The Tablet takeover

According to Gartner, the Tablet segment sales are going to increase from 68 million units in 2011 to 118 million units in 2012 registering a 98% increase in volumes. 2011 saw tablet shipments multiply by 3.5X over 2010. Furthermore, the segment will see growth at 60%+ CAGR for the next 5 years and gartner expects that the total number of tablet users will be in excess of 660 million by 2016.

Apple will be the key player and influencer in the segment, even while Amazon, Android and Windows build base and shall continue its leadership position well in 2015 albeit more smaller margins.

Presenting my first infographic build to emphasize the promise in the Tablet devices segment.

The pictures in Numbers: Indian Mobile Handset industry

Gartner release on the size and growth projections of Indian Mobile handset numbers:

Mobile handset sales in India, expected to grow an annual 8.5 percent and reach 231 million units in 2012
Annual Mobile handset sales in India to top 322 million by 2015
Smartphone sales 6 percent of the total device sales in Q2, 2011. Gartner expects to go up to 8 percent in 2012
Average selling price ASP for a mobile device sold in India is about $45
75% of the Mobile devices sold costing below $75

These set of projections amongst other things emphasize the growth of the smartphone segment in the mobile phone markets. Smartphones are projected to grow by 45% as against a total market growth of 9% Y-o-Y 2011-12.

The report also speaks about the waning klout of the Tier A brands to the local and Chinese brands such as G’Five, Micromax, Spice, Karbonn.Going forward in 2012, the big global brands will continue to face competition from local and Chinese brands as some of these brands are building capabilities to compete at a larger level covering broader consumer segments.

Gartner: Q3, 2011 Mobile Phone and Smartphone Market shares

• The global mobile handset market gained 5.6 percent in the third quarter to 440.5 million phones. It slowed from 35% growth reported a year earlier and 16.5% in the previous quarter. The slowdown in Western Europe has been compensated by stronger growth in emerging markets such as China.
• Nokia retained the top spot with a 23.9 percent market share, climbing from 22.8 percent in the second quarter, down from 28.2% year on year. Samsung, LG Electronics Inc., Apple, and ZTE Corp. rounded out the top five vendors.
• Smartphone sales by volume grew 42 percent. Smartphones gained one percentage point from the previous quarter to 26 percent of all mobile-phone sales. Smartphone sales to end users reaching 115 million in the quarter
• Google Android accounted for 52.5 percent of smartphone sales, more than doubling its share from a year earlier. This is up from the 20.5 million Android-powered smartphones sold in the third quarter of 2011, when Android accounted for a 25.3 percent market share.Android benefited from more mass-market offerings, a weaker competitive environment, and the lack of exciting new products on alternative operating systems. Android was estimated to sell 60.5 million units in the third quarter of 2011
• Samsung, maker of the Galaxy line of Android smartphones, became the biggest smartphone maker for the first time. Samsung sold a total of 24 million smartphones in the third quarter compared with Nokia’s 19.5 million. Symbian handsets lost almost 20 percentage points from a year earlier (36.3% last year) to account for 16.9 percent of smartphones as the company shifted to Microsoft Corp. Nokia accounted for 22.1% smartphone sales in the quarter that ended June.
• Research in Motion Ltd. (RIM) declined 4.4 percentage points from a year earlier to 11 percent of the smartphone market in the quarter.
• Apple was the world’s fourth-largest handset vendor, while its iOS operating system was the third-largest smartphone operating system with a 15% market share, down from 16.6% a year earlier. With a limited number of iPhone models taking on a plethora of Android-powered handsets from multiple manufacturers, Apple’s iOS actually lost market share in the worldwide smartphone market last quarter despite growing sales
• ZTE Corp.’s smartphone market share increased to 3.2% from 1.9% in the same quarter a year ago, while Research In Motion Ltd.’s (RIMM) share declined to 2.9% from 3.0%.

Gartner: Q2,2011 Mobile Phone and Smartphone Market shares

Analysts predicted that sometime around the first week of July, the Mobile phone population of the world touched 5 billion devices mark.The global mobility is at 73%.However growth in the mobile phones devices markets continues unabated as Gartner recorded 16% Y-o-Y growth in number of mobile devices sold. However, look deeper and there are a few other interesting trends.Smartphones as a sub-category is powering growth in mobile phones. While smartphones have grown at 74% Y-o-Y as against 16% Y-o-Y growth registered by Mobile phones, Smartphones have also contributed 75% to the differential volume units in mobile devices sales.

