Google's Android takes No 2 spot from iPhone in US

* Google's Android OS in 28 pct of U.S. smartphones in Q1

* Apple U.S. iPhone share 21 pct in Q1

* Research in Motion retains No. 1 rank with 36 pct share

By Alexei Oreskovic

SAN FRANCISCO, May 10 (Reuters) - Google Inc (GOOG.O) displaced iPhone maker Apple Inc (AAPL.O) to become the second most popular provider of smartphone software in the United States during the first quarter, the latest sign of the increasing competition in the fast-growing mobile market.

Smartphones featuring Google's Android operating system accounted for 28 percent of U.S. smartphone unit sales in the first quarter according to NPD Group, behind top-ranked Research in Motion (RIM.TO), maker of the Blackberry phone, which had a 36 percent share of the market.

Smartphones, which allow consumers to surf the web, send email and run specialized applications on wide, color screens, are increasingly replacing no-frills cell phones for many U.S. consumers.

The devices have become a prime battleground for a variety of tech companies seeking to ensure a good position in the evolving market.

Last month, Hewlett-Packard Co. (HPQ.N) said it would pay $1.2 billion to acquire Palm Inc PALM.O, which sells two smartphone models based on its WebOS operating system. Microsoft Corp (MSFT.O), whose Windows operating system is used in the majority of the world's PCs, unveiled a pair of smartphones last month and recently launched a revamped version of its mobile operating system.

Apple has sold more than 51 million iPhones since it launched the device to wide acclaim in 2007, and the company says that more than 200,000 apps are available for the phone.

In the first quarter, Apple's iPhone which is available exclusively on the AT&T wireless network in the United States, dropped to third place as its share of the smartphone operating system market remained flat quarter-over-quarter at 21 percent share.

Unlike Apple, Google offers its Android software to other phone-makers. In April, Google said that a dozen vendors currently offer 34 different devices that feature the Android software.

NPD analyst Ross Rubin said the strong showing of Android phones during the first quarter owed to promotions by Verizon Wireless, which he said has expanded its buy-one-get-one offer. Verizon Wireless is a venture of Verizon Communications (VZ.N) and Vodafone Group Plc (VOD.L).

"As in the past, carrier distribution and promotion have played a crucial role in determining smartphone market share," said Rubin in a statement.

While the Android operating system is gaining momentum in the market, Google has had less luck with its Nexus One phone, the Android-based device that it designed in close collaboration with HTC. Google sells directly to consumers from its website.

In a report earlier this year, analytics firm Flurry estimated that Google sold roughly 135,000 Nexus One phones in its first 74 days on the market, compared with the 1 million iPhones that Apple sold in the same time frame when it initially released the device in 2007. (Reporting by Alexei Oreskovic; Editing by Steve Orlofsky)