While new data shows that the smartphone market is continuing to grow, it also points to increased competition between Apple and Samsung for the top spot.

While Apple reclaimed the top position as the world?s No. 1 smartphone vendor during the quarter, Samsung was close behind in terms of the number of smartphones shipped. The two were also neck and neck for the year, as both companies delivered significant increases.

?Apple is No. 1 for now,? said Michael Morgan, an analyst with ABI Research, New York. ?Right now, it looks like it is going to be a two-horse race between Apple?s and Samsung?s approach.

?A battle is shaping up between Apple, which is strong on the service, media and consumption side and Samsung, which is strong on the component side,? he said. ?The thing that could shift the battle is with Apple having a closed ecosystem, publishers are starting to think about more about moving to another operating system.

?Android may become more attractive because publishers are not getting such a large chunk of their revenue being taken out. This could help Samsung.?

Ace in the hole
While Apple and Samsung are not likely to be able to maintain the same level of momentum they had in 2011, they should maintain market-leading momentum going forward, per Mr. Morgan.

Samsung could even pull ahead of Apple.

?We will see iOS continue to capture market share this year,? Mr. Morgan said.

?Samsung will also continue to capture market share,? he said. ?I think they will likely be able to out ship Apple this year but it is not going to be by a wide margin.?

Samsung shipments increased by 18 percent year over year, fueled by strong shipments for its Galaxy-branded 3G smartphones.

In its quarterly financial results released last week, Samsung said strong quarterly earnings were driven by  sales for the Galaxy S II and the Galaxy Note. The company also said its flagship Galaxy S II smartphone and its full lineup of high-end mobile devices, such as the Galaxy Note and the Galaxy Nexus helped drive up revenue for the year by almost 40 percent compared with the previous year.

?You cannot just be a hardware OEM,? Mr. Morgan said. ?You have to have good software, good services and you have to be able to create a coherent ecosystem.

?Samsung is trying to move closer to that but it does not have control over the operating system,? he said.

Samsung could have an ace in the hole with the Samsung Note, which is a smartphone with a 5.5-inch screen that has done well in Korea and is coming to AT&T soon.

?Right now we are keeping an eye on the Samsung Note,? Mr. Morgan said. ?Do we have a new device segment that Samsung can be a new mover on?

?It will be interesting to see if this device can get traction,? he said. ?If it does, it can shift the battle field.

Apple?s strong performance was fueled by intense demand for the new iPhone 4S as well as the availability of iPhones at a variety of prices.

In 2012, Apple will benefit from emerging markets such as China, Brazil and Russia.

?However, Apple will have to come up with a refreshed iPhone design this year with capabilities such as LTE to sustain growth in developed markets such as USA and Japan,? said Neil Shah, wireless device strategies analyst at Strategy Analytics, Newton, MA.

In the middle
Despite Samsung?s strength, Android?s market share declined from its third quarter high of 52.5 percent to 47 percent in the fourth quarter, according to ABI Research.

While low-end Android handsets from Huawei and ZTE showed strength, mid-tier handsets from manufacturers such as Motorola, LG and Sony Ericsson are struggling.

?The guys in the middle are regularly struggling to deliver profitability,? Mr. Morgan said. ?Usually, when handset OEMs dip below profitability, they never come back,? he said.

?This could be the signaling that Android may not be enough to save these guys.?

The issue for some handset manufacturers is that the market is bifurcating with growth in a low-end, low-profitability market and a high-end, highly differentiate market leave no room for anyone in the middle.

?To be high end, you cannot be just slapping parts together,? Mr. Morgan said. ?You have to be developing stuff that is differentiated on the hardware and you need to pull in services that play across handsets.

?Some are having a hard time differentiating so they are competing on price,? he said. ?However, the Chinese manufacturers have a much better cost structure and can still remain profitable with lower priced handsets.

?The guys in the middle cannot afford to create differentiate experiences and cannot afford to compete on the low end.

Vertical integration
Global smartphone shipments grew 54 percent to reach a record 155 million units in the fourth quarter of 2011, according to data from Strategy Analytics.

Apple had a 23.9 percent market share in the fourth quarter and its global smartphone shipments jumped 128 percent for a total of 37 million units. Apple shipped 93 million units for the year and had a 19 percent market share.

For the year, Samsung was the leader with a 19.9 percent market share.

Samsung shipped 36.5 million units in the fourth quarter and 97.4 million for the year.

Nokia?s smartphone market share dropped from 33.4 percent in 2010 to 15.8 percent in 2011. Strategy Analytics attributed the drop to a lackluster touch screen smartphone portfolio and a limited presence in the U.S. market.

Nokia shipped 19.6 million units in the fourth quarter and 77.3 million units for the year.

While Nokia said this week that it sold more than one million Microsoft Lumia phones since October, these numbers did not offset the decline in Symbian sales.

The winners in the smartphone market this year are likely to be those who can deliver scale, brand awareness, quick time to market and differentiated products.

?Samsung is one of the highly vertically integrated vendors in mobile industry and thus benefits from the time to market perspective as well as multi-devices and multi-screen assets,? Strategy Analytics? Mr. Shah said. ?Hence, Samsung will continue to grow at expense of some of its competitors who are less profitable making them financially constraint to expand and roll out multiple models faster."

Final Take
Chantal Tode is associate editor on Mobile Marketer, New York