The first Bloodbath Year of smartphones, 2010, was very bloody indeed. Some of the casualties were very clear to see, from Palm and Microsoft's Kin phone, to the CEOs of Nokia and LG. Other effects were less clear, like the early death but then resurrection of the Nexus line of smartphones from Google or the back-and-forth attempts to return to the global smartphone stage by Sharp. And the biggest casualty of 2010 was not revealed until February 11, 2011 - the end of Symbian. Now lets take a preview of what we can expect out of Bloodbath Two: Electric Boogaloo..
The total smartphone industry grew by 72% last year, reaching 298 million smartphones sold for the full year. By Q4, more smartphones were sold than all personal computers of any kind including desktops, laptops, netbooks and tablet PCs like the iPad. This year I am modelling the smartphone industry to grow to 500 million devices shipped (67% growth rate from last year). We will monitor how that starts to form and I will update that forecast as we get early numbers coming in. Remember that last year we analysts upgraded our smartphones total year forecast several times during the year as smarpthones kept selling more than we had expected. And once again the warning: this is a long article (about 9,000 words) so get yourself a big cup of coffee before you start reading..
NOKIA WAITS FOR CAVALRY TO ARRIVE
So we start with the world's biggest smartphone maker. Yes, even after new CEO Stephen Elop announced that Symbian, the world's biggest-selling smarpthone OS platform would be ended, and its announced replacement, MeeGo would in fact not be the future of Nokia smarpthones, and that Nokia would switch to the smallest smartphone OS platform, Microsoft's Phone Seven, this does not kill Nokia's smartphones for the year. Nokia is committed to bringing another 150 million Symbian based smartphones to the market (over the next two years). Do bear in mind that the world's second biggest smartphone maker of 2010, RIM, sold only 48 million Blackberries last year (Apple sold 47.5 million iPhones), and Nokia still now commits to more than three times that amount of more Symbian based smartphones - so this is not going to be a quick end to Symbian.
The end of Symbian was to be expected, even as it happens quite rapidly. The stunning part in Stepen Elop's announcement was that Nokia would abandon MeeGo the newest smarpthone OS that had been developed with 'strategic partner' Intel (who, incidentially were only informed of this the night before) and rather Nokia would adopt Microsoft's new OS, Phone 7. Nonetheless, Nokia also commits to one MeeGo device this year as well. So suddenly Nokia which last year supported one smartphone OS, has to support three this year, in the best case scenario, that Nokia manages to release a Phone 7 based smartphone before the end of the year. So if you thought Nokia was a bit confused last year, and spending a lot of its resources (generating costs) in the coordination of a bloated bureaucracy, expect much more of that for 2011.
So Nokia now is in a defensive position, like the wagon train in the Wild West, Nokia has circled the wagons and the pilgrims inside are shooting at the attackers on the outside, and are hoping that the cavalry will come and rescue them soon. The cavalry for Nokia is the new set of smartphones designed for Microsoft Phone 7. Nokia has already announced they will not release phones on the current Phone 7 version, but they will wait for the next one, which is scheduled for October 2011 launch by Microsoft. Then we will have a good little parlor game of guessing the dates. How much will Microsoft's updated OS be delayed, and then when will Nokia announce its first Microsoft handsets, and then, how much will those again be delayed. If nothing is delayed, we may see the first Nokia Microsoft smartphones by Q4 ie just in time for Christmas sales. I would think its far more likely the first Microsoft Nokia smartphones will not appear until well into 2012. (And a small part of me says the delays will pile upon delays, and the first Microkia Nokisoft phone will ship on the last days of Q2 of 2012. That would be a major disaster.)
Nokia's smartphone market share will crash this year, inevitably. I have modelled Nokia to hit the level of 12% by Q4 at the end of year before the recovery can start. A similar analysis by Horace Dediu at the Asymco blog had Nokia falling even further but his analysis goes into 2012. I think its fairly fair to expect Nokia to have a disasterous year in the smartphones battles, and that some of Nokia's major rivals will have a field day of capturing long-time-loyal Nokia customers, especially Apple, RIM, Samsung, HTC and SonyEricsson. Note that for considerations 'after the cavalry has arrived' the relevant point is not the full year up to that point, it will be the last quarter before Microsoft Nokia phones. So while this blog article is about the full year of the Electric Boogaloo, for Nokia the only issue is when will the Cavalry arrive. And all signs point to a situation that by Q4, Nokia will have fallen from first place to behind Apple, behind RIM and behind Samsung for sure, and running neck-to-neck with HTC for who gets to be in fourth place.
For the full year, I am projecting Nokia in the 13%-16% range but remember, the Q4 number is the relevant one for Nokia analysis into the new bold world of 2012. All of 2011 will be a bloodletting for Nokia and the full-year numbers will be artificially inflated counting long-lost customers from early in the year. The thing to watch for Nokia is when the first Microsoft phones will ship. Nothing else matters to Nokia now. If the first Microsoft phones ship by Q4, things are doing quite well, the further they slip into 2012, the worse it will be for the former biggest smartphone maker.
