Samsung shipped about 50 million smartphones last quarter — about double the number Apple sold and, according to IDC, the largest number of units ever shipped by a handset vendor in a single quarter. However, if Raymond James data is any indicator, Samsung’s 2:1 lead over Apple is a statistic in vain. Apple — thanks to the higher gross margins of the iPhone and iPad — far outshines its rivals in both revenue and operating profits.
Having generated only about 6 percent of the industry’s smartphones and tablets in the second quarter, Apple captured about 43 percent of the industry’s revenue and an astonishing 77 percent of the industry’s operating profits. Thats about 2.65 times that of Samsung’s. Interestingly enough, Apple and Samsung account for 96% of the global Mobile computings EBITs. Now you know why the rest of them are such a deep shade of Red! Apple’s statistic is of note especially in the light of the fact that Q2 in generally Apple’s weakest quarter and Samsung had the Galaxy SIII launch in Q2.
Ultimately, profits are the feedstock of innovation; and, innovation drives profit. Until Samsung starts generating more profits than Apple, we would not be overly concerned with who has the unit share lead. Remember, HP and Dell still sell a lot more PCs than Apple sells Macs, but does it matter. Probably not to Apple.
The era of mobile computing, catalyzed by Apple and Google, is driving among the largest shifts in consumer behavior over the last forty years. Impressively, its rate of adoption is outpacing both the PC revolution of the 1980s and the Internet Boom of the 1990s. Since 2007, more than 500 million iOS and Android smartphones and tablets have been activated. By the end of 2012, Flurry estimates that the cumulative number of iOS and Android devices activated will surge past 1 billion. According to IDC, over 800 million PCs were sold between 1981 and 2000, making the rate of iOS and Android smart device adoption more than four times faster than that of personal computers. While the Internet began its commercial ramp in 1996, iOS and Android devices have seen double the number of device activations during its first five years compared to the number of Internet users reached during its first five years (Internet 1996 – 2001 vs. Smart devices 2007 – 2012).
On top of this massively growing iOS and Android device installed base, roughly 40 billion applications have already been downloaded from the App Store and Android Market. The average smartphone user, is beginning to spend more time in mobile applications than they do browsing the web.
This chart by Flurry compares how daily interactive consumption has changed over the last 18 months between the web (both desktop and mobile web) and mobile native apps. Ever since June 2011, time spent in mobile applications has grown. Smartphone and tablet users now spend over an hour and half of their day using applications. Meanwhile, average time spent on the web has shrunk, from 74 minutes to 72 minutes. Users seem to be substituting websites for applications, which may be more convenient to access throughout the day. People are now spending less time on the traditional web than they did during an year ago. This drop appears to be driven largely by a decrease in time spent on Facebook from the traditional web. In June 2011, the average Facebook user spent over 33 minutes on average per day on the website. Now, that number is below 24 minutes. Time spent on the web without Facebook has grown at a modest rate of 2% between June 2011 and December 2011.
Even while, the growth in time spent in mobile applications is slowing – from above 23% between December 2010 and June 2011 this year to a little over 15% from June 2011 to December 2011. The growth is predominately being driven by an increase in the number of sessions, as opposed to longer session lengths. Consumers are using their apps more frequently.
Facebook is the most used app on Android among 14 – 44 year olds, surpassing usage of Google’s own native, pre-installed apps. Additionally, Facebook Messenger became the top downloaded app, at least one time during 2011, across more than 100 different App Store countries. In the U.S., the largest App Store market, Facebook Messenger ranked as the top overall app across all other apps across all categories.
As the mobility revolution matures and smartphones start penetrating lower price brackets, Microprocessor chip makers such as Qualcomm and NVIDIA are becoming the superpowers of computing devices. According to a recent release by NVIDIA, revenue from NVIDIA’s mobile chip unit projected to mushroom tenfold by 2015, to a whopping $20 billion. Mobile processing sector will see very robust growth in the next 5 year horizon. It is estimated that there are about 100 million devices that will need chips this year — a figure that could soon rise to one billion, on the strength of more affordable smartphones, efficient ARM processors and the rise of ultra-thin notebooks. Between 2011-15, Gartner expects 4 billion smartphones being sold. Personally the 4bn number for smartphones appears to be a stretch given that it took Telecom industry a good decade and more to have 4bn subscribers on mobile networks. However, there are very many factors including price, better networks and mainstreaming of Internet that should benefit the massification of smartphones and tablets.
A few pointers in the general direction of microprocessors and computing given below:
1. Even while the demand for higher computing power increases and we would see more and more of dual and quad core processors, demand for graphics performance is also slated to increase.
2. Cloud based, Version and Platform independent technologies such as Microsoft’s Silverlight will play also feature in major roles in future cloud-based developments.
3. What this means for device manufacturers and content hosts is that the companies without a solid mobile strategy are “in deep turd.”
4. The only spanner in the wheel is that the ongoing patent wars between tablet and smartphone manufacturers may be a dampener to the growth projections for mobile computing even while immediate impact of the patent wars on mobile computing eco-system will not be too high .