US smartphone market sees sluggish growth as India-made phones surge, Canalys says

The U.S. smartphone market experienced sluggish 1% growth in Q2 2025, signaling tepid demand despite vendors front-loading inventory. This period notably marked a significant supply chain reorientation, with India becoming the leading manufacturing hub for US-bound smartphones for the first time, as China's share of shipments plummeted from 61% to 25% due to ongoing tariff concerns. While Indian-made volumes surged 240% year-on-year, iPhone shipments declined 11%, contrasting sharply with Samsung's 38% growth, highlighting the profound impact of economic pressures and geopolitical trade realignments on market dynamics and supply chain strategies.

Analysis

The United States smartphone market is exhibiting signs of significant stress, with growth stagnating at a mere 1% in the second quarter of 2025 despite vendors front-loading inventory. This discrepancy, highlighted by Canalys analysts, points to tepid underlying consumer demand and a widening gap between factory shipments (sell-in) and actual consumer purchases (sell-through). Concurrently, the market is undergoing a profound and rapid supply chain realignment driven by US-China trade tensions. The share of US smartphone shipments assembled in China has collapsed from 61% to 25% year-over-year. India has emerged as the principal beneficiary, with its volume of US-bound smartphones surging 240% to become the leading manufacturing source for the first time. This shift, largely driven by Apple, has not insulated the company from market headwinds; iPhone shipments declined 11% in the quarter. In stark contrast, Samsung's shipments grew by a robust 38%, indicating a potential market share shift amid the challenging economic and geopolitical landscape.

Key Decisions for Investors

• Investors should closely scrutinize Apple's (AAPL) upcoming margin guidance, as the 11% decline in iPhone shipments coincides with the costly operational pivot of its supply chain to India.
• The sharp divergence between Samsung's 38% shipment growth and Apple's 11% decline suggests a potential shift in US market share, warranting a review of positions in both companies and their respective supply chains.
• Given the explicit warning of 'tepid demand' and inventory build-up, exposure to the broader consumer electronics retail sector should be evaluated for risks related to slowing sales and potential future inventory write-downs.
• Monitor developments in US-China trade policy, as the data confirms that tariff-driven supply chain relocations are now a primary factor influencing production costs and competitive dynamics in the technology hardware sector.