Global Smartphone marketshares: IHS and Strategy Analytics

The battle for smartphone device supremacy is all the way headed in 2012 with Apple and Samsung slogging it out. Nokia which was the market leader till 3 quarters back has now been pushed back to 3rd spot on the market shares. While Apple managed to sell 37 million iPhones in Q4, 2011, Samsung managed to edge out Apple as the year’s top smartphone manufacturer. Samsung played to a portfolio strategy and advanced in 2011 because of its strategy of offering a complete line of smartphone products, spanning a variety of price points, features and operating systems.

The relatively small growth of Sony Ericsson and Motorola may indicate that the Android smartphone market is becoming too crowded as the various licensees compete for limited consumer mindshare and shelf space.

With global smartphone shipments nearing half a billion units in 2011, Samsung is now well positioned alongside Apple in a two-horse race at the forefront of one of the world’s largest and most valuable consumer electronics markets. Nokia’s global smartphone market share halved from 33 percent in 2010 to 16 percent in 2011. A lackluster touch-screen smartphone portfolio and a limited presence in the huge United States market caused Nokia’s shrinkage last year. Nokia’s partnership with Microsoft will be very much in focus during 2012, and the industry will be watching closely to see how swiftly the two companies can expand in the high-value 4G LTE market that is rapidly emerging across the United States, Japan and elsewhere. The silver lining for Nokia was that a million Lumia’s have been shipped in 2 months since launch and Nokia has in over a decade has found some traction with US Operators with the Lumia.

Android’s patent quagmire (Part II)

Continued from an earlier post

Patents: How it could help (Protect) and injure (the not so ready)

The theory of protection because of Collateral damage
A lot of times just the sheer volume of patents [is] sufficient to deter someone from filing suit against you. When you have the potential to get a court order that will exclude a competitor’s product from the marketplace, that is a very powerful thing. Apple and Microsoft both had lots of patents that could potentially do that with respect to the Android products. And unless and until Google is in a position where they have patents to raise those same threats, there’s no reason for Apple and Microsoft to back off. They’re either going to get the products excluded or they’re going to get damages and/or royalties going forward.

Patent as an instrument of Doom
Even more threatening, perhaps, is the specter of rulings preventing Android phones and tablets from either being sold or using certain types of functionality. Apple and Samsung and then Apple and HIC have been at war on Patents with Apple insisting import ban on Samsung on Samsung smartphones and Tablet in certain states.

Making Android uncompetitive
Also what could hurt Google is the fact that the patent holders may choose to impose unreasonable fees for the patents in which case the open source zero cost Android could become uncompetitive in the markets. As long as Android lacks proper patent protection, Microsoft can demand licensing fees from hardware vendors. With a stronger patent portfolio, Google and partners could negotiate cross-licensing deals that don’t require payments. However, the point of these lawsuits is to raise the price of Android so that it is no longer able to compete. If Google and partners have to pay licensing fees, or change functionality due to infringement findings, “then all of a sudden Android is not as strong a competitor.”

Google/Android left its ranks uncovered in its charge for marketshares

Google’s rush into the smartphone market as an outsider “seeking to get to the front ranks” very quickly afforded it little time to build a defensive portfolio or negotiate cross-licensing deals to head off lawsuits. The key for Android will likely be in Motorola’s patent portfolio, when and if Google officially takes ownership of the company. None of this will be positive for Android. If enough of these lawsuits get through in which Android is found to infringe some of these patents, the question is what could Android do. If they could not design around the patents that could be a problem. Analysts bet that Google is hoping that they can design around all these patents, but certainly the infringement cases are a concern.

Apple and Microsoft share a similar approach in patenting technology quickly and frequently, a more common strategy for commercial software than for open source software such as Android.But the use of open source software and a smart, defensive patent strategy are not mutually exclusive. Red Hat, in the enterprise server market, has shown that an open source company can publicly oppose the software patent system while building up a portfolio of its own, offering customers indemnification against lawsuits, settling with patent trolls when a fight wouldn’t be worthwhile, and battling aggressively in other lawsuits when core issues are at stake.

