Gartner’s Q1, 2013 mobile phone and smartphone shipment numbers provide the same set of observations
1. The total mobile phone shipment numbers have been stagnant YoY (425.8 million Q1, 2013 versus 422 million Q1, 2012) …
2. …. Bogged by 22% decline in feature phone shipments (215.7 million Q1, 2013 versus 275 million Q1, 2012)…
3. …. And Buoyed by 43% increase in the smartphone shipments (210 million Q1, 2013 versus 147 million Q1, 2012)!
4. Smartphone sales accounted for 49.3 percent of sales of mobile phones worldwide in the first quarter, up 34.8 percent year-on-year.
5. Only the Asia/Pacific region contributed to mobile phone sales across the globe, with a 6.4 percent increase year-on-year. More than 226 million mobile phones were sold to end users in Asia/Pacific in the first quarter of 2013, which helped the region increase its share of global mobile phones to 53.1 percent year-on-year. China saw its mobile phone sales increase 7.5 percent in the first quarter of 2013, and its sales represented 25.7 percent of global mobile phone sales, up nearly 2 percentage points year-on-year.
6. Samsung rules the smartphone roost growing by 51% YoY. In Fact, Samsung presence in Smartphone segment is so overwhelming that its sales and market shares are almost equivalent of its next 4 competitors put together (Apple, LG, Huawei, ZTE)
7. Apple, is estimated to have secured 18.2 percent of global marketshare, a drop of 4.3 percentage points. Apple’s redemption has been the Chinese market with the lower price of the iPhone 4 making China a key revenue generator for the tech giant. However, with no new products due from the Apple stable until the fall, the next quarter may drag Apple’s market shares significantly downward.
8. In terms of operating systems, Android continues to race ahead of rival systems, claiming 74.4 percent of global marketshare. 156.1 million smartphones running Google’s operating system were sold in the first quarter, whereas Apple’s iOS claimed an 18.2 percent slice of the market with iPhone sales. With new OSs coming to market such as Windows,Tizen, Firefox and Mozila, one can expect some market share to be eroded, but not enough to question Android’s volume leadership.
This is the second part of a two part blog on Apple reliving the mistakes that Nokia made 4-5 years back. Read Part I here.
Both Nokia (2007) and Apple (2012-13) were trying to time and control consumer preferences in terms of the features and the screen. Conversely, that was akin to letting the competition in thrugh the back door. Instead of creating the future by out-innovating on the feature roadmap – Both the companies were possibly trying to amass the cost benefits from standardized feature formats.
Tim Cook’s comment on this issue, “Our competitors have made some significant tradeoffs in many of these areas to ship a larger display. We would not ship a larger display iPhone while these tradeoffs exist. Some customers value large screen size. Others value other factors such as resolution, color quality, white balance, reflectivity, power consumption, compatibility of apps, and portability.”
The strongest parallel is how both companies started fighting the consumer preference for larger displays at the peak of their profitability… and then dug in as margins began eroding rapidly. Sample this: Phablets as a segment are already likely to make up more than 15% of smartphone market in 2013 – And Apple chooses to give this market a miss. At the peak of its prowess, Nokia executives talked about the performance trade-offs of big-screen phones: power consumption troubles plaguing big-screen phones; surveys showing that most consumers prefer smaller models. On and on and on, an endless stream of justifications and carefully constructed defenses, lecturing consumers about what they should want to buy. Do you see the pattern?
Apple already has a well learnt lesson – the iPad Mini which was sacrilegious in terms of Steve Jobs’ definition of a tablet is the one that is holding the fort for Apple against the medium/low cost Androids.
Secondly, Apple’s smartphone market shares now seem to be on the wane with Androids from Samsung doing the pincer attack – both from the top end and the economy smartphones. As smartphone penetration moves from early adopters to mass-market and laggard consumer segments, the smartphone as a product will be less dependent on technical superiority, and more dependent on reliability and value – and it is Apple’s market to loose. (The gainers will mostly be the ZTE, Huawei and Alcatels of the world). As reported by Juniper, Samsung’s smartphone volumes are 2X that of Apple’s. AllianceBernstein predicts that Apple’s market share in smart phones will fall to about 12% this quarter, compared to 23% in the same quarter of 2012. Further, the firm predicts that Apple’s market share may fall into single digits next quarter. IDC’s Q1 market shares also show Apple slowing down on its growth trajectory (YoY).
