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The U.S. market for feature-rich smartphones is still expanding at a rapid clip, with two-thirds of new mobile phone buyers opting for devices that can do far more than their old-style flip phones, according to new research from Nielsen released July 12. Googles Android operating system is the beneficiary of this surge, although the iPhone still holds sway.
The smartphone market is still just a little more than half saturated, with only 54.9 percent of U.S. mobile phone users owning a smartphone as of June, according to the new market figures from Nielsen. That means that the other 45 percent of mobile users still have non-smartphones, leaving a lot of users up for grabs in the marketplace.
The biggest winner in all this is Google Android. The latest version–4.1, or Jelly Bean– is starting to hit the market.
“Android continues to lead the smartphone market in the U.S., with a majority of smartphone owners (51.8 percent) using an Android OS handset,” according to the Nielsen data. “Over a third (34.3 percent) of smartphone owners use an Apple iPhone, and BlackBerry owners represented another 8.1 percent of the smartphone market.”
Apple handsets have the highest manufacturer share of the smartphone market overall, Nielsen reported, but in June, about 54 percent of handset buyers chose an Android handset, compared with 36 percent who bought iPhones.
What this all means, said Chris Silva, a mobile analyst with The Altimeter Group, is that the smartphone market is still very open and ripe for competition, such as the rumored new Amazon smartphone and others.
“Keep in mind that 45 percent of U.S. users still dont have smartphones, so a lot of people will look for a low-priced phone,” said Silva. “That’s maybe 100 million handsets.”
And despite the slow economy, worries about incomes and disappointing survey data of consumer moods and economic confidence, people always seem to find a way to afford new smartphones, Silva added.
“People are going to buy them, despite whatever is happening with the economy,” said Silva. “They are so important in people’s lives. And the pace at which this is growing, we’re not even at the point where it’s slowing down.”
Smartphone Penetration Has Risen Despite Economic Concerns
Yet even while consumer confidence and other indicators are falling, smartphone penetration has risen from 25 percent to more than 50 percent in the same time frame, said Silva. “Are $500 smartphones the true opiate for the masses in these bleak times? It could be. We’re still seeing this growth keeping pace. It’s not tapering.”
And the Nielsen numbers don’t even address the market for a subset of users, said Silva those who own more than one smartphonewhich would expand sales even more. “Per person, that number of devices could grow as well. It’s a whole other issue.”
Vishal Jain, a mobile analyst with 451 Research, said the latest Nielsen numbers agree with data recently collected by his company’s ChangeWave survey.
“We see an uptick in planned smartphone buying going forward,” Jain wrote in an email reply. “The survey reveals that planned smartphone buying is higher than it was a year ago at this time. As more and more computing resources shift toward smartphones, consumers will see better utility from smartphones.”
The ChangeWave research revealed that the market is heavily swayed toward Apple devices, said Jain, with 50 percent of prospective smartphone buyers saying theyll get an Apple iPhone in the next 90 days. “At the lower-price end, there are several manufacturers from China, Taiwan and South Korea competing with each other although using the Android OS. Amazon will certainly follow with aggressive price points.”
Dan Maycock, a mobile analyst with Slalom Consulting, said that the expanding smartphone user base will mean that mobile carriers will continue to roll out new services so they can work to increase the average revenue per user.
“Expect to see new services, such as deeper home automation,” said Maycock. “Now that enough people will have the devices to interact with these services, they’re going to be much more detailed, not just turning your lamps on or off at home.”
What could come next are cellular monitoring services for Alzheimer patients in homes, as well as consumers being able to control far more in-home devices using their smartphones than they can today.
“The carriers still need to make more money” so they’ll expand the range of offerings. “We’ve hit this critical peak, said Maycock.
That means that carriers will focus on leveraging their cellular networks even more, he said, which will require better networks. “It’s actually great news because it will help with spectrum optimization by forcing it to happen. It will also force carriers to get out of the business of building cellular towers and go toward a European-style network where companies share towers.”
A May report from Ovum found that Android will dominate the smartphone market through 2017.
Ovum said it expects Android to hold 48 percent of the smartphone market by 2017, while growing at a slower pace than it has recently. In 2011, Androids share jumped to 44 percent, up from 2010s 17 percent. Apple is expected to control a 27 percent share in 2017, up from 2011s 23 percent share, with remaining smartphone players following at a good distance.
While Apple has defined the smartphone market since it introduced the iPhone in 2007, were now seeing a sharp rise in the shipment volumes of Android, signalizing its appeal to leading handset makers, Adam Leach, Ovum principal analyst, said at the time.
Apple and Samsung have dominated the U.S. market in recent years with their handsets.