Q3, 2011 State of Indian Mobile Phone and Smartphone markets: IDC

1. Indian Mobile markets on a growth curve. Year-on-year, shipment growth of 13.8%.
2. Q3, 2011 Indian mobile phone market grew by 12% in units shipped, over the previous quarter (Q2,2011), to clock 47.07 million units.
3. Nokia had 31.8% of the mobile phones shipment share in the Q3, 2011 followed by Samsung at 17.5%
4. Dual-SIM handset shipments notably with a sequential growth of 25.2% over the previous quarter
5. India Smartphones shipments for Q3, 2011 show an impressive growth of 21.4% over previous quarter Q2,2011 & 51.5% year-on-year
6. Android on a roll in India: Android saw a growth of 90% over the previous quarter
7. Android overtook Symbian to emerge as the top Smartphone platform in India for the first time.Garners 42.4% of the Smartphone market
8. In the Smartphone segment, #Nokia led with ODM shipment share with 35.3%, but Samsung came closer at 26%.
9. Apple iOS consolidates in Indian markets, with a 3.09% share of the Smartphone market, compared to 2.6% in Q2 2011
10. Smartphone contribution to the mobile phone shipment in India increases to 6.5% in Q3, 2011 from 5.6% in Q2, 2010

Impact Analysis: Google buys out Moto (Part III- Impact on the present day partners and eco-system)

Read Part I and Part II

Google is pulling off an acquisition that is larger than any that Microsoft, Apple, or any of their other main competitors ever have. The Moto acquisition is either the smartest thing Google has ever done, or the dumbest. A $12.5 billion deal in cash, with a $2.5 billion collapse clause? There is no in-between

In a series of blogs over the next few days, I would be analyzing the impact of the Google-Moto deal in terms of:
1. Patents Leverage
2. Platform/Hardware Competence
3. Eco-system view/ Impact on OEM partners
4. Impact on Telcos

Eco-system view/ Impact on OEM partners

Google says they will continue to run Motorola as a separate business. Again, given its size, that’s about all they can do. Google also says that this will not change their commitment to Android being “open” and to their other OEM partners. Another compelling argument in favour of the Google-Moto deal is that, this is a strategic buy for Google in order to exert more control over the Android eco-system. Google says they will continue to run Motorola as a separate business. Again, given its size, that’s about all they can do. Google also says that this will not change their commitment to Android being “open” and to their other OEM partners. Many including myself, however, believe that it will not be very practical and possible to keep the Android “open” and as impartial given the $12.5 investment in Moto. Beneath all the sweet talk with the other partners, all the larger partners of the eco-system are disingenuous with their positive statements and sentiments. Carrots rarely work in the “open” Android eco-system. With Motorola in their back pocket, Google now has another stick to use when the carrots don’t work: Control on the Google device. With Moto, Google has the capability and competence in devices, which in turn is pretty handy to apply to pressure the other OEMs to force them to do better work.

What this means for the other significant partners of the Android eco-system: Samsung, Sony-Ericsson and HTC. There are two points on that
1. The OEMs were not dumb not to have anticipated this move. Thus Samsung moved into making the Bada.
2. The World of OEMs would now split into Loyalists (Moto for Android, Nokia for Microsoft) and the multi-platform vendors (Samsung, HTC, SE). This move could drive some of those OEMs to give a second look at Windows Phone as Android alternatives. Microsoft will have to deliver a truly competitive consumer mobile operating system to take advantage of this opportunity and chip away a few of the big OEMs from the Android camp.

