Apple Primed to Regain Lead in U.S. Smartphone Market

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HTC recently revised its fourth quarter revenue forecast lower for the second time in less than a month, sending its shares plunging in the Taiwanese stock market. The company had already lowered its smartphone sales forecast for the coming quarter and guided for flat quarter-on-quarter revenue at best during its earnings call on October 31st. But now, the company feels that it may not even be able to achieve the lowered target and has cut its forecast by as much as 23% despite the ongoing holiday season that usually sees smartphone makers post their best sales. It seems the company has started to feel the effects of increasing competition in the smartphone market from rivals using Google’s (NASDAQ:GOOG) Android platform as well as the marauding Apple (NASDAQ:AAPL) iPhone and the upcoming Nokia (NYSE:NOK) Lumia.

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It may be possible that the broader smartphone market is suffering due to global economic uncertainty, but that certainly doesn’t seem to be the case if we look at the optimism surrounding  some of HTC’s rivals. Samsung, which also makes Android-based smartphones, announced yesterday that it is seeing good demand for its Galaxy S series and is now aiming to beat its 2011 smartphone sales estimates. [1] Apple’s recently launched iPhone 4S has also done extremely well, selling over 4 million in the opening weekend alone. So, it seems to be a case of HTC losing market share to its rivals rather than a market-wide issue.

Apple’s iPhone 4S driving a stake through HTC

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While HTC’s loss of market share may be good news for all of its rivals, what is interesting to consider is the timing of its announcement. The announcement comes close on the heels of the iPhone 4S launch in a quarter that usually sees smartphone makers post their best numbers due to the accompanying holiday season. Last quarter was particularly good for HTC, which became the top smartphone vendor in the U.S ahead of Apple, as customers postponed their iPhone purchases in anticipation of a new model. [2] However the pent-up demand for the iPhone has so far proven to be beneficial for Apple this quarter, as it set new sales records in its debut weekend. It seems HTC is feeling the heat of this heightened pressure from Apple more than any other competitor, with the 4S stealing the show this holiday season.

Also, the fact that HTC churns out smartphones more regularly than Apple, which focuses on coming out with a flagship phone every 6 months to one year, has resulted in a lot of similar looking phones in the market which has brought down its brand value. HTC’s dependence on Android for its smartphones means that its products are also not very different from the crowd of handset makers such as Samsung, ZTE, Huawei, LG and Motorola, all of whom also use Android for their phones. This lack of differentiation, both among its own smartphones and those manufactured by its rivals, puts HTC at a disadvantage when competing with Apple and paves the way for Apple to regain its lead in the U.S. this quarter

However, in order to stay comfortably ahead of the pack, Apple will need to be on its toes and make sure that it doesn’t delay the launch of the next iPhone like it did with the 4S, which was launched 16 months after the last iPhone 4 release. (see Samsung Overtakes Apple, Can iPhone 4S Reverse This Trend?)

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Notes:
  1. Samsung aims to beat 2011 smartphone sales estimates, November 29th, 2011 []
  2. HTC takes the lead in the US smart phone market, Canalys, October 31st, 2011 []