Spain and France push Western Europe smartphone market into reverse

Q1 2015 numbers from market researcher GfK reveal the total value of smartphone sales in Western Europe declined for the first time, in part due to weakness in the Spanish and French markets.

GfK uses a different methodology to analyst houses such as Strategy Analytics and IDC, using point-of-sale tracking rather than vendor shipment data. While GfK’s numbers were more or less in line with the others a year ago, it reckons only 310 million smartphones were sold this quarter, while SA is going for 345 million. GfK is putting this down to peaking APAC markets.

Much of the phenomenal growth in the smartphone market in recent years has come from feature phone users upgrading to smartphones. That process is pretty much complete in western markets, which is why they have relatively low growth, and global smartphone growth has been reliant on demand in APAC, especially China, for the last couple of years. But now that smartphone penetration in China is at a similar level to western markets global growth is slowing down and GfK thinks Chinese 4G demand will be the next source of growth.

“The weakness in China was caused by a significant slowdown in 3G demand, which was not offset by 4G growth,” said Kevin Walsh of GfK. “We forecast China to return to growth in the second half of the year, driven by a continued 4G ramp-up. In Developed Asia, the year-on-year decline was caused by tough comparisons with Q1 2014, when demand was pulled forward in Japan due to an upcoming VAT increase in April. We forecast unit demand in Developed Asia to grow by +3 percent year-on-year in 2015, driven by Japan and South Korea, which are expected to return to growth in 2Q15”

In the table below you can see that the Western European sales value decline is happening in spite of healthy unit growth of 12%. This points to a declining average selling price for smartphones across the region, which GfK confirms is part of a global trend, with low price-tier devices forming an growing part of the overall mix.

GfK is forecasting this slow growth to continue for full-year 2015, with China and developed APAC countries such as Japan and South Korea having peaked, just as Europe and North America had previously. The growth drivers now are other developing regions, where entry-level smartphones are becoming increasingly affordable.

“GfK forecasts global smartphone unit demand to grow +10 percent year-on-year in 2015, a slowdown from the +23 percent growth experienced last year,” said Walsh. “Emerging Asia is forecast to be the fastest growing region, driven by India and Indonesia, where low smartphone penetration leaves plenty of room for growth.”