The Canadian Blackberry maker had a good year of strong growth and profits last year, but was unable to grow as fast as the industry and lost market share quite drastically from 20% to 16%. Now they are given an unexpected opportunity to grow strongly for 2011 and even recover some lost ground. RIM has a peculiar sales situation, where about half of its total business is from enterprise/corporate sales (employee phones) where the sales is steady, is not very much dependent on economic cycles (the economic downturn didn't damage RIM too much) but also is not prone to sudden upswings. Corporate phone buyers have budgets and a system for deciding who gets a company phone, and those change slowly. So in its business/enterprise phone market, RIM cannot greatly create new sales - under normal times.
This year is the exception. The total Nokia E-Series customer segment of enterprise/business phone users is now up for grabs, and RIM is in the driver's seat to take the vast majority of those soon-to-be ex-Nokia E-Series customers, gobbling them up at thousands of devices at a time. The TomiAhonen Phone Book 2010 said that Blackberry had 39% market share of all corporate/enterprise phones, with Nokia second at 35%. Other Symbian based enterprise/corporate phones (mostly out of Japan) had a further 9%. Only 10% of all employee phones are on other smartphone operating systems like Windows Mobile, Palm, iPhone, etc. The opportunity here is a golden one, a once-in-a-lifetime chance for RIM to jump and gain massively in its market. Here the question for RIM is execution. Can they field enough of their sales force out to those disgruntled Nokia corporate clients who want to ditch their E-Series and Symbian platforms, and for RIM to sell equivalent Blackberry solutions, which very often means sales with partners and enterprise-wide mobile solutions. It should be a banner year for RIM's corporate sales force, and the year the top salesguys buy their yachts and summer homes and luxury cars with their bonuses.
Then half of RIM's business today comes from the consumer segment, and there, very strongly it is centered in the youth and young adult segment, roughly the 16-24 year group, among those who are heavily into messaging. There is some magical threshold level, where Blackberries reach adoption by the thought-leaders among the youth (especially among older school-aged teenagers and those of university age), where the magic happens. Suddenly the cool kids all have Blackberries and shift their messaging away from SMS and away from any other instant messenger services, and onto the Blackberry instant messenger. Then if you want to be in touch with the cool kids, to share what is hot and happening, you too have to get a Blackberry. The adoption rate climbs easily into 70% or 80% or even more, among youth in this age bracket.
But this happens very unpredictably, in countries where there doesn't seem to be much of a predictable pattern. So Blackberries are the must-have youth accessory in Indonesia, in Venezuela, in Botswana, in the UAE and the UK. But not necessarily in all neigboring countries. For the consumer market, RIM sales need to work very hard this year to push the Blackberry into the youth segment and try to find that magical inflection point, after which the sales take off in organic growth due to the contagion effect. Certainly it would be worth RIM's while to make tons of promotions in strong prospective candidate countries, to try to convert the thought-leaders in the youth segment to adopt the Blackberry.
The big bottleneck for RIM is manufacturing quantity. It is likely that RIM will suffer this year from a demand that exceeds their ability to supply. While this is usually good for profitability, that is small solace if RIM usually has slow market share growth and if it then this exceptional year cannot capitalize fully on its windfall gains from Nokia's capitulation in both of RIM's main markets. For RIM the point to watch this year, is the balance of customers. As Nokia's E-Series enterprise customers should naturally fall for RIM, the perfect execution will have RIM also picking up more of consumer customers. If RIM reports its balance shifting to more enterprise customers than consumer customers, that is not the optimal solution. But if RIM manages to grow the consumer segment while grabbing more enterprise customers, that is optimal performance for RIM.
Apple had a fantastic year and is headed to an even better one. Apple missed out by less than a million phones from capturing second place among smartphones overall last year, but by Q4 had jumped into a strong lead ahead of RIM and is now the second-biggest smartphone maker in the world. When we add the iPad, iPod Touch and Mac, and using the now-accepted definition that a smartphone is indeed a 'real' computer - Apple has returned to the top, as the world's biggest-selling computer maker, ahead of HP, Dell, Nokia etc. The iOS ecosystem strategy is very successful for Apple.
While Apple never gave Nokia much credit as a real rival, they knew internally very well, that in the consumer segment - where more than 95% of the iPhone sales are - the big gorilla and rival to Apple was always Nokia. As my TomiAhonen Phone Book 2010 showed for the customer segment market shares, in the consumer market, Apple iPhone had 21% but Nokia smartphones were more than twice as big at 43% globally. Blackberry was far smaller in this segment and for the full year 2010, Android a tiny slice of what Apple was selling to the consumer segment. So now in this year 2011, Apple sees Nokia committing suicide and gifting most of its premium customers to its rivals.
Apple would love dearly to capture all of those - remember, the customers most likely to abandon Nokia this year, are the ones who buy the most expensive Nokia smartphones (N8, E7 etc) and those are well within reach of the cost of the iPhone - and thanks to Nokia recently, even the form factors of latest Nokia top end phones are very similar to iPhones - one could argue easily that the N8 is an iPhone clone. The only problem for Apple is, that it had already taken the lion's share of the premium priced smartphone customer for the iPhone. Even if Apple stole all N8 and E7 type of customers from Nokia, that wouldn't grow the iPhone by even half in size. Nokia had already lost so much of that desirable top-end market, when the N97 turned into such a dog last year.