With the loyalists (Samsung, SE and HTC) now moving into frienemy space, Android may loose some momentum in the numbers that it kept on pilling for sometime now. The decider or qualifier for Android’s success will be the pace of Android’s extension across multiple other platforms, eco-systems and device categories. For instance, Google TV will necessarily have to fire to keep the Android registers ringing… V2V systems will be another decider in terms of number of Android activations. The trade-off that Android will have is its capability to extend across platforms versus the rate at which its partners desert it.

Android accelerating on Smartphone space

Canalys has stated the obvious in terms of smartphone platform market shares: Android rules and has captured 48% of the smartphone market in Q2 of 2011. Smartphone adoption continues to grow rapidly across the world, reaching a total of 107.7 million units shipped in Q2 of 2011, a 73% year-on-year growth.Android was the biggest driver of smartphone shipments in Q2, as Android-based smartphone shipments were up 379% year-over-year, coming in at 51.9 million total units shipped.Successful Android-based products from vendors such as Samsung, HTC, LG, Motorola, Sony Ericsson, ZTE and Huawei, as a catalyst for the platform’s growth. As written about earlier Apple has over-shot Apple and is the No.2 smartphone platform. Android’s growth has powered Samsung as the No.2 smartphone maker globally.

Android was the number one platform in 35 of the 56 countries Canalys tracks, resulting in a market share of 48 percent. Nokia’s leadership position has proved most resilient in key emerging markets, and it still leads in the BRIC countries: Brazil, Russia, India and China. The problem for Nokia is that demand for its Symbian-based smart phones has dissipated very rapidly, particularly in operator-led markets, such as Western Europe, where it’s been strong in the past. It badly needs the first of its Windows Phone devices to launch as soon as possible to arrest a decline and, hopefully, silence its critics.Even while Nokia-WP tie-up was announced in February, the first of these devices will be launched only towards end of 2011.Nokia is set to have several more difficult quarters before a possible reversal of fortunes.

RIM had a challenging quarter in North America, with its market share slipping to 12%, down from 33% a year ago. However, Blackberry continues to see significant interest and uptake of its devices, for example in Indonesia and South Africa where it is the leading smart phone vendor. Nonetheless, it must continue to innovative and recapture lost momentum. It’s critical that the next-generation BlackBerry OS 7-based products launch ahead of the upcoming holiday season to compete in the market.

Apple versus Samsung: The real deal is not in the devices, but the war is between eco-systems

Smartphone are not only about Devices – It entails software, games, maps, LBS, navigation, applications and APNS, user interfaces, back –end integration with services, developers, content and aggregators, eco-systems and partnerships with other constituents of eco-system. What goes into the smartphone rivalry are ecosystems against one another trying to engage and enrich consumer experiences around media that is carried through by the device. As such the Samsung and Apple rivalry is actually the tipping point of a much larger war between Apple and Android. There are some patent-led issues around the device which is what Apple and Samsung are fighting about. But the bigger context here is the battle royale between Android, Apple and Microsoft (Hopefully in an year’s time).

Apple versus Samsung, thus in real terms, is Apple versus Android. Samsung is the largest contributor to Android smartphone volumes globally and a lot of cutting edge Android services have been featured in Samsung smartphones. Android also has HTC, Motorola among its other significant device partners. Nokia is yet to perfect the Smartphone domian, not so much in terms of devices- rather in terms of the eco-system, technology, partners and the likes. So the focus remains on getting that right. That is where the partnership with Microsoft comes in. Microsoft with its own competency in the online digital space is the third part of this very unique and interesting competition that is now maturing. While Microsoft has joined this late, but Nokia’s inherent strengths as a device manufacturer and distribution is what Microsoft WP (Windows Phone) could ride on to get at par with Apple and Android. Nokia is presently making the migration from proprietary Symbian to WP and the fall currently is because while Symbian is slipping, WP has not kicked in yet.

