Nokia's Symbian continued to lead the market with a 37 percent share, while Android had 17 percent of the market. It has surpassed Research In Motion, Apple and Microsoft this year.

Growing popularity of Android phones -- made by companies including Motorola Inc, HTC Corp and Samsung Electronics -- puts Google in a good position as handsets look set to surpass computers for browsing the Web.

Google Chief Executive Eric Schmidt said in September he expects mobile searches to generate most of the firm's revenue eventually, but it could take a long time, despite growing at a rapid clip.

Android software, offered free to cellphone vendors, has experienced dramatic growth since coming to market two years ago. Last quarter it saw a 14-fold growth from very low levels a year ago, Canalys said.

Helped by the surge of Android phones, cheaper smartphones are becoming increasingly the growth engine of the overall smartphone market, the researcher said.

"We are seeing more volume going into the mid- and lower-tier. We have reached a tipping point, smartphones are no longer the high-tier product," said analyst Pete Cunningham.

"Operators are looking to push smartphones into prepay market as these phones are generating a lot of data traffic revenues," Cunningham said.

This opens a new, large market for smartphones which have been sold on many developed markets mostly with monthly contracts.