What Apple needs this year, is the 'Nano' cheap variant of the iPhone. So in June when Apple is expected to announce the iPhone 5 (possibly called the iPhone 4G) - it will have a chance to offer some major upgrades to the current model - for example growing the screen size to 4 inches to better match up with the Samsung Galaxy etc phones with larger screens than the original iPhone at 3.5 inches. That would probably mean a modest increase in the length and width of the iPhone from its current form factor, but probably allowing it to continue as the very slick and slim thickness of the iPhone 4. At the same time Apple coudld/would upgrade many components, a faster CPU, more memory, a better camera etc, for the top-end model
Then simultaneously for June, announce the Nano iPhone, as a clearly smaller form factor, with say a 3.2 inch screen, but otherwise many of the specs from the iPhone 4. And price this at about half what the new iPhone 5 would cost. With internal components mostly the same as the iPhone 4, due to Moore's Law, Apple could sell the new Nano iPhone for about half price of the original iPhone 4 price (so rather than 600 dollars unsubsidised price, sell the iPhone Nano for about 300 dollars unsubsidised) and still keep the same level of profitability. By making it smaller physically (most obviously comparing screen size) it would not be that desirable to existing iPhone owners, who will rather want the new iPhone 5. But as it will be a new iPhone for 2011, and be significantly cheaper, those who always wanted an iPhone but felt they could not afford the current models due to their price - will be able to take this cheaper model as the starter model, thinking its 'my first iPhone' especially for the Emerging World markets.
Again, this will eventually come from Apple, that is certain. Just look at the iPod and the Macintosh, of course Apple will sooner or later release a series of iPhones rather than just one model per year (especially in an industry that sells more devices than all PCs or all MP3 players or all DVD players or all cars... per year. And how many variants of a BMW car can you buy today? Of course Apple will be splitting its model line sooner or later). The point is, that this year 2011, because of the Nokia customer give-away bonanza, and because Apple's price is the only barrier why most existing Nokia smartphone buyers are not going to take an iPhone - this year 2011, Apple has to release its Nano model. I really expect it rushed to the market and if they are smart about it, they'll have it selling in June. If Apple want to be really clever at damaging the sales of all rivals - they should announce the Nano now in March or April and essentially freeze much of the sales of mid-priced smartphones and create a huge demand for the Nano iPhone up to its launch.
Apple's total market performance in 2011 is almost exclusively dependent on the product line. If they continue with one new iPhone model only in June, then expect Apple to finish with good growth and somewhere in the 75 million iPhone sales level - a massive growth from the 47.5 million in 2010, but that would mean a slight decline in market share from 16% to 15%, quite a disasterous performance in a year when total market exploded by 67% and where the market leader Nokia gives away something like 50 million smartphone customers.
The problem for Apple is speed. They need Foxconn (Hon Hai) their supplier from Taiwan to rush this new iPhone Nano to the market and make sure it is super-desirable like past iPhones but without any technical glitches (antennagate). It may be that Apple is now rushing the spec on the Nano (in response to the Nokia announcement) and if thats the case, the Nano wouldn't be appearing until late in the year, perhaps for Q4 Christmas sales. That would be a big shame. If Apple is able to relase the Nano in the summer months (for the world, this cheap iPhone is not primarily intended for the US market) then Apple should easily double its total iPhone sales from last year and be running neck-to-neck with Nokia for the title of the world's biggest smartphone maker. Yes, if the Nano is released in the summer, Apple would do roughly 90 million iPhone sales this year.
A long-shot prediction. I have been critical of Apple for abandoning the youth segment who love their QWERTY based Blackberries. I know that Apple's 'philosophy' suggests the smartphone should be a touch screen device. I know that by now, Apple internal market analysis teams have truckloads of evidence, that the only market segment they are failing, is the most desirable 16-24 year segment, where the iPhone is totally trounched by the Blackberry. So there is no doubt those numbers-oriented people in Cupertino, who argue every year, that now the evidence is overwhelming, it is time to release one slider-QWERTY based iPhone model. I understand from the gossip that such a model has been prototyped, so Apple seems to be at least toying with the form factor.
It is clear, from various blogs and tech forums, that if Apple would release a QWERTY slider variant of the iPhone, it would be an instant hit with many who will not buy the current touch-only types of iPhones. Whenever there are rumors of a QWERTY variant of the iPhone, there are tons of comments saying 'I'd buy it immediately'... This would be the year to launch the QWERTY iPhone, to steal many disgruntled Nokia E-series customers and take the fight to RIM for the youth consumer segment. I would think that a full touch screen plus QWERTY slider iPhone 5, with otherwise the same specs as the new iPhone 5, and costing 50 dollars more, would be the 'must have' phone explicitly in the youth segment. Obviuously Apple would also do its 'facetime' type of solution as the Apple instant messenger too, and offer that messaging app to all other iPhone owners haha.. If Apple splits the iPhone model line from 1 to 3, this year, and adds both the Nano and QWERTY - then they will easily become the biggest smartphone maker selling well in excess of 110 million smartphones. And the QWERTY model would hit Blackberry mostly in the youth segment, not so much in the enterprise/corporate segment.
