Why Google Stock Is Loving the Smartphone Market
Alphabet Inc (NASDAQ:GOOG) and Google stock may be ready to make a huge splash in the phone market as a new report shows “Android” phone sales dominating globally.
88% of the 375 million new smartphones shipped worldwide were running the Android operating system, according to a new report from Strategy Analytics. With Apple Inc.‘s (NASDAQ:AAPL)”iOS” platform and Android accounting for 97.3% of the worldwide smartphone market share, Google continually looks to place its new smartphone offering, “Pixel,” in opposition to Apple’s “iPhone.”
Google has released several challenges to the mainstay Apple product, including a video on “YouTube” of how to switch over to a Pixel from an iPhone, pushing for reviews comparing the two devices’ high-powered cameras, and otherwise trying to provoke confrontation between the two types of smartphones, in an effort to present Pixel as the alternative to the iPhone. (Source: “#Pixel Tips: Switching from iPhone,” Google YouTube channel, October 26, 2016.)
With Google stock hitting its all-time high last month, coinciding with the release of the Pixel, Alphabet Inc seems poised to begin carving away a large share of the burgeoning global smartphone market. (Source: “Android has captured a record-high share of the smartphone market,” Business Insider, November 4, 2016.)
And to make things even better for Google stock, regions in South Asia, Africa, and the Middle East are largely responsible for spurring Android sales as people there adopt smartphones. These are places where a large portion of the smartphone market remains untouched.
Apple’s iPhones simply don’t offer any models at an attractive price point for the global market, while Android phones benefit from the ability to produce affordable phones for a global audience, which accounts for their global market domination. The drawback is that, of the hundreds of manufacturers producing smartphones, many are money-losers, including big-name brands like HTC Corporation and LG Electronics Inc. (Source: “Apple iPhone Grabs 104% Of Smartphone Industry Profit In Q3,” Investors Business Daily, November 3, 2016.)
Apple, on the other hand, continues to dominate the smartphone arena in terms of profit, accounting for 103.6% of the smartphone industry’s operating profits in the third quarter.
At the moment, there are no Pixel models that could compete globally from their price point, but that could change as newer devices are released and cheaper Pixel options may become available.
As for the Strategy Analytics report, despite the global smartphone market’s excellent showing this quarter, that market is expected to slow down over the next few years. The report states that 2015 will likely be the last year for double-digit growth for smartphone shipments, as markets hit peak saturation in the U.S., Europe, and China.
Emerging markets across the world are likely to spur growth for the foreseeable future, even if it is at a decreased rate. India and Indonesia, in particular, might be major players in the smartphone market due to their developing economies and high population growth.
There will be an estimated 2.1 billion smartphones shipped in 2021, according to the report. Despite the potential for tapping out the market, ultimately the world’s emerging market consumers will see more opportunities to purchase handsets as they become more affordable. The average selling price of a smartphone in India, for instance, saw a nearly 50% price reduction between 2010 and 2015.
If these trends continue, potentially hundreds of millions of consumers across the map will have the opportunity to purchase smartphones. Alphabet Inc may be able to tap into this market if the company can find an attractive price point for global customers.