The growth rate of global smartphone shipments slowed to 25.9% in 2014 and is expected to fall to 12.4% in 2015, according to TrendForce. A total of nearly 1.17 billion smartphones were shipped in 2014, while approximately 1.31 billion are predicted to be shipped next year, the research firm says.

"The growth rate of smartphone shipments is decreasing because the penetration rate is already very high while the market is saturated," said Avril Wu, a handset analyst at TrendForce. Chinese brands remain the driving force in the global smartphone market, Wu said, adding that they will comprise 17 percent of global handset shipments in 2015.

Competition among smartphone brands is more intense in China than in more mature markets. Lenovo, Huawei, Xiaomi, Coolpad, ZTE and TCL are the six largest Chinese smartphone brands. They vie with each other for both China's huge domestic market and overseas markets and compete largely on price, which forces down their razor-thin margins further. TrendForce expects M&A activity in the handset industry to pick up fast in 2015 and continue for the next two to three years. Brands will also look to differentiate themselves with social media, apps and mobile payment systems.

The iPhone 6 is performing extremely well, reflecting iOS users' desire for a larger screen and not just advanced hardware. Androids and Windows brands, however, are competing largely on price since many of their hardware features are similar. TrendForce expects these vendors to continue this pattern in 2015, as consumers increasingly demand high quality, feature-packed handsets for low and mid-range prices.

After 2 years of work building 4G infrastructure, the global 4G network is now in place. It will mature in 2015, allowing more optimal use of AP and other hardware products. US chipmaker Qualcomm has surpassed Taiwan's MediaTek in the 4G sector, Wu said. In the first half of 2015, these two brands will focus on making 4G products, while in the second half of the year, they will devote their energies to producing chips for low and mid-range handsets, she added.

In the smartphone supply chain, advanced hardware has historically been the key to success. But in 2015, user experience will become more important. Expect to see brands attempting to differentiate with features that create a more distinct user experience, like metal cases, 3D screens and multiple camera lenses.

Mobile payment systems are still at a fledgling stage. In some countries, regulations still need to be created to govern mobile payments. But from the consumer's point of view, mobile payments are necessary. TrendForce expects more regulations for mobile payments to be implemented in 2015. That will bring new opportunities to smartphone vendors.