Apple's performance depends on the expansion of the model line. Its iPhone 5 will be an ultra-desirable premium price smartphone in the 600 dollar (unsubsidised) price range, where Apple makes tons of profits with it. The market is very robust, Apple would be foolish to lower the basic price level of that phone - in fact, Apple should consider going 'upstream' to about 700 dollars with the next top model, the iPhone 5. But Apple's market performance for the full year depends on when the new models are released. If no new iPhone Nano (or QWERTY) is released in 2011, then Apple would be in the roughly 15% market share range, selling about 75 million iPhones. If they expand to the Nano model in the summer, expect Apple to come close to 100 million sales for the full year, and approaching 20% market share. If they are really aggressive and release the QWERTY model as well for Q4 Christmas sales, you can add another 10 million total sales, but if they are really serious and do the QWERTY for Q3 'back-to-school' sales or even the summer of 2011, then Apple would be selling iPhones in the scale of 120 million units - at roughly a 24% market share level. The two announcements to watch for - when is the Nano going to ship, and if a QWERTY iPhone will also ship this year. These are the items that can dramatically boost Apple performance.
The fourth biggest smartphone maker for last year was HTC, just edging Samsung. HTC is struggling with the problem of hypergrowth. Since they switched from Micorosft Windows Mobile to Google's Android, HTC has been growing faster than the total industry, growing by more than 2.6 times in size of unit sales, in just one year! The problem is now everywhere because HTC has to grow its sales capacity, its marketing ability, its distribution chain, its sourcing capability, its R&D, and its manufacturing. And that was before the Nokia bombshell of February 11.
Now considering the Nokia windfall, HTC is closer to Nokia main smartphone customers in prices than Apple, and closer to Nokia customers by markets and segments than RIM. HTC is poised to take more gains from Nokia than either RIM or Apple. HTC further has an ace in its sleeve - its product portfolio width and replenishment speed is far faster than those of Nokia, RIM or Apple. HTC can very easily during this year make many 'Nokia clone' devices aimed at very specific popular Symbian handsets, but using Android, and capture large slices of Nokia customers. With this, the question at HTC is how bold and brave can they dare to be. Imagine if HTC is able to grow 2.6 times to what it was in 2010, they would be in the 65 million smartphone unit level sales for the full year.
I would see HTC to have a strong year for the first half and a monster year for the second half, where the best possible solution to capturing any disgruntled Nokia current owners is to offer phones on similar form factors. That is not practical for Apple or RIM, they have to stay with their main design parameters, iPhones being premium touch screen style phones, and Blackberries having all QWERTY keyboards. But what of all other sliders, folders, palmtops, candybars, etc, that Nokia's current Symbian family offers? HTC is the most nimble of the big makers, able to do smaller product runs profitably. I expect HTC to fully capitalize on this strength and flood the market with a dozen clever 'upgraded Nokia' form factor phones in the second half, and all those who bought their current Nokia Symbian phone in 2009 or early 2010, will find a very comfortable upgraded HTC model, running Android, that seems to fit that particular need. So for me, I think HTC will do well in the spring of 2011, but however well it does that, it will do far better in the second half - that is when HTC will be dangerous... Look for regular stunning announcements of ever more new HTC models released all through the year, especially at the lower price points.
But where HTC can do targeted niches, Samsung is the only rival who can do Nokia style scale. Samsung will have a monster year in smartphones. They are nothing if not competitive and this is the ultimate competitive opportunity. Every department and unit in Samsung is now working overtime to take every bit that is on the table. Samsung is the new gorilla of the industry. While it is not a fully-grown gorilla yet, it is the only one with the massive scale in handsets - in its dumbphones unit - meaning production capability, sourcing, distribution, carrier relationships, marketing budgets, customer research etc.
Samsung more than trippled in size last year in its smartphones unit. Now, bearing in mind, this is a giant dumbphone maker, who is shifting its handset customers from featurephones to smartphones, that is not strictly comparable to Apple, RIM or HTC, all of which are pure smartphone makers - but Samsung is a different animal altogether. Let me repeat. They grew by 342% last year in smartphones. If Samsung manages the same growth level this year, they'd be at 85 million smartphones, at 17% and breathing down RIM's neck for third place for the full year.
As Samsung is in heavy growth, that means that by Q4 Samsung would be selling far more than RIM, and would be chasing Nokia for second place, and possibly even challenging Apple for first place! Samsung is definitely the new gorilla of smartphones, and while its still a baby gorilla this year, just watch them play with this market and take it with ease. No matter what the others do, this will be Samsung's year. They were already the fastest-growing maker, with by far the biggest footprint on the dumbpohnes side to add to that, and now, are the maker most perfectly poised to capitalize on the Nokia windfall.