Smartphone sales continued to rise at the expense of feature phones.Google and Apple are the obvious winners in the smartphone ecosystem. The combined share of iOS and Android in the smartphone operating system market doubled to nearly 62% in the second quarter of 2011, up from just over 31% in the corresponding period of 2010. The platforms’ popularity can be tied to their usability and apps

The mobile phone category is rapidly evolving and is actually moving away from brands. Sample this: While the today number of branded OEM units remained constant at 252 million, the entire growth in the mobile phone category was powered by Local brands and white label manufacturers such as ZTE and Huawei. Others, ZTE and Huawei grew 52% by unit volumes Y-o-Y. Nokia, Samsung, LG, Motorola, Sony-Ericsson, Blackberry-all the players who defined the market pre-2008 are loosing thier markets.

Consumers in mature markets are choosing entry-level and mid range Android smartphones over feature phones, partly due to carriers’ and manufacturers’ promotions. Local ODMs are making decisive inroads into the markets basis a better value equation and prices on their handsets. Operators are also increasingly looking at the device bundle space to support value propositions to consumers. Mobile phones category is one where value-for-money is winning over the brands proposition. Do we term this as commoditization? In some sense, yes!

Gartner: Q1,2011 Mobile Phone and Smartphone Market shares

Mobile phones device sales increased 19% Y-o-Y to total 427.8 million units in Q1,2011, On the same lines, Smartphone sales registered a 85% increase and accounted for 23.6% of overall mobile sales in 2011. Smartphones registered 100.8 million unit sales in 2011. Smartphone numbers have seen a depression due to the situation in Japan and the fact that buyers haven’t invested in smartphones in Q1,2011 anticipating stronger and bigger device releases in Q2,2011.

Graphic:Gartner Mobile device market shares

Graphic:Gartner Smartphone market shares

The smartphone numbers only re-inforce the familiar rise of Android to Ubiquitous status, the marginalization of Symbian in Smartphone OSs and pressure on Nokia to defend its leadership. Symbian lost 24% share in 9 quarters, whereas Android gained 35% of its market in the same 9 quarters propelling the likes of HTC to No.7 in Devices and lifting the ASPs for Motorola, Sony Ericsson and Motorola. Android currently is in the mode of moving into the $100 price feature phones to get into the mass mode.

Nokia’s move from Symbian to Windows was announced this February and there is a 1 year or more waiting time before the Nokia Windows Phone hits the shelves. In the meantime, consumers are expected to shy away from Symbian and thus in the ensuing quarters, Symbian market shares are expected to free fall further. By the time, the Windows tie-up kicks in for Nokia, Nokia could well be around 10% market share points and combined with Windows, it would claw back to 20% but never really challenge the dominance of the Android OS, eco-system and partners.

Graphic:Market shares for device makers over the last 9 quarters

With presence across 90 countries from 186 CSPs, Apple has doubled its number of units sold Y-o-Y. It is unlikely that Apple will push past the 20% market share in Smartphones majorly, but the unique eco system of devices, applications, platforms and services would make it the most profitable mobile platform.

Graphic:Market shares of device majors

In the first quarter of 2011, RIM announced that it would transition its BlackBerry portfolio to the QNX platform in 2012. This should make its smartphones more competitive in graphics, performance and touch, and unify RIM’s tablet and smartphone user experience.
Windows devices launched at the end of 2010 failed to grow in consumer preference and CSPs continued to focus on Android. In the long term, Nokia’s support will accelerate Windows Phone’s momentum to double figures.

We aint seen nothing about Apps Stores says Gartner

$15 billion! That’s the total mobile apps pie in 2011. Apple’s App Store helped mobile application downloads soar in 2010. With Google’s Android Market pushing Apple, the growth story could become a little more steeper. The $15 billion number by Gartner, is up 190 percent from $5.2 billion in 2010, and counts both users buying applications and applications generating ad revenue on smartphones and tablet computers. Consumers will download 17.7 billion applications this year, more than doubling from the 8.2 billion downloads installed in 2010.

