A pple sold 35 million iPhones in the first quarter of 2012. Nine million of those were sold among the top three carriers in the United States; the U.S. market remains important to manufacturers because it is where the hype cycle for the world begins, and where the most marketing dollars are found. But when you do the math, the overseas market is where the true smartphone battle is now taking place. 

Apple Dominating U.S. Through Top Carriers

For now, Apple still owns the U.S. market. Since the beginning of 2011, Apple has sold about 39.1 million iPhones through the top three U.S. carriers - a figure that runs close to 65% of the domestic market for that period. The majority of those were through AT&T (21.8 million). That makes sense, given that the iPhone was the carrier’s exclusive property for the first four years of its existence and has the most consumers on long-term contracts. Verizon released its first iPhone in March 2011 and has sold 14 million iPhones to date. Sprint has only been on the iPhone bandwagon since the fourth quarter of 2011, with the iPhone 4S, and has sold 3.3 million devices. 

In the last two quarters alone, Apple sold nearly 72 million smartphones. Only 22.7 million of those were in the U.S. Where is all of this fantastic growth coming from?

Apple CEO Tim Cook said on the company’s latest earnings call that iPhone sales have grown 500% in China during the past quarter, a trend that extended throughout the region. "We experienced very strong iPhone sales in all of our segments, led by our Asian-Pacific and Japan segments, where sales more than doubled year-over-year," Apple CFO Peter Oppenheimer said. "We continue to see tremendous momentum in greater China, where iPhone sales were five times the level of the year-ago quarter."

So, that is one big chunk. Apple is moving horizontally through the world market with GSM-capable devices (which AT&T and T-Mobile run in the U.S.) at a variety of price points. As we predicted last fall, once Apple had multiple prices for consumers to choose from, growth would rise exponentially.

That is precisely what has happened. In the U.S. and many other destinations throughout the world, an iPhone can be acquired on the cheap. In the U.S., an iPhone 3GS is free on a two-year contract through AT&T. An iPhone 4 is $99, and the 4S is $199. This has certainly had an effect in Apple’s primary North American market; Apple sold 13.7 million iPhones during the holidays, which was almost as many as the 16.4 million it sold in the first three quarters of 2011.

However, while Apple remains the dominant smartphone maker in the U.S., there are still several other competitors that are churning along in international markets or trying to penetrate the U.S. ecosystem.

Samsung Primes Apple for Worldwide Battle

Samsung outsold Apple worldwide in the first quarter of this year by 44 million smartphones to 35 million. However, Apple has been winning the U.S. market in the last two quarters. Sprint did not divulge how many total smartphones it sold in this year's first quarter, but a reasonable guess would be that 60% of its smartphone sales were iPhones. For the quarter, Verizon's sales were 51% iPhones, while AT&T's were 78%. If Sprint sold 1.5 million iPhones at 60% of smartphone volume, the carrier sold about 2.5 million smartphones altogether. That means that Apple took about 63.4% of smartphone sales for the first quarter - a number that correlates closely to Apple’s U.S. sales in the fourth quarter of 2011.

Research firm NPD noted that U.S. smartphone sales for the fourth quarter of 2011 were 48% Android and 43% iPhone. That gap may have closed in Q1, but Android still likely outperforms the iPhone on a global basis. If Android had 36.6% of sales from the top three U.S. carriers in Q1 and Samsung sold a majority of those devices, then the Korean smartphone maker likely sold between 4.5 million and 5.5 million smartphones in the U.S. in the first quarter (considering a 22.4 million Q1 smartphone market with Samsung taking 20%-25%). 

That is a lot of numbers to get to a couple basic points. First, if Apple is dominating the U.S but Android still outperforms iOS globally, then the war for smartphone supremacy is no longer U.S-centric. Between Apple and Samsung, the two manufacturers sold about 80 million smartphones overseas. Key emerging smartphone markets where the battle is taking place are China, India, western Europe and Africa. 

Second, the numbers also speak to the challenges faced by other manufacturers trying to gain a foothold in the U.S. market. Right now, about 90% of smartphone sales in the U.S. are either Android or iOS. That means a steep climb for Microsoft and Nokia, which are trying to gain traction with the Lumia 900 on AT&T and the Lumia 610 on T-Mobile. AT&T has a $150 million marketing budget for Windows Phone and will aggressively sell the device, but with the Samsung Galaxy S III and HTC One series coming to nearly every U.S. carrier, the amount of traction that Windows Phone can gain in its primary target market is questionable. Nokia, like the Android manufacturers, should continue to focus on high-growth locations outside of North America.