For Samsung the challenge is how to manage the shift from Android to bada. Samsung's bada was launched last year and already has had the world's most successful new smartphone OS launch of all time. They did 5 million bada phones in the first half year, and have targeted 10 million for the second 6 months. With Samsung's Wave smartphones on bada, priced at the low cost end of smartphones, this goes directly head-to-head with what was Nokia's main market segment in smartphones. Where RIM, Apple and to some degree also HTC all aim for high end smartphone customers, as does Samsung's Android phones on its Galaxy series, the bada Wave smartphones are the only major line of smartphones purely aimed at the lower price point of smartphones today. So Samsung should be able to capture the biggest slice of Nokia's 50 million smartphone customer give-away. And bearing in mind, that Samsung had already targeted this year for enormous growth - they had their sales and manufacturing all set up for massive growth - they are also best positioned to take more than their fair share.
Imagine the scenario of a teacher giving a big bowl of candy to the students and makes it a free-for-all. Those kids closest to the table will end up getting more than those kids in the back of the classroom who have to race to the front of the room even to have a chance. And the biggest kids in the class, could muscle in and take more than the smallest kids. Samsung is not only the strongest kid but also the one nearest to the candy bowl. This year will be the coming-out party for Samsung, and they will end the year as the darling of the industry and if they have not yet passed Apple, the pundits will all be falling over each other making predictions of when Samsung will pass Apple and become the biggest smartphone maker in the world.
But yes, the thing to watch with Samsung is the bada/Android balance. I would expect that we'll see several bold targets stated for bada, so that by the end of the year the vast majority of Samsung's smartphone sales will be on bada, not Android.
Motorola's comeback was built upon the Android platform. They seem to have done a mediocre job at that, with Samsung, HTC and now even SonyEricsson selling more Android phones by Q4 than Motorola. This is particularly painful for Motorola as it is the only one of the big 4 Android providers who doesn't supply smartphones on any other OS platform. But at least Motorola was able to do a come-back of sorts and also returned to the brink of profitability. Last year saw the internal hassles of the company being split into two, that is now all done, and Motorola can focus on being a phone maker again. And they had taken the costly decision to abandon their global intentions and now focus on three main regional markets, of North America, Latin America and China. The sad point here, is that most of the Nokia dividend of this year, is in the world outside of North America, while North America is by far the biggest market for Motorola. So they will not be able to get a big gain out of Nokia's pain. Meanwhile it seems almost every new or recently revived rival in smartphones seems to be aiming for Motorola's backyard. Consider LG, last year in deep trouble, fired its CEO. Now LG is coming back with 3D display Android phones. And LG is the second best-selling dumbphone maker in the USA (behind Samsung, ahead of Motorola). LG should be able to grab plenty of Motorola's USA customers. What of HP? Its natural home market is that which used to be Palm - in the USA. What of SonyEricsson? Their comeback in smartphones this year is built upon the Playstation phone, Xperia Play (on Android). Motorola's home market is getting ever tougher while it is least able to capture Nokia goodies, compared with the other big smartphone makers.
For Motorola this should be a consolidation year, ensuring their primary markets are strong, with a return to clear profits, and build from there. If they can end the year with 4% or 5% market share, in line with what they had last year, they will have done very well, under difficult situations. I would see them regressing but probably not very much because in the markets they now defend, the Motorola brand is strong (including China).
The other big come-back kid from last year is SonyEricsson. They had their troubles from the happy peak of musicphones and cameraphones in the featurephones category, before the iPhone came along and demolished that market and found SonyEricsson struggling with loss-making and losing market share. That has stabilized last year and SonyEricsson found a happy market opportunity with Android especially in the Xperia premium smartphone range. SonyEricsson made many prudent strategic choices, ended its support of Symbian, retreated from global footprints and focus now mostly on European smartphone sales where the SonyEricsson brand is particularly strong.
For 2011 SonyEricsson finally gains the Playstation brand to use in its battle for the consumer segment. The gaming sector was strongly revitalized by the iPhone in general and Rovio's Angry Birds game in particular. The SonyEricsson Xperia Play seems to be timed quite perfectly to try to capture the title of the optimal gaming phone. Regardless of how well or badly the phone handset does, this should boost any game developer interests in the Android platform. And if SonyEricsson gives us a great phone, this could be the next global hit phone after the iPhone. But do remember, there is the fear of the Nokia N-Gage experience, we need to monitor the reception of the Xperia Play and see if the gamers fall in love with it early. For the Nokia windfall, SonyEricsson has just nicely resurrected itself in Europe and should take a disproportionate share of Nokia's European customers and should emerge as one of the biggest smartphone makers in the European market by the end of the year.
South Korean LG had a miserable year in smartphones last year but ended the year strong after switching from the Microsoft driven platform choice to Android (and firing LG's CEO). Now they are hungrily looking at how well Samsung and HTC are doing, and think, that whatever those guys can do, LG can do as well if not better. They want a piece of the action, and LG is one of only three global dumbphone makers, with a legitimate global footprint in smartphones too. By all reason, they should be a giant, rather than a minnow. And like their domestic rivals, Samsung, LG too is driven by a fanatical South Korean work ethic and razor-sharp focus on competitiveness. They are in it to win it, not just to be a bit player. During the past decade they came from beyond the top 10 into the top 3 in dumbphones. Now they want to do the same in smartphones. And the second half of 2010 gave early indications of what is to come.