Gartner expects free downloads will account for 81 percent of total mobile-application-store downloads in 2011. However, users will begin paying for more applications as quality and billing systems are boosted. Gartner claims that Apple accounted for 9 out of 10 apps downloads in 2010. Even with its 10 billion downloads, a 90% share of download is a very implausible number especially because of the growth in Android and GetJar. Apple seems to have mastered the art of attracting developers, organizing content and engaging users throughout the life of the store in order to remain profitable.
In many ways, this is a thumbs down to Google’s Android Marketplace. While Apple’s App Store has set the gold standard for application stores, Android Market is struggling to reduce spammy applications and improve billing options to boost paid application sales.

Gartner also expects media tablets such as Apple’s iPad and Android-based tablets, RIM’s PlayBook and other devices to drive more downloads from consumers.

With such huge growth numbers, the mobile-application market is beyond just a passing fad as many initially expected it to be. Gartner forecasts that, by 2014, 185 billion applications will be downloaded from online stores such as Apple’s App Store, Android Market, Nokia’s Ovi Store, Research In Motion’s App World, Microsoft Marketplace and Samsung Apps. Gartner also said Apple’s App Store will remain the best-selling store through 2014, although to a lesser extent, as the Android Market and other shops gain momentum. Revenue from mobile apps on stores will grow by 1000% over the next 3 years and reach a staggering $58 billion.

However, Gartner also remarked that Applications will have to grow up and deliver a superior experience to the one that a web-based app will be able to deliver. Native apps will survive the web enhancements only when they provide a more personal and richer experience to the ‘vanilla’ experience that a web-based app will deliver.

Gartner: Q3,2010 Mobile Phone and Smartphone market shares

The Gartner release on Mobile Phone shipments for Quarter 3, 2010 puts Worldwide mobile phone sales to end users at 417 million units, a 35% growth over 308 million units in Q3,2009. Smartphone sales grew 96% YoY from 41 million units in Q3, 2009 to 80 million units in Q3,2010. Contribution of Smartphone sales to overall sales of smartphones increased from 13% in Q3, 2009 to 19.3% in Q3,2010. Smartphone sales have driven the total mobile phone numbers which otherwise have registered 25% growth YoY.

Nokia dropped 8.5% market share to end at 28.2% market share. Another interesting trend observed is the fragmentation of the market by the “Others” category chiefly comprising of white-box manufacturers who have continued to expand their reach outside of China into markets such as India, Russia, Africa and Latin America. These feature rich value for money handsets now form 33% of the total mobile handset sales i.e 1/3rd of the handsets sold globally are white box labels. This in part has been instrumental in taking the wind out of the sales of Nokia, Samsung and LG, the top 3 vendors each of whom have dropped market shares. The Other category grew 16% market share where as the top 3 lost 14.6% market share. Furthermore these numbers are expected to rise further with accelerating growth of the white box handset category.

While Nokia reported better financial figures basis better ASPs (in absence of low end products, which were supply crunched) and favorable currency exchange rates, it is doubtful if Nokia would be able to claw back in terms of market share. The Nokia Dual SIM handsets would certainly get additional sales, but it is difficult for Nokia to come back to 36% in view of steady growth of the white-labeled handset makers.

Samsung had a strong third quarter, as mobile phone sales reached 71.7 million handsets in the third quarter of 2010, up 18.2 percent from the third quarter of 2009. Samsung’s smartphone market share reached 10 percent in the third quarter of 2010. Samsung sold close to 1 million bada devices in the third quarter of 2010, and 6.6 million Android phones, making Samsung the top Android seller.

LG sold 27.5 million mobile devices in the third quarter of 2010, as its global market share dropped to 6.6 percent. LG’s strengths in stylish midtier devices are becoming less relevant in mature markets that are moving increasingly toward smartphones, and this is translating directly into market share. LG lacks a flagship smartphone; its devices tend to be affordable midtier devices that lack hardware or software innovation, priced at the low end of communication service provider

Apple really has gone from strength to strength and inspite of the Antennagate Fiasco, iPhone sales grew 91%. This was good from the Mobile phone perspective, but it was not able keep pace with the 96% growth in smartphone markets.While Apple remains focused on consumers, enterprise adoption of the iPhone and iPad has grown and will continue powering iPhone sales into 2011. With 48% of the smartphone profits, Apple isnt in a any eagerness for volumes.

