the reported quarter. Another iPhone model was also among the top three in the country.

Apple’s focus on enriching its ecosystem through software update is anticipated to boost sales of its other products like iPad and Homepod.

The recently announced iOS 11.4 supports Messages in iCloud and introduces AirPlay 2. Further, the latest update will allow two HomePod speakers to work together as a stereo pair. Apple currently holds 7.6% market share in the smart speakers market currently dominated by the likes of Amazon (AMZN - Free Report) Echo and Google.

Reportedly, Apple is expected to introduce iOS 12, an upgrade to iOS 11, at its upcoming Worldwide Developer Conference (“WWDC”). Per Bloomberg, the latest upgrade will offer plenty of new features including a “single set of apps work across iPhones, iPads and Macs, a digital Health tool to show parents how much time their children have been staring at their screen and improvements to Animojis.”

Zacks Rank

Currently, Apple carries a Zacks Rank #3 (Hold). Amazon with a Zacks Rank #1 (Strong Buy) is a better to stock to invest. You can see the complete list of today’s Zacks #1 Rank stocks here.

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