Who will win in the Smartphones business?
The smartphones has been the fastest growing category within the mobile phone space for the last couple of years. In 2009, a total of 172 million smartphones were sold which was a growth of 24% over 2008 (source: Gartner) whereas the mobile phone category was more or less flat in 2009 in the backdrop of severe recession. Analysts expect over 240 million Smartphones to be sold in 2010.
What is a Smartphone?
Unfortunately, there is no one universal definition of Smartphones. Some analysts have defined it as phones using open operating system which means that Symbian, Windows and Android based phones qualify as Smartphones but then what about Apple iPhone and RIM that run on proprietary operating system? Some define it as phone that gives PC like functionality and for some, it is the one with most advanced mobile phone features and hence the feature set of smartphones keep changing. A few industry analysts define it at mobile phones running on operating system with standardized interface and that provide easy access to developers for application development.
Whatever is the definition, it is commonly accepted that Smartphones have strong email clients, third party applications of some kind, QWERTY hardware or software keyboard support, high-speed internet, powerful calendar, contact and organizational features and support for powerful processors and touch screens. The operating systems that can support the above feature requirements are Symbian, Windows, Android, iPhone OS, RIM, Maemo (Meego going forward with Maemo’s merger with Moblin) and Palm OS.
Why does everybody want to win the Smartphone battle?
Smartphones are not even 10% of the total mobile phones but still all the handset players want to win this battle for the following reasons:
- High ASP - The average selling price of a smart phone is almost 3 times that of a non-smartphone which means it has a higher impact on not only the value share but also on the profitability. Apple and RIM though have just 3% market share in the mobile devices but have over 50% share in industry profits which reflects the high profitability of the smartphones.
- Thought leadership - Success in the smartphone business gives the device vendor the status of “Thought Leadership”. Any vendor having the “Though Leadership” benefits in the non-smartphone devices as well as the consumers want to buy the devices from the leading brands (in terms of “Thought Leadership”) even if they are not buying the devices that gave the vendor this status. This status is like the quality assurance certificate.
- Future of mobile phones – The smartphone market is expected to expand significantly in future to almost 40% of the total device market by 2013 which means that no vendor can afford to ignore this market.
- Operators prefer Smartphones – The increasing popularity of iPhones has led to increased data usage on the mobile. This has enabled the carriers to maintain their ARPUs despite fall in voice tariffs. The data usage on smartphones is almost 3 times higher than a normal phone. 55% of iPhone users use mobile social networking and 80% use it for surfing web daily. The high data usage has led to the situation of data scarcity from data abundance and carriers love this situation.
Who will win the battle?
Symbian has been the market leader in the Smartphone segment of the market with 47% market share in 2009. However, Symbian is facing a stiff challenge from iPhone OS, Android and RIM OS and has lost market share in the recent few quarters. The figure alongside gives Smartphone market shares in 2009. Android though has only 3.9% market share in 2009 but is making the most noise in the smartphone segment.
Each operating system has its own positives and negatives and before we attempt to answer the question that who is going to win the battle, it is important to evaluate the pros and cons of top operating systems:
This operating system has been developed by Google with the aim of not only to get a foothold in the lucrative mobile industry but also to change the way the mobile owners consume data on the net.
Pros – Open, free and supporting many devices. Great experience of Google’s web properties on the mobile like messaging
Cons- Fear of excessive fragmentation due to its open architecture and is also more susceptible to security threats
This operating system has been developed by Apple and is a closed, proprietary operating system and is only for Apple devices, iPhone and iPod Touch. iPhones have been so popular that they are now being blamed for the increasing data congestion on the networks.
Pros - Single unified platform and its biggest asset is the application store
Cons- Proprietary and hence its dependence on one vendor is a risk. Application submission process is a cumbersome and Apple keeps a tight control on the 3rd party applications.
Blackberry OS is owned by Research in Motion (RIM) and is a proprietary operating system.
Pros - Strong in enterprise mobility segment and has created a perception amongst IT managers of being a much secured OS. Strong messaging service
Cons- Proprietary and hence its dependence on one vendor is a risk. Aged operating system and requires the special BES server. Lack of focus on consumer segment in the past limits the lure to potential developers. This operating system also suffers from lack of optimization on touchscreen devices and a bad web browser.
Symbian is owned by Nokia and used by many other vendors like Samsung, LG and Sony Ericsson. It is market leader but is seen as an archaic operating system. However, it is still holding out with promise to launch Symbian 3 and 4 by the end of the year.
Pros - Largest installed base and hence the economies of scale. Backing of Nokia, the market leader helps Symbian maintain its market leadership.
Cons- Aged OS and not really optimized for touchscreen devices. It is virtually absent in the North American markets and is facing huge competition from Android, iPhone OS and Blackberry OS. Dependence on Nokia is a risk as many of the other vendors are shifting to Android.
This operating system has been developed by Microsoft and promises to mirror the PC experience on the smartphone. After continuous decline in market share in the past many quarters, Microsoft recently announced Windows Mobile Version 7 which has got rave reviews from analysts and handset vendors.
Pros - Backing of Microsoft which has virtual monopoly on personal computers. Microsoft’s ability to provide resources and its possible integration with its other hot properties like X-Box, Zune can ignite developer interest in this operating system.
Cons- Past failures to haunt version 7. Heavy operating system and hence requires higher hardware specifications. Last version had a bad user interface (UI) and web browser. I hope the new version has targeted the UI for improvement
There are many other operating systems like Maemo, LiMo, Samsung’s Bada that are trying to get a foothold in the lucrative smartphone business but only time will tell if they can manage to break into the top five operating systems.
I am not going to pass a verdict on which operating system will win but I will publish the results of the poll that I conducted on this site and no prizes for guessing the winner (refer to the image on the left). The winner was Android with over 40% of votes. In the backdrop of its popularity and the confidence that the ecosystem players are putting in Android, it is not at all surprising that it is going to be the fastest growing operating system for next five years. In the recently concluded Mobile World Congress, Android managed to get the highest number of handset announcements. Though even iPhone OS is a wonderful operating system but its proprietary nature would limit its expansion.
In your opinion, which operating system and vendor is likely to win in the smartphone space? Please do comment and cast your vote.