RIM sales have registered a 40% growth which again pales considerably against a 96% growth in smartphones mostly powered by Androids. Blackberry has been under some pressure in the recent times and a lot depends on the Torch and the Playbook Tablet. The numbers currently donot augur a recovery for Blackberry.

Android grew at the cost of every other Mobile Phone OS in the smartphone markets. Androids grew at a whooping 1340% YOY. Even though Nokia sold more smartphones, but it pales compared to Android. Every third smartphone in the world is Symbian and every fourth smartphone in the world is a Android powered device. However, Symbian’s future is a little unclear with the exit of foundation members Samsung and Sony Ericsson. (Read more about Symbian here) This leaves even less hope for the beleaguered Symbian to hold on to its leadership which has been so severely challenged by Android.

An important event last quarter was the return of the Windows Mobile with its 7.0 version. While there are minor glitches to the OS, it is still a huge improvement over its predecessors and may herald the coming back of WinMO. (Read more here)

For the whole year 2010, Gartner expects overall device sales to show a 30% YoY increase. The impact of media tablets on mobile device sales will be tested in 2011. Gartner forecasts that media tablets (such as the Apple iPad) will reach 54.8 million units in 2011.

Android Rules Global Smart-phone Forecasts

A day after my initial post of Android’s takeover of Smartphone markets with anecdotal references from Piper Jaffray, Gartner has come up with what they think the OS markets would look like in 2014, which is well… quite close to what many of us possibly know already. I call it massification of the Android and Android’s challenge to the Symbian.

Gartner expects manufacturers such as Samsung to launch many new budget Android devices in 2H10 that will drive Android into mass market segments. Other players, such as Sony Ericsson, LG and Motorola, will follow a similar strategy. This trend should help Android become the top OS in North America by the end of 2010. Might I add to this, that the white label manufacturers from China will be the ones who will take Android to the masses in the Asian and African context.
CSPs/Telcos and mobile device manufacturers alike will need to revisit their platform strategies and balance the need to pursue platforms with the highest current demand against the need to maintain differentiation with unique devices. CSPs/Telcos will likely reduce the number of platforms they offer, to reduce their support costs and clarify their propositions to market.

Gartner predicts that by 2014, open-source platforms will continue to dominate more than 60 percent of the market for smartphones. Single-source platforms, such as Apple’s iOS and Research In Motion’s OS, will increase in unit terms, but their growth rate will be below market average and not enough to sustain share increase. Windows Phone will be relegated to sixth place behind MeeGo in Gartner’s worldwide OS ranking by 2014.

Gartner: Q2,2010 Mobile Phone and Smartphone market shares

Worldwide mobile device sales to end users totaled 325.6 million units in the second quarter of 2010, a 13.8 percent increase from the same period in 2009, according to Gartner, Inc. Smartphone sales to end users accounted for 19 percent of worldwide mobile device sales, an increase of 50.5 percent from the second quarter of 2009.The double-digit growth this quarter, were offset by lower average selling prices (ASPs). ASPs were lower than expected and margins fell.Intense competition that drove price adjustments and changes to the product mix.Manufacturers such as LG and Samsung pursued market share in a low-margin market but this approach proved risky, as shown by LG’s decline of 27.8 percent in ASP in the second quarter of 2010.

New product introductions from Apple, HTC and Motorola, along with the drop in ASPs, drove strong sales of smartphones, shortages of components, such as active matrix organic LED (AMOLED) displays impaired sales volumes of some of the more popular new smartphones.HTC made its debut in the top 10 worldwide ranking, holding the No. 8 position with 139.1 percent growth year-on-year. This reflects the popularity of its Android portfolio but also a more aggressive branding strategy compared to the same period in 2009.The sudden growth in media tablets, such as the Apple iPad, did not appear to hold back smartphone sales. This lends credibility to the thought that most tablet users still feel the need for a truly pocketable, yet highly capable, device for those situations when it’s inconvenient to carry a device with a larger form factor

A few quick notes on the players in the market:

