Last quarter (Q2’13) was a landmark for the mobile industry as for the first time smartphone sales outstripped the sales of feature phones. This is a significant milestone for not only the handset vendors but also for other players like operators, VAS players, etc. It is a proven fact that the users consume more services and data on smartphones and hence higher smartphone sales means higher revenues to carriers and VAS players. However, smartphones outpacing feature phones is not the only important trend from Q2’13 mobile phone sales data. There are other trends that if uncovered can have huge learning for the handset vendors. A detailed analysis of the mobile phone market in 2Q13 is as follows:
1. Smartphone outpace dumb phones in sales
In the second quarter of 2013, a total of 435 M handsets were sold as per Gartner. Smartphones accounted for 225 M out of those 435 M which meant that for the first time the smartphone sales exceed the feature phone sales (refer chart on the right). The global market for mobile phones has remained largely unchanged for last three years and vendors are relying on feature phone to smartphone migration for higher revenues. Most of the feature phones are sold in Asia and Africa and there also, it is expected that the market for the dumb phones would vanish in next 3 years. This shift would have serious repercussions for players who have a large feature phone business like the Chinese vendors. As a result a lot of players are shifting focus to smartphones and this is evident in presence of new and lesser known brands in the Global top 10 smartphone list (refer to the last chart in the article). Many of these players have managed to beat the better known brands like Sony, HTC and Blackberry.
2. Android continues its dream run
A look at the smartphone sales by operating system (refer to chart on the left) shows the strength Android continues to gain at expense of other operating systems. In fact, barring Microsoft Windows Phone, all the other OS have lost share to Android. Blackberry is in real danger of falling further from the current 2.7% which means that Microsoft is now clearly the 3rd ecosystem. iOS lost share significantly as it is single vendor OS and Microsoft face the same problem where no other vendor apart from Nokia is committed to it.
3. Samsung has a lot to worry
Today, Samsung is seemingly doing very well and there is nothing that can stop it. However, its over reliance on Android and its loss of share within the Android ecosystem must be keeping the Samsung bosses awake at night. Samsung has lost 5.3% share within Android as evident from the chart on the left. Samsung’s loss has resulted in strengthening of smaller players (categorized as “Others”) which are primarily playing in the Chinese market. Even Strategy Analytics estimates that Samsung’s share of Android has come down from 46% in Q1’12 to 40% in Q2’13.
Google is not interested in any one dominant player and this situation suits it. It would do anything to undermine Samsung and would want to follow the PC strategy of Microsoft where there were multiple vendors each having less than 20% share but the Windows operating system had over 90% share of business. Samsung knows its over dependence on Android and hence is open to licensing any operating system but its problem is that apart from Android, no other operating system is in a position to give it scale that fit its ambition.
In the Android ecosystem, LG is a distant second with 6.5% share. There are hundreds of handset vendors that are leveraging off-the-shelf hardware platforms from Qualcomm and Mediatek and delivering customized Android handsets to Asia and Africa, with as small as a 10-people production team and own distribution networks. These handset makers are able to supply the cheapest possible smartphones, customize for every corner of the developing world. China with over 250 M smartphone market is powering the micro vendors.
4. The market is cruel. Android does not guarantee success!!!
The table on the right (top 10 handset vendor) is very interesting. It shows that apart from Samsung and Apple, all the other places are up for grabs. The number 3 to number 10 players have changed multiple times in last 18 months. The consumers have been brutal and kicked out vendors like RIM/Blackberry and Motorola out of top 10 for failing to innovate. Small players like Coolpad & Lenovo have made it to the top 10 list though both of them were notably absent in the list just a year back. HTC has been moving in and out of the list though it was once a leader in Android ecosystem and the second largest player till just a year back. This teaches us an important lesson – Android is not a guarantee to success, innovation is the only way of ensuring place among the top smartphone vendors.
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Mohit is a telecom professional with rich experience over 15 years. His expertise is in the area of strategy and planning and his work experience includes stints with two of Big 5 consulting organizations, a telecom operator and a handset vendor. Mohit can be reached at firstname.lastname@example.org