LG is using the 3D displays (that don't need special goggles or glasses) as their gimmick to capture the excitement in the market. Some of their new 3D phones even have steroscopic cameras, ie their cameras can shoot 3D pictures and 3D videos. How cool is that? LG's dumbphone footprint is global including number 2 ranking in the USA, they will be able to sell these premium 3D/Android smartphones in all advanced markets, while offering low-cost LG Android basic smartphones in the Emerging World markets to capture a piece of the Nokia dividend of 2011.
The Japanese maker has been comfortable selling high-end premium featurephones and smartphones (using Symbian) for the very demanding Japanese market for most of the past decade and that kept them in the top 10 smartphone makers. Now last year they signalled an interest to move abroad, starting with China. Fujitsu carries not just a highly respected Japanese tech brand but also is known for high-end laptop PCs. Their market entry beyond Japan has been slow going and to me, that is not the way to go. I do not see Fujitsu making strong gains, but probably will grow sales just by entering China.
Slightly smaller in smartphones than Fujitsu, rival Sharp is Japan's biggest dumbphone maker and by contrast to Fujitsu, has exhibited a continuous hungry passion for moving beyond Japanese shores for some time now. Last year they played a bold Microsoft card in their ambitions - by manufacturing Microsoft's Kin phones - but that adventure ended prematurely as Microsoft killed its Kin phones in world record time of only 6 weeks. This effectively messed up all plans at Sharp for riding a Microsoft wave to foreign shores (and serves as yet another powerful lesson to those who hope to ride Microsoft to handset success.. is Espoo listening?)
Sharp was not deterred. They went back to the drawing board, used their technology lead to launch Japan's first 3D glassless phones only weeks after the world's first such phones were launched in India. And now in 2011 Sharp has released the world's second smartphone with in-built pico projector (after Samsung did it last year with their Galaxy Beam). If the smartphone market is going to spliter into many form factors (as opposed to every smartphone seemingly being an iPhone clone) Sharp is well poised to play in several high price/high profit market niches. Moving from Symbian, Sharp is strongly positioning onto the Android platform and it should be able to make some good moves abroad this year, at the premium end of superphones.
Beyond the top 10 we have several other major brands selling in the several millions of smartphones per year. Biggest of the rest is Chinese Huawei, better known for their networking equipment and their 3G data modems and dongles. Huawei is strong in the Chinese domestic market and pushing to the many strong Emerging World markets near to China either geographically (like India, Pakistan, Thailand, Vietnam etc) or economically (like much of Africa, Brazil etc). They produce low cost smartphones and should also benefit from the Nokia market give-away.
Chinese rival dumbphone maker giant, ZTE (the world's fourth-largest mobile phone handset maker) is also hungrily shifting attention from dumbphones to smartphones. They run very close to Huawei in total sales of smarpthones, and serve a similar footprint, driven by China.
If thats not enough Chinese smartphone makers for you, how about the company that bought IBM's PC business, Lenovo. They launched their LePhone as an iPhone clone, touch screen Android device last year and sold a couple of million of them mostly in China. They are envious of how well Apple is now dominating the computer industry and want much more out of their smartphones unit. Expect Lenovo to grow and use its PC brand to get more visibility abroad. Their price points are low, the feature/price offer is compelling and should do reasonably well but Lenovo like most smaller players, struggles with building the carrier relationships that you need in the handset business.
HP (ex PALM)
Hewlett-Packard is the world's biggest IT industry corporation, by sales revenues, about as big as Nokia and Microsoft added together. So they are a very powerful giant, but while HP has sold smartphones for most of the past decade (in trivial numbers) and thus have some understanding of the smartphone market, they were never able to use any HP synergy as the world's biggest PC maker to convert that to smartphone sales success. The success of Apple, a bit-player in PCs who now dominates smartphones, must grate on the nerves of HP executives. Now they bought Palm last year and while it took them an age to get their act together, they finally in February 2011 anounced some new HP (Palm) smartphones using WebOS (ie Palm) operating system. These include the world's smallest smartphone. It is somewhat an ironic claim because about 5 years ago it was fashionable to make your phones smaller (remember a famous phone called the Razr) but then along came an iPhone and today everybody is competing on fitting the biggest conceivable screen into the phone. The size argument is far less compelling in 2011 than it was perhaps five years ago.