1. Nokia loss of 2.6 percentage points reiterate the need to do more to attract developers and other ecosystem members by revising its platform strategy and improving its communications
2.Although Samsung’s sales were strong in developing markets, its shift in product mix caused an overall decline in ASP. Its aggressive strategy toward the mass market enabled it to reduce inventory in the second quarter of 2010.Samsung will also be one of the first manufacturers to bring Windows Phone 7 devices to market, in time for the fourth quarter of 2010, showing that this manufacturer continues to keep its platform options open, even as it works on its own bada platform.
3.Blackberry has stood its ground in face of increasing pressure from the Androids. Blackberry released the Torch and Blackberry OS 6.0 to remain competitive. Torch’s form factor will still appeal more to business users than to consumers and will stop many loyal BlackBerry users defecting to other platforms, but it won’t attract many new users to the brand.
4.Apple’s sales would have been higher if it had not had to face tight inventory management in preparation for the arrival of the iPhone 4 at the end of the second quarter of 2010. Apple also suffered from some supply constraint on the new device.
5.In the smartphone operating system (OS) market, Android expanded rapidly in the second quarter of 2010, overtaking Apple’s iPhone OS to become the third-most-popular OS in the world (see Table 2). In the U.S, it also overtook RIM’s OS to become the No. 1 smartphone OS in this region. A non-exclusive strategy that produces products selling across many communication service providers (CSPs), and the backing of so many device manufacturers, which are bringing more attractive devices to market at several different price points, were among the factors that yielded its growth this quarter
6.Telcos will increasingly offer more affordable tiered data plans to users. Tiered data plans will make smartphones more accessible to different market segments and help make smartphones the dominant device category in mature markets. This means that total cost of ownership will be lower, and new users will face less of a barrier to entry
7.Launches of updated operating systems will help maintain strong growth in smartphones in the second half of 2010 and spur innovation. However, market share in the OS space will consolidate around a few key OS providers that have the most support from CSPs and developers, and strong brand awareness with consumers and enterprise customers

Indian Telecom Story (Part XXXII): A snapshot of the Telecom handset markets in India.

Gartner projects a growth of 18.5% in telecoms penetration in India this year.Mobile handset sales will rise to 138.6 million units in 2010, up from 117 million last year and is expected to hit 206 million by 2014.India is the second largest mobile devices marjet in the world with a 636 million mobility numbers.However, established global device manufacturers are losing ground due to fierce competition from local and Chinese manufacturers in the low-cost segment.

According to Gartner, Price is the main criteria for purchasing mobile device. The average selling price of a mobile phone in India is $52 (~ Rs.2400) whereas, 85% of all mobiles sold in India are below $100 (Rs.4500).

These were thoughts to a few questions related to the momentum in the Indian Telecom Industrygoing forward.

What are the primary demand drivers in Indian mobile handset market?
1.In the Indian context, Every 10% of additional mobility increases the GDP by 1.5%. The growth engine primarily is the socio- economic benefits of “being connected”.
2.Reducing cost of ownership of mobile handsets
3.Wider range of services are expected to power growth by bringing communication/education/utilities and information closer to the consumer. The evolving telecom eco-system will drive services story not only in high end but also in the low and entry segments.

From and evolution perspective, has the Indian market reached a stage where the so-called upgrade demand is significant?

With a 55% mobility footprint, “Upgrade demand” is beginning to outrace the “entry demand” of mobile handsets. To that extent upgrade demand is becoming more and more significant. Having said that the “entry demand” will still be large in absolute volume terms. From a revenue and business perspective, the upgrade demand will be more lucrative given the low profit realization from entry handsets.

Among handsets, which segment (entry, mid-market or high end?) will drive growth ?
There are no absolute winner segments. Each has its own value story and each is expected to grow in significant amounts over the next 5 years horizon.
The entry segment represents 529 million Indians who are not connected yet. This is a bottom of the pyramid story and companies will need to be innovative and smart with their businesses to tap the entry markets.
The Mid end markets have seen the purchase cycles reduce with more features/benefits available at affordable prices. A large part of the earlier consumers are beginning to upgrade and hence this segment also holds a lot of promise in future.
The High end story will be propelled by Data, Services and 3G roll outs.
In terms of absolute numbers, the entry and mid end are larger than the high end.