Apple needs to look at the next evolution of iPhone – the mid level low cost iPhone. The iPhone 5S is already confirmed to be only an incremental over the iPhone5 – and is not going to incite mass hysteria as iPhones normally have done. A low cost iPhone could also be critical for Apple especially because ABI estimates the low cost smartphone market will more than triple, in devices sold, between now and 2018 whereas the mid-range will grow at only (roughly) 50%.
For the present, Apple and Tim Cook look to be in a denial state – which is further going to bleed Apple. The high margin strategy is a great things for share holders – but then market presence and numbers is quite another thing. For the love of Apple, I hope it doesn’t going the Nokia way.
Addendum: Just read that Apple may finally be looking at iPhone low cost model and saw a couple of photos as well. Will this turn the tide or is the initiative lost already
Addendum 2: A further validation of loss of Apple’s grip in the smartphones segment is Apple’s declining profit share of the global smartphone industry. Between Q1,2012 and Q1, 2013, Apple’s profit shares of the global smartphone industry declined from 74% to 57%.
This is the first of a two part blog on Apple reliving the mistakes that Nokia made 4-5 years back.
In 2007, Nokia was the biggest thing in the mobile phone market. It held 60% of the global smartphone market and more than 40% of the overall handset market. Its handset operating margins briefly topped 25%, something that was thought to be impossible in the phone business. In the summer of 2007, Nokia released the N95 – a 2.4” screen dual slider phone with a 5MP camera which in 2007 was a package that couldnot be bettered. N95 went on to create a roar in the markets – but imperceptibly Nokia’s slide was beginning. 3 months after Nokia launched N95, Apple launched iPhone and the rest is history.
The initial iPhone and even the early Samsung phones played on the large screen format – 3.2” – 3.5” and the likes. Nokia’s response to the first smartphones, was a bettered N95 – the N96 – crammed with more features which failed to tickle the market. Touch was catching on – and Nokia was lethargic in its reaction. In an age when customers were falling head over heals in love with the iPhone, Nokia was lamenting the iPhone on subjects such as 2MP Camera and lack of Bluetooth and loaded up the 2.6″ N96 to fightback (in vain). By the time, Nokia responded with the 5800 XpressMusic, it had fallen behind on its tracks. It repeated the mistake with N97 – a large screen which was woefully resistive – in an era when the iPhone3GS ruled and the Androids were beginning to fly. Nokia was edged out of the market – and had fallen behind. Nokia’s next releases N900, N8 failed to woo customers clamoring for the iPhone.
2013 – Apple’s incredible run through from 2007 onwards is slowly running out of steam and gross margins had peaked in early 2012. Apple played economies of scale on standard screen sizes to keep its BOM (Bill of Materials) cost low – driving operational efficiencies in production. However, they seem to have been reading the market wrong as the era of large screen devices was stepping up considerably against the 4” iPhone. Premium buyers were increasingly flocking to the 4.5” segment smartphones and the 5.5”+ phablet space and Apple’s roadmap to large screens is already a couple fo years behind.
The sense of déjà vu is not wasted – as Apple repeats the same mistakes in 2013 that Nokia made in 2007.
Continues to Part II
Long time back, i had written a blog on the subject of smartphones becoming the key handheld at the cost of feature phones. If the Gartner 2012 numbers are to be considered, the saturation point for feature phones has been reached and the 2012 feature phones numbers – have been on a 1.66% decline as against 2011.
Incidentally, i see another trend – that of smaller players/ white-labelled OEMs- and a fragmented market emerging – a far cry from the Nokia and Samsung dominance days. The rise of Android is but actually a testimony to this trend with the exception of Samsung. With no malevolence to Samsung – it does seem to me that Samsung is holding on to a untenable position in shares in mobile devices with the white labeled OEMs on the prowl.
While Apple will still hold on to the smartphone ground (because of its ability to leverage hardware, software , services and experience), Samsung doesnot hold that ace with Android. This inspite of the fact that Samsung Galaxy series was the first high end Android that has challenged and now dethroned technology leadership of the iPhone.
