Smartphone Sales Down In Japan, But Android Hurting Most

MMRI released their report for mobile phone sales in Japan for he first half of 2016, and the results were not good. 

  1. Total handset sales decreased by 10.9% YoY. 
  2. Smartphones decreased 8.4% YoY. 
  3. However, looking at iPhone sales, this decreased only 3.1%, resulting in an increased market share of 40.7% (including feature phones).
  4. Importantly, Sony which is 2nd in market share saw a 28.5% drop in sales, while Sharp which is 3rd in smartphone share fell off a cliff with a 46.4% drop. 
  5. The sharp decline has been attributed to the government decision to restrict what they consider excessive discounting of devices. The government thinks that by restricting discounting (some smartphones are sold for free by carriers if the purchaser agrees to a 24 month contract), carriers will eventually reduce the prices of their data plans. However, data plan prices have yet to come down, and are actually increasing depending on your usage pattern. 

What this suggests is that when customers are more exposed to the real price of smartphones, it is the Android users who either decide to buy cheaper devices, or hold on to their devices longer. The iPhone users seem to be less sensitive to price increases. 

In a nutshell, the Android market has a high level of price elasticity whereas the iPhone market does not. 

I believe that the iPhone markets and the Android markets are actually different despite both being smartphones. Customers buy each for different needs, and they are not interchangeable. This is similar to how Mercedes and BMWs do not share the same market as cheap cars; the role of luxury cars is not just transportation. 

  • obarthelemy

    I don’t think there a single Android market. There’s a Smartphone market with different segments (probably: value, midrange, luxury, professional, and some niches ie gaming photo/video/music creation, media player,…). Android is in all of those, Apple only in luxury and pro (and niches). But I don’t think you can validly say Android isn’t *also* in the same segments as the iPhone (there are Android flagships too ^^); it’s just also/mostly in other segments, which confuses the picture and prevents oversimplification.
    Edit: for example, the Samsung Galaxy Edges are regular “S” phones with different looks and a $100 price hike. That’s luxury to me ? And the S are mostly about luxury to start with.

    • The point that I’m trying to make is that the iPhone and Android markets have very different dynamics. The example above demonstrates that the price elasticity of the markets are very different. It is likely that there are many other things that are different as well.

      It is not my intention to segment the whole smartphone market by price and to assign certain devices to each slot. In fact, I do not think that this kind of segmentation is particularly useful, since the boundaries are arbitrary and often the boundaries themselves are artificial and unnecessary. Instead, it is more useful to divide the market where there are already natural boundaries.

      The observation that the market dynamics for the iPhone and Android are different give, you a way to predict how certain perturbations will affect the market. In the above example, I showed how changing the way prices are presented to the customer will affect the Android market but not the iPhone one, simply because price elasticity is very different. Similarly, low cost phones significantly expanded the market for Android phones, but lowering the price of iPhones will probably not have much effect in growing iPhone’s market share.

      • obarthelemy

        My point is that you can’t look at “the Android market”. There’s about as much difference between a $150 Xiaomi Redmi Note 3 Pro buyer (that’s me ^^) and a $900 GS7Edge than between the same Xiaomi buyer and a $900 iP7+ buyer.
        I think looking at aggregates really confuses the picture in Android’s case. It might be doing well at the bottom and bad at the top, or the reverse. At the bottom it’s pretty much the only game in town now, so moves there reflect the whole market, not specific Android issues. At the top, there’s competition from Apple, so there’s indeed a dual dynamic of iOS vs Android and top of the market evolution.
        Aren’t Japan’s Android OEMs all kind of flaking out ?

        • The following link ranks devices by sales in Japan (in Japanese).

          Until last year, both were dominated by high end models for both iPhone and Android, because due to how the carriers subsidies device costs, it didn’t make sense to buy cheap models.

          This year however, we are seeing cheap MVNOs rise dramatically in popularity. This is due to the data plan costs from the major carriers rising, due to boneheaded attempts by the government to reduce prices (their policies are having the reverse effect as to what they intended).

          The rise in prices and shift to cheap MVNOs (which do not provide subsidies) has resulted in the popularity of cheap smartphones. However, this has affected Android sales far more than iPhone.

          It is likely that a significant proportion of Android users who were using premium Japanese built smartphones are moving to cheap MVNOs and buying cheap Chinese devices. However, this is not happening so much for iPhone users. They either do not shift to MVNOs or they use iPhones on the cheaper networks. This could be due to lock in.

          Either way though, the end result is that iPhone is shielded from the onslaught of cheap Chinese smartphones. Premium Android is not.

          http://wakuwakumobile.com/sumahouriage20161024-1030/

          • obarthelemy

            Understood. I think iOS’s shielding might be short-medium term though (it’s harder to switch from iOS to Android than between Androids). At some point, customers might/will realize that Apple Care by itself costs as much as a good smartphone ;-p