The Great Smartphone Slowdown

NEW YORK ( TheStreet) -- Apple ( AAPL) shares have been under attack this year, as investors worry about revenue growth, the law of large numbers, and a perceived lack of innovation coming from the company. Samsung has also recently experienced a drastic drop in market cap on concerns over sales of the Galaxy S4. It turns out these investors might very well be justified in their concerns.

Research firm IDC shows that the iPhone lost market share in Western Europe in the first quarter of 2013. According to the research firm, Apple shipped 6.2 million iPhones during the first quarter, good for 14% of the market. That's compared to 7 million in the year ago quarter, when Apple held 15% of the market.

Overall, the smartphone market increased 12% year-over-year to 31.6 million units in the quarter, the lowest growth rate since IDC started tracking the market in 2004.

Samsung continues to dominate the Western European market, with 46% share, but even that growth is slowing. Samsung shipped 19.9 million units in the first quarter, up from 18.1 million units in the year-ago period, good for a 10% increase.

The smartphone market is rapidly losing its growth, as more and more customers own the devices, and are simply buying replacement phones. Couple this with a weak economic outlook for most Western European countries and mobile operators cutting subsidies, and smartphone sales are bound to slow down drastically.

"We are now entering the second wave of smartphone adoption in the region," said Francisco Jeronimo, European mobile devices research director at IDC, in the press release. "The first wave was driven by those users looking for devices that would meet their mobility needs. They did look for the best devices in terms of performance and user experience, and more importantly, they were able to afford and pay a premium to get a premium experience. We are now entering the second wave of smartphone adoption, which will be driven by those users with no need for a smartphone."

Google's ( GOOG) Android continued to dominate the operating system landscape, owning 69% of the market, as vendors such as LG and Sony ( SNE), in addition to Samsung, continued to see growth in the area. Apple's iOS lost ground, owning 20% of the overall market, compared to 25% of the market last year.

One interesting note is that Microsoft's ( MSFT) Windows Phone continued to see improvement, owning the third spot in the region, largely thanks to the tech giant's deal with Nokia ( NOK), but it's still a tiny fraction of the massive smartphone market.

Vendors are increasingly turning towards multiple price points, Particularly as consumers in Southern Europe, and more notably in Northern Europe, begin to make the tough choices on whether to upgrade their phones now or wait, especially with subsidy cuts.

This is one area where Apple has been beaten by Samsung. The Korean device maker has a seemingly never-ending portfolio of smartphones, whereas Apple offers just three: the iPhone 4, iPhone 4S, and iPhone 5.

That doesn't mean that Apple isn't thinking about a low-end iPhone to boost market share. Speaking at the D11 conference last month CEO Tim Cook, said Apple hasn't extended the iPhone product range just yet. "We haven't so far," Cook said. "That doesn't shut out the future. It takes a lot of really hard work to do a phone when you manage the hardware and software and services in it. We've put our focus on doing that right. We haven't been focused on working multiple lines."

If Apple was indeed to come out with a low-end iPhone as many analysts, pundits and talking heads believe it will (some expect it as early as September this year), then perhaps that reinvigorates the growth Apple has been accustomed to seeing over the past six years. The iPhone was a revolutionary product, and changed the smartphone and technology world forever.

The iPhone growth engine, while still extremely profitable, is starting to slow down, and Cook, along with the rest of his team, sees that. The smartphone slowdown is here, and unless Apple, or another manufacturer does something incredibly innovative soon, the slowdown is only like to get worse.

That notion will have investors dialing for help sooner rather than later.

-- Written by Chris Ciaccia in New York

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