The end result looks like an Android dominated market, though there could be a case of Android fatigue setting in with the audiences. However with the low end $50 smartphones on Android’s the numbers for Android will continue to add up especially in APAC and African markets. Thus Android is expected to still rule the volumes game on smartphones. It would be interesting to see how Windows and Blackberry go after Android – but the key still remains that – Android is the undisputed choice in smartphones in the fastest growing markets across the world. Windows and Blackberry will take time reversing this trend.
Continued from an earlier post: Why am I so deeply sceptical of BB10 as RIM’s comeback kid?
The Smartphone sector looks to be one of the most extreme oligopolies of the 21st century- even while the market is exploding at 35% YoY (700 million in 2012 versus 490.5 million in 2011) – there is little room left for any one but Android and Apple.
Apple and Android contribute to 92% of the Industry Volume and 102% of the Industry profits! All others combined for 8% of the market volumes but were edged out of the profits – leaving little space for investments into devices and the markets. The thing about market share is that it is liable to change rapidly in a rapidly growing market.However, with the base of 700 million it is possible that growth rate would have topped out. On the other hand, North Americas and Europe are visibly saturated in volumes/and growth is slowing down; and with maturity are only driving Revenues and profits as people tend to purchase more high-end smartphones, including the more expensive Android variants and the iPhone.
Blackberry with its Z10 and Q10 is targetting the high end of the smartphone market – The space that is dominated by Samsung Galaxy SIII, Apple iPhone, Nokia Lumia 920 alongwith handfull others. Instead of beating its competitors out on price, it wants to offer a genuinely quality product that the most tech-savvy consumer would be happy to purchase. This part of the market is by far the most cutthroat, and also the slowest growing.Ergo, even if Blackberry succeeds in creating space in this segment, it will be just a niche! Blackberry is trying to sell an expensive smartphone with a high margin, but it is competing against the most entrenched players imaginable. The part of the market that Blackberry is choosing to enter will not grow much, and RIM will face vicious competitors from every angle. There isn’t room in the lucrative high-end smartphone market for small fry ~ a $8billion Blackberry for instance! (Refer to the Blackberry Torch as an example – well crafted – but it didnot take BB where it was designed for)
On the other hand, the smartphone market is growing super because Android is powering the low end of the market. These markets are typically the South East Asian regions, Indian subcontinent, China and Africa. Even while Blackberry has a strong presence in nations like India, it is the Android army that it has to content with in such markets – and currently Blackberry’s portfolio in the low end is only based on the 4 year old Blackberry Curve which is appearing a little jaded and last generation.
Thus Blackberry really needs to be focussing on low end innovation, pricing, volumes and markets – currently there is no visibility of it doing this. Hopefully it gets its act together before its too late. A flagship device is one thing – numbers, profits, revenues is quite another.
Q4, 2012 revenues- $52.7 bn, profits- $8.8 bn.CY 2012 revenues – $188bn, profits- $27bn.
Samsung is on a roll and having thumped Nokia four quarters back, Samsung is taking the fight to the mighty Apple. Samsung is already the no.1 Mobile phone maker and smart phone maker globally. Also, its foray into Smart Cameras and Refrigerators have altered Samsung’s position from a Fast Follower to a Technology Leader in the Industry! 2012 has been very productive for Samsung as it seems to have a transition from a moderately successful electronics Chaebol to the leading non-iOS device maker. Interestingly enough Samsung and Apple make 104% of the Mobile devices profits – leaving no headroom for any investments from any other Mobile device maker. Samsung’s relentless progress in the Mobile-tech sector over 2012 have christened it as the Fifth Horsemen – next to Google, Apple, Amazon and Facebook. (and I am shocked by the absence of Microsoft in that list by MG Siegler).
Even while Samsung has made its modest efforts to extend its run in smartphones to Smart TVs, Smart Cameras and Smart Refrigerators – the key to Samsung is and will remain to be smartphones. If smartphones as a device follow the PC/Laptop route – i.e only incremental changes and no quantum leaps- then Samsung will end up the HP, Compaq and Dell route – where these players kept producing laptops until laptops became redundant – due to the advent of Smartphones and tablets (Handhelds is the industry terminology). Those profit figures will be difficult to emulate year on year in horizontal device domain.
