New research into the Australian mobile phone market predicts 5.6 million smartphones will be sold in Australia in the second half of the year and competition between the smartphone manufacturers will be fierce as the loyalty of consumers is still up for grabs.

Technology analyst firm Telsyte expects the strong sales will be driven by new devices and shortening average replacement cycles. The majority of sales will be to existing smartphone users, however it estimates around 1.5 million new users will take up smartphones before the end of the year. Currently, around 20 per cent of mobile phone users still use regular mobiles.

The number of smartphone users in Australia has grown by 1.1 million in the last six months, and there were 16 million smartphone users in Australia at the end of June 2014.

Both the Android and Apple platforms grew in the first half of this year and together make up 93 per cent of the installed base of users, Telsyte said.

However, Telsyte managing director Foad Fadaghi said the Australian smartphone market is dynamic and still up for grabs.

“Roughly a third of those intending to buy a new smartphone in the second half of 2014 have not decided on the platform they intend to purchase and around a third intend to switch platforms,” Fadaghi says.

According to the research, Apple retains the highest repeat purchase intentions (70 per cent) while Android has improved to over 60 per cent.

However Telsyte research showed Apple’s market share could depend on the size of its next iPhone screen.

“Some 40 per cent of survey respondents that intend to purchase an iPhone 6 indicated they would only consider it if it has a larger screen,” Fadaghi says.

Telsyte research shows that one in five existing Android users that intend to purchase a new smartphone and are not planning to purchase an iPhone, indicated they would “change their smartphone purchasing decision” if a larger screen iPhone 6 became available.

There is plenty of movement in the market between Android and Apple users as Telsyte also found that around 10 per cent of those expecting to purchase an Android smartphone are currently using an iPhone.

Furthermore, Telsyte research shows that Android smartphones have now overtaken iPhones as the main devices purchased on contract from carriers, following strong carrier promotions and the reduction in iPhone subsidies.

Phablets still niche

Despite more manufacturers releasing larger-screen devices that blur the line between a smartphone and tablet, phablets are still a niche market, Telsyte said. It defines a phablet as a  smartphones that have a screen size of 5.5 to 6.9 inches.

Telsyte believes the phablet market hinges on the entrance of Apple which is expected to launch a 5.5 inch iPhone 6 later this year.

Fitness bands more popular than smartwatches

Telsyte research showed that smart fitness bands are more popular than smartwatches. This is due to their lower price points and popularity as a gift. Fitbit is the market leader and only a third of fitness band users currently pair them with iPhones.

Samsung is the market leader in the smartwatch category, however Telsyte  found that smartwatch adoption is still “embryonic” in Australia and 80 per cent of smartwatch users pair their devices with Android smartphones.

More than 1 million smart watches and fitness bands (combined) have been sold in Australia according to Telsyte.