Still, HP is big, it is a superbly trusted name in the computing world, especially for enterprise customers. HP may be able to capture some enterprise sales of smartphones - but that market unfortunately is not where all the growth is (in fact, enterprise smarphone sales are stagnant, and were it not for hte Nokia dividend of E-Series customers, there wouldn't really be any growth in the segment). The growth is in the consumer segment. Palm knew that, Palm shifted. HP seems to 'get it' with their new smarpthones but that is not where HP's traditional strength is. The smartphone market is not like the PC market, the phones are sold through carriers or with carrier blessings, and if you don't have strong carrier relationships, you are not able to sell in large volumes (witness Palm, Lenovo, Google Nexus, Microsoft Kin etc). And look at the iPhone, even with Apple having the world's most desirable smartphone, it has taken them 4 years to get from AT&T to Verizon, and still today they only sell on one carrier in Japan, only one carrier in South Korea, only one carrier in China etc. The smartphone races are all about carrier relationships and here HP is a beginner, not a giant.
But they have deep pockets and their (new) management believes in the need to be big in smartphones (HP also fired their CEO last year). That they launced a series of smartphones tells me they are also serious about this race, but I feel they have to go through those same pains that for example Lenovo and Dell and Acer went last year, when all complained that its hard going in the smartphones market. HP needs to build its footprint and it gets no real gains out of Nokia's woes, as HP's natural market is North America that was Nokia's worst market.
A strange bird in the handset manufacturer side is Google. They suddenly appeared with the Nexus One last year, with a big splash, proclaiming the device as so much better than the iPhone, that the Nexus One should not have been called a smartphone, it should be called the first superphone. Then Google lost its carriers and tried to sell the Nexus One through its online store and two months later, withdrew the device. But before the year had ended, Google switched its supplier from HTC to Samsung, and brought us a new Nexus smartphone, which seems to be selling in reasonable numbers. Google isn't telling us how many, so it cannot be big numbers as of yet.
Why does Google do this? It no doubt annoys its large army of smartphone manufacturers, that Google also sells a smartphone under its own brand. But maybe Google wants to play this option 'just in case'. If they happen to get it just right, with the very smart people at Google designing the perfect smartphone, it could be the next hit phone, and do for Google what the iPhone did for Apple. Certainly when Google says 'mobile mobile mobile' and that they do 'mobile first' and Google tells everybody to 'put your best people on mobile' then yes, it makes sense that they also dabble in the handset side of this opportunity. So long as Microsoft has the reputation it has - again darkened now, with the stories that they paid Nokia billions to join - then Google gets away with it. They are not necessarily 'do no evil' but more likely in the Bloodbath 2, Electric Boogaloo, are the 'do less evil than others' smartphone OS maker with Android. Google can sell a Nexus smartphone because they know they can get away with it. But I also think its a telling fact, that Google shifted from HTC to Samsung last year, shows where the strongest of the strong are right now.
DELL, ACER, INQ, VODAFONE, G'FIVE, PANTECH...
There are tons more kind of third tier and fourth tier smartphone makers. They will sell in the hundreds of thousands of units, perhaps in the low single digit millions this year if they're lucky. A couple of them may emerge as a brand to follow but I don't see them breaking into the top 10. But also, this is a bloodbath year, we will see plenty of surprises. There are many domestic makers in relevant markets that could surprise us like for example India, as they start to build 3G networks, the hunger for smartphones will grow and some India domestic makers could break through and gain some international visibility too, with for example dual SIM or tripple SIM based smartphones usually with QWERTY keyboards far more tuned for the Emerging World market needs.
The world of smartphone operating systems is now ruled by Android. While the race was still neck to neck in Q4, as Symbian throws in the towel, Android will easily run away with the biggest market share during 2011. But there is plenty of intrigue in this side of the Electric Boogaloo as well.
The dramatic growth of Android will start to slow during 2011 as all of the big classic dumbphone makers supporting Android (Samsung, LG, SonyEricsson and Motorola) have launched on Android and there aren't major new handset brand launches to boost the uptake. While the Nokia dividend will help boost Android sales, the growth should slow down by the end of the year, due to competition from other platforms. The single biggest damage to Android growth will come when Samsung shifts the majority of its smartphones from Android to bada. That is likely to happen this summer but may happen later. Then Android will lose much of the contribution of its strongest single partner.
For the full year Android will be clearly the biggest smartphone OS maker, pulling away from the rivals. I see Android with full year 2011 market share in the range of 35% - 45%.
Nokia's Symbian is not dead. It will see a steady and quite rapid decline in sales but even at the end of the year Symbian is likely to sell about 20 million smartphones in the fourth quarter. Bear in mind that last year, HTC and Samsung sold 25 and 24 million smartphones for the full year. Motorola and SonyEricsson combined didn't sell 20 million smartphones in 2010. So while Nokia will see a dramatic decline in smartphone sales, they are diving from so high above the others, that even after a year of bloodletting, they will still be big at the end of the year and Symbian OS will easily be in the top 5 even in Q4.
The Japanese angle to Symbian will be interesting. NTT DoCoMo has been a long term loyal Symbian partner and because of it, Sharp and Fujitsu have been making Symbian based 'smartphones' (by some definitions these are fancy featurephones) for the Japanese market but now both handset makers have moved to Android and NTT DoCoMo has signalled interests to move beyond Symbian. We have to monitor how the Japanese market does with Symbian but it has traditionally done about 10% of all Symbian based phones. After Nokia's announcement to shift away from Symbian, I would expect the Japanese are not particularly interested in continuing with what is now an obsolete platform. So the Japanese support to Symbian may come to a rapid end. But it will depend almost completely on NTT DoCoMo who may have reasons to keep supporting the OS for the time being.