Currently, at this point of time, Samsung seems to be going the Sony Way – Like Sony had the Walkman, the Bravia TV, Sony Music system, Vaio laptops, Mobiles & Smartphones, Cameras and other very strong sub brands in the consumer segment and has been largely unable to piece it together in a coherent strategy. The lack of this coherence was what has led to the slow skid at Sony. Samsung similarly is invested in a dozen and more device categories – TVs, Mobiles, Tablets & Smartphones, Laptops, Cameras, Refridgerators, ACs and Washing systems and in the current context is seemingly trying to put all these devices in the connectivity era. However, that is nothing more than just a smart tactical move – and Samsung knows this. Samsung’s dilemma is about not being able to marry these disparate components into one converged strategy.
(to be continued)
As I write this post, I am aware of a considerable hype and excitement that has been created by Sony Experia C660 Yuga Smartphone- 5” Full HD display, Glass Back, Android 4.1.2, Samsung Exynos 5 Quad Core processor, 3GB RAM, 128GB Storage, 16MP Camera and more. Sure that’s excitement- its closer to a laptop than a smartphone and sure that’s big- But I am really not sure –if that enough to get Sony back in the game. Here’s why-
Back in 2005-08, Sony (Then erstwhile Sony Ericsson) was big in devices- the 4th or the 5th in terms of device volumes and revenues, 2nd or 3rd on Profits and an enviable leadership in ASP. As if that wasn’t good enough Sony had a real plan to leverage its other sub brands – Walkman, Cybershot, Handycam, Playstation, Bravia, Sony Pictures, VAIO and Sony Music. Sony thus had enviable stakes in Music, Video, Imaging, Gaming, Computing, Content (both movies and Music) and LCD screens. In 2007, that kind of a portfolio was something that even a Apple couldnot think of for itself. Sony needed Brand extension of its venerable consumer brands into mobility and many believed that Sony had the secret sauce … except that the secret sauce did not happen. In 2009, Sony launched its last big sub brand- Xperia which would stand for its line of smartphones and one hoped that Xperia would marry the Sony heritage of consumer durable brands – 3 years on, the promise is un-fulfilled and Sony is fast fading into “has been” territory in smartphones.
Where did Sony Loose it? Like Nokia, it misread the writing on the wall as a war of features. It did not recognize the importance of putting all this together on a platform and innovate on the platform – something that Apple and Google pioneered with their App stores. Instead it played the marksmanship on device features bettering one sec with another and still with other. The most appalling realization is that Sony hasn’t still done anything to leverage these sub-brands to build a proposition in Mobility even now. That’s where Sony Experia C660 Yuga Smartphone comes in. All hardware, device and specs – no real platform innovation.
Sony has to get its content platform strategy in place – to really cause a dent in the device space. However, I don’t see a platform play happening at Sony which is a little sad given that there is very little profit pool left to maneuver only on the basis of devices. Neither has Sony been able to leverage its sub brands positively to create compelling propositions.
As per the latest reports from IDC, Global market for Connected and Smart devices grew 27.1% YoY in Q3,2012 to 303.6 million units, valued at $140.4 billion. Shipments will continue to reach record levels in Q4 2012, rising 19.2 per cent from the 3Q, 2012 figure and 26.5 per cent above 3Q, 2011. IDC expects sales of 362 million units with a market value of $169.2 billion in the final quarter, with tablet sales up 55.8 per cent and smartphones up 39.5 per cent, while PCs are expected to show small declines. Samsung maintained the top position with a 21.8 per cent market share while Apple help 15.1 per cent based on unit shipments. But Apple led all vendors in value with $34.1 billion in quarterly sales and an average selling price of $744 across all device categories. The difference in the ASPs (average selling prices) Of Samsung and Apple, is a telling sign of different market approaches. The fact that Apple’s ASP is $310 higher than Samsung’s with just over 20 million fewer shipments in the quarter speaks volumes about the premium product line that Apple sells. Having said that, there is also a risk that Apple could get relegated to a minority market, just the way Windows95 out-marked Apple OS in the mid 90s.
