With demand in mature markets such as North America and Europe easing, top smartphone makers Samsung Electronics and Apple Inc are introducing cheaper models to new markets, such as Apple's iPhone 5C.
"Sales of high-end smartphones will slow as increasing sales of low- and mid-price smartphones in emerging markets will shift the product mix to lower-end devices," said Anshul Gupta, analyst at Gartner. "This will lead to a decline in average selling price and a slowdown in revenue growth."
Global smartphone sales for the first time outpaced sales of normal handsets last year, accounting for 53.6 per cent of overall sales in 2013 and 57.6 per cent in the fourth quarter.
Overall 2014 smartphone sales are expected to increase to 1.2-1.3 billion devices from 968 million in 2013, Gupta said.
Of those smartphones, close to a billion will be running on Google's mobile platform Android, which was on almost 760 million units, or 78.4 per cent of all smartphones, in 2013.
Apple's mobile platform iOS was on 15.6 per cent of all smartphones, down from 19.1 per cent a year earlier.
Weaker demand for the priciest smartphones was already visible in the fourth quarter as Samsung and Apple saw their market share fall, while China's Huawei HWT.UL gained, driven by an 85 per cent increase in its smartphone sales as it expanded outside its home market.
Samsung's market share dropped to 29.5 per cent from 31.1 per cent a year earlier, Apple saw its market share drop to 17.8 per cent from 20.9 per cent and Huawei's share grew to 5.7 per cent in the fourth quarter from 4.2 per cent, according to Gartner.
Industry analysts expect that this trend will be more of a problem for Samsung than for Apple, which has not really played on the mass market and is not expected to do so.
"Samsung has to think about how to spread their sources, how to reinvent themselves and how they will have to innovate for the next year or two to protect their margin structures," said Jefferies analyst Lee Simpson. "Strategies will have to change for handset vendors for this new era."
The overall mobile phone market, which includes smartphones and normal voice phones, amounted to 1.8 billion units in 2013. Almost a quarter of the market was cornered by Samsung, up from 22 per cent in 2012, while Nokia saw its market share drop to 13.9 per cent from 19 per cent, according to the Gartner data.