Ina Fried

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Annual Smartphone Sales Could Reach One Billion by 2016

Although the smartphone market continues to grow, the division between market winners and losers is also growing.

A new study from IMS Research predicts that smartphone sales this year will total 420 million units, making up 28 percent of the total handset market. With cheaper models on the way, smartphone sales could top one billion units a year, or one out of every two phones sold.

“But despite the higher margins for smartphones, and the seemingly insatiable consumer appetite for converged devices, it is clear that not all [handset makers] are equally positioned to capitalize on this market trend,” IMS analyst Josh Builta said in a statement. “For instance, LG, despite being the third largest [manufacturer] in the world, has offered a fairly limited smartphone portfolio in recent years, a factor that resulted in the company reaching less than three percent share of the total smartphone market in 2010.”

Nokia is another company not benefiting from the dramatic growth in smartphone sales, with second-quarter smartphone sales of 16.7 million units, down more than a third from the same quarter a year ago.

“Clearly one of the key dynamics of the mobile handset competitive environment in recent years has been the inability of many traditional market leaders to recognize and adjust to the growing smartphone tier,” Builta said. “The reasons for these failures vary and include everything from poorly designed and manufactured devices, unsatisfactory user interfaces, and portfolios that don’t offer products with a differentiating feature. These lapses have created opportunities for newer entrants to the market, which they have aggressively pursued.”

The beneficiaries — companies such as Apple, Samsung and HTC — are no surprise.

And while LG and Nokia are trying to bolster their position, they face steep competition in the short term from the current leaders, Builta said.

“Apple, they are going to get another boost in momentum here when they release the iPhone 5,” Builta said in a phone interview, adding that HTC and Samsung are also building on their strong positions. Android, Builta said, should be the dominant operating system through 2016, thanks to its widespread adoption by multiple phone makers.

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