In terms of shipments, Lenovo ranked third with seven percent of the market, followed by Hewlett-Packard (4.6 percent), and Sony (3.6 percent). IDC expects the worldwide smart connected device market will hit 2.1 billion units in 2016 with a market value of $796.7 billion worldwide. In 2011, PCs accounted for 39.1 per cent of this market but by 2016 it is expected to drop to 19.9 per cent. Smartphones will be the top product category with share growing from 53.1 percent in 2011 to 66.7 per cent in 2016 and tablets will grow from 7.7 per cent in 2011 to 13.4 per cent in 2016. The advent of cloud-based services is enabling people to seamlessly move from device to device, which encourages the purchase and usage of different devices for different situations.
The shift in demand from the more expensive PC category to more reasonably priced smartphones and tablets will drive the collective market ASP from $534 in 2011 to $378 in 2016. While, IDC hasn’t provided a breakdown by operating system, Android with its mass-market devices with prices trending towards $100 or less will continue to take a majority share in smart devices.
Over the last few months now, Apple has been behaving like the big daddy – reminiscent of Microsoft in the 2000-10 decade. Firstly, there is the push into patent led legal processes with Samsung; then the whole act of reducing supplies of the Samsung chips and then there is the whole maps fiasco for which Tim Cook has also had to apologize in public. Apple’s push to pack all of its eco-system in its walled garden is becoming a bad press issue. The latest being the Map application errors which has led Australian Police to issue a warning on use of the Apple Maps application in North West Australia categorizing the app as “Potentially Life Threatening”. The latest map glitch puts motorists 70 kms off from where they are supposed to be.
Again then – the question that arises- Post the Jobs era, Is Apple lapsing into the ordinary?
The headline reminds me of “Batman Begins!” – 1st part of Christopher Nolan’s Batman trilogy.
However, unlike the Batman series which made some epochal contributions to the world of movies – the Samsung Galaxy Connected Camera (Even while it breaks new ground in Camera connectivity to the Internet), isn’t essentially a breakthrough device in terms of the value that it brings to the customer. It does bring a novelty and innovation tag to Samsung – which is now exceeding itself and transforming itself from a Fast Follower (Read Apple) to a Innovator.
Firstly the specs and features and there isn’t much reading here- Clearly Samsung has extrapolated its competency in the Galaxy smart-phone and leveraged it to bring forth a device that centers on the Camera and the Networked. The device by itself is a smart looking thingie and from what the initial reviews say – it is dimensionally/ergonomically easy to carry around in the pocket.
Now then comes the all important question of how this device is positioned and will it be able to cut ice in a melee of converged devices. The key is convergence – and if the trend from EBook readers and MP3 players is read through – both these stand alone (single/dual function boxes) do not quite run the favor of customers. Both EBook readers and MP3 devices are onwards a gentle decline which in product marketing terminology would be branded as End of Life. The vote goes to the converged set of devices – which is this case is the smart-phone. The new converged devices pretty much does the same as compared to the connected Camera along with other moves such a music, gaming, browsing, calling, texting and more.
A critical component of the Productization and Penetration process is the Price. Priced at Rs.29999 (Rs.29850 on deals), the Connected Camera is dearer than the entry level DSLRs. A DSLR is a semi professional device that the connected Camera intends to substitute. However, DSLRs are much more versatile in terms of the Imaging technology – a touch screen camera with Applications is an interesting substitute- but there is nothing that can beat the concept of changeable lenses that the DSLRs provide. Thus the Connected Camera will not be a semi-professional/professional’s device of choice.
In effect, Smartphones will continue to rule Casual Imaging and DSLRs will rule the professional imaging – Thus leaving the Connected Camera with fewer options exceot perhaps a geek (with money) who just wants the device for the sake of having it.Bottomline – I dont see the Connected Camera carving out a niche for itself.
Thus the Connected camera to me is about Samsung’s coming of age on devices- the benefits in terms of capability and competency enhancement will accrue to the Galaxy Smartphone in its imaging division – a great way to take the challenge to Nokia Pureview.