All these three majors: Apple, Android and Microsoft come with different competencies. Apple for instance is the innovators brand but is very stringent in terms of control on its innovation and integration across its devices. This adds a great deal of exclusivity to the Apple Brand. Android on the other hand is “open” and encourages wide diversity of partnerships across its platform. Android obviously has its competence in Google’s presence across all web based platforms and huge repertoire of web based services. Microsoft is the legacy company which is trying to re-invent itself in a swanky new avatar that is more relevant to the mobile generation. The market dynamics will depend upon factors such as experience and engagement with the users, range of services offered and the time to market for innovations. The objective is to host the user life and lifestyles on platforms in a seamless manner creating a stickiness and monetization ability for the platforms. Currently the Android platform has made major inroads in this segment. However, it is Apple who is the most successful in terms of monetizing its user base and that is what really matters. Microsoft hasn’t really started and one will have to wait for the Nokia-WP partnership to kick in, before we place our bets on Microsoft.

Smartphone device market shares and profit shares

Strategy Analytics in its AMJ (Q2) quarter has declared Apple to the king of the smartphone crown. Apple cornered 18% of the 110 million unit smartphone market which itself registered a 76% growth Y-o-Y.In Q1, 2011, Apple had become the world’s largest phone vendor in terms of revenue. Samsung scored a close no.2 even when it was expected by analysts to become the no.1 vendor. Samsung’s growth story has seen impressive success, and its shipments grew a huge 520 percent annually from 3.1 million smartphones in the year ago quarter.

The Apple wonder doesnot just stop there.. the 18% smartphone volume market share translates into 66% profit share of the mobile phones.(Base calculated is 365 million as per IDC numbers) To put it other way around, Apple which contributes 5.5% of mobile phones by volumes, takes a disproportionate 66% of the mobile phone industry profits. This is up against from 57% share of profits same time last year. This Q2,2011 quarter saw a slight sequential decline in overall profit for the mobile phones, but Nokia, Motorola, Sony-Ericsson and LG did not manage a profit from selling phones. Apple’s share is up from 57% in Q1 and 50% in Q3 and Q4. Samsung’s share went to 15%, though that’s not a peak level historically. In Q1 2008 the company was at 21%. RIM was at 11%, a level in a range that has been unchanged for three years. Finally, HTC captured 7.4%, a new high and an increase from 6% since last quarter.

Smartphones have become the primary driver of mobile phone vendor profitability, giving Apple a significant edge over most of the competition with its smartphone-only offerings.

Apple’s ability to out-innovate competition has been a key to its domination of the profit shares. Come October and one expects that iPhone5 and a low cost iPhone would add another dimension to Apple’s ability not only to exact high profit shares but also maintain its lead in the device volume shares.

Data courtesy: Strategy Analytics, IDC, Asymco

Apple dominates profits with 57% profit share in Mobiles Globally

I had first blogged about the wealth, margins and profit distribution between smartphone makers 9 months back. Read Global Smartphone markets: Of disruptive competition and wealth distribution.

Asymco has come out with another sequential set of figures that focus on share of margins and profits for 8 of the largest smartphone vendors in the world.

1. The ever familiar change of guard in smartphones is a cliche.With Nokia Loosing out on a YoY and Sequential growth and high rises from the Apple and the Androids.

2. The surprise kid here is RIM, which is positive on 3 yr CAGR, Y-O-Y and Sequential. This is more to do with Blackberry’s growing markets in Asia mostly. On its home turf, BB has been taking the pounding from both Apple and Android.

3. With 19% smartphone (Canalys) Market share, and 5% Mobiles (IDC) market share, Apple takes a disproportionate 45% of the industry profits. Blackberry (25% of Industry Margins), HTC (15%), Samsung (12%) and Nokia (8%) complete the list.

The mobile industry has historically been unforgiving. Companies that fall into unprofitability tend to stay there or exit/merge. This has claimed many: Ericsson, Siemens, Alcatel, BenQ, Palm, Sony, Toshiba, Handspring, NEC, Hitachi, Casio. LG, Moto and Sony Ericsson are all in the same precarious situation. We’ll have to watch carefully whether a recovery is possible for any of them and whether Nokia will reach the same rocky position.

Looking at operating profit shares; While RIM, Samsung and HTC have maintained profit share, between 2007 and now, profit share has mostly shifted from Nokia to Apple. Nokia has declined from 47% in 2007 and Apple has come from 0% to 57% of Industry profits.

Not that it surprise too many: It’s become routine to see Apple at the top of the list of profit earners from mobile phones.

Google Nexus S underwhelms!

An year back, Google announced its plans to work on a device with the intent to provide the “pure” pristine Android experience to users. That was Nexus One. The pure, pristine bit is mainly due to the fact that other manufacturers have a way of tinkering with Android to build in their own levels of differentiation into the product which is very understandable (Click here for more details). Inspite of the initial failure of Nexus One. Google’s intent clearly remains unchanged.

Google yesterday unveiled the Samsung manufactured Google S. Blogs, Articles, Reports and You Tube is full of articles reporting the Nexus S. The Nexus S is positioned as a pure Google smartphone. For everything else, the physical specs are close to Samsung Galaxy S, but this is the flagship Android 2.3 (Gingerbread). The Nexus S supports NFC signaling Google’s move into Contactless solutions (This would be the big Mobile Push into Payment solutions).

However, in my opinion, the Nexus S in terms of device is extremely underwhelming. This may be because of the multiple version releases of the Android coupled with the Android army effect. The changes and developments with every other Android becomes that much more “incremental” as against an iPhone which because of its 1 device per year approach has been able to bring forth “innovations” which are far more discontinuous and have the “Ah” effect.

Coming back to Google Nexus S, the look is fairly a cross between every other Samsung Android and the Nexus One. If there was one lesson that Gogle could have taken from the Milestone success, it was the side sliding keypads, which serve as a differentiator if not anything much beyond that. Gingerbread may be fast, very fast, but Google could possibly worked on the 1GHz Microprocessor and extended a bit on that. One would ideally have expected a Dual Core Tegra microprocessor, but Tegra’s release is still a month beyond. But I would still expect a 1.4GHz device. The other small addition that would have made a significant lot of difference to the Nexus S would have been a Radio and a TV out. 2 Cameras are passé and a 5MP Camera is hardly anything to write home about. One important miss in this device is the lack of 4G. With HTC EVO 4G establishing the benchmark, the minimum expectation with a Nexus S would have been a 4G! The looks are also very commonplace and plastic. Not impressed there. Sealing the list is a Internal 16GB memory capacity as against a T-Flash Card slot to allow the user to load his kind and requirements.

Bottomline: Not to make a Mistake, the Google Nexus S is a great device by itself with an impressive feature set coupled with the Gingerbread and NFC. But that aint enough! The way it looks, Samsung did a pretty smart job of cloning and crossing their existing products with the Google Nexus S. There isn’t anything beyond here.

A couple of videos detailing the product story of Nexus S (Not very convincing) and the Nexus S in its glory are featured here.

Q3, 2010: Global Mobile Phone Market Shares

Global mobile phone shipments rose 14.6 million to 340.5 million units according to IDC. Strategy Analytics pegged them lower, at 327 million units, noting that the rate of growth slowed from the first half as component (Touchscreens, application processors and cameras) shortages trimmed sales. Many component manufacturers reduced production output during the recession of 2009 and they are struggling, or even unwilling, to restore the capacity in the upturn of 2010.

Nokia is struggling to hold on to the top slot and is relentless loosing volumes and shares to local OEMs in Asia and is getting battered by the likes of Samsung, HTC, Apple and Android-enabled systems in the smartphone segment.

Apple gatecrashed into the top 5 taking out Sony Ericsson from the list. Whats also interesting is that the “Others” segment is also gaining momentum and there’s a lot of Android powering that.

My Take: Nokia will still loose share and we will see a few more names in the list (HTC anyone?)