Meanwhile, Nokia's future is now irrevocably linked to the new Microsoft based smartphones, so Symbian smartphones will be the transitional devices where the new clever stuff will be prioritized for the maximum success of the early Microsoft based smartphones. Expect Symbian based Nokia devices to be of only modest competitiveness this year and most devices to be offered at the lower end of the price range. It may be that we will not see another premium phone on Symbian (or MeeGo) equivalent to what the N8 and E7 have been. The E7 may achieve some degree of a 'nostalgia' phone as the last major 'pure' Nokia device.
Symbian will see a huge drop in market share as it will face the end in 2012. For the full year 2011, I expect them to sell about 13% to 16% but by Q4 Symbian is likely to be as low as in the 10%-12% market share scale and continue to decline from there into next year.
Apple will have a good year but like I explained in the above, it will depend on when the Nano appears and if a QWERTY model is also released. I expect a Nano during the summer but no QWERTY phone this year, and with that, Apple should get something like 15% to 18% in smartphones (plus plenty more in iPad and iPod Touch devices) ie modest growth.
I also discussed Blackberry in the above. They should take a strong share of Nokia's enterprise customer base and a fair slice also of its consumer youth market. Even with that, if Blackberry can hold its market share for the full year of hypergrowth in the market for smartphones, it will be a good year for RIM. I am projecting RIM in the range of 13% - 17% for the full year, roughly flat market share.
Samsung's bada will have a banner year as it is perfectly poised to take tons of low-cost Nokia Symbian customers. If bada had 'natively' a market potential of 20-25 million, after a Nokia dividend, they should do close to twice that. I project bada to finish the year with about 7% - 9% market share for the full year and by Q4 to be well in the scale of RIM's sales. I am assuming that in H2 of 2011 Samsung will shift much attention to bada and diminish its effort on Android. They could be selling at a ratio of 3:1 bada over Android by Q4.
Microsoft's Phone 7 is having a mixed year. One the one hand, the developers will find a big boost as Nokia is now destined to land on Microsoft. There will be a lot of confidence among developers that Microsoft and Nokia will be able to do big efforts in the enterprise/business customer space, based on Microsoft's PC platform and Nokia's E-Series phones. This is somewhat misguided, and after being burned by Nokia E-Series/Symbian sudden death, and that Nokia renegs on its promise of a migration path from Symbian to MeeGo, all while similarly Microsoft denied any migration path from Windows Mobile to Phone 7, the enteprise customer IT departments will not be that dumb to trust MicroKia NokiSoft for long term enterprise/corporate IT and mobile platforms. No, they will go RIM first, probably Apple second, Android third, Palm fourth, and only if none of those can provide solutions, would they be willing to risk it with a solution from Nokia and Microsoft.
Meanwhile the Phone 7 partners, especially the previous 'big' handset maker partners, Samsung, LG and SonyEricsson, and HTC the biggest pure smartphone maker without its own OS, will all feel burned by the cloak and dagger secretive games. Why was Nokia paid 'billions' to join the handset family. Will Nokia be treated better than the rest? Why would any of the other four bother to put any extra effort now to Phone 7? They probably won't abandon Phone 7 (although one out of the four well might) but all four will release many more Android devices than Phone 7 handsets during 2011. Still, the young OS will see growth and will 'inherit' somewhat a similar market share to what it had with Windows Mobile, so we could see the full year with something from 3% to 5% market share for Microsoft's OS. If Nokia release a couple of smartphones early for Q4, that could be even better but thats a long shot, where Phone 7 the OS is not supposed to ship until October, according to Microsoft's latest schedule.
Microsoft has a major card to play with X-Box compatible gaming. If the SonyEricsson Xperia Play phone takes off, then one of the Phone 7 handset family members could well release an X-Box phone, and even if not, it would seem like a natural as one of the early Nokia Microsoft phones (but probably not until early 2012).
WinMo was killed last year but still keeps shipping in ever smaller numbers. By mid-year 2011 we should see the last WinMo handsets going out of production.
So what of Nokia's MeeGo project? It was developed with Intel, and MeeGo is actually not dead either. Its quite a good OS even in its early forms, and already powers some netbooks. There are more than a dozen manufacturers committed to MeeGo, mostly in the IT and automobile sides of the industry but still, there should be plenty of MeeGo devices shipping during the year, enough to be a thorn in Nokia's side. A strong candidate for an early MeeGo based smartphone handset is Fujitsu who already shipped a netbook on the OS and who have said they want to expand abroad. Where Japanese rival Sharp is doing Android, it might make sense for Fujitsu to use MeeGo as a differentiation strategy. Nokia is also committed to one handset (or more precisely, a 'device' so it could be a tablet or netbook or some 'non phone') running MeeGo this year. So we should see some view to what might have been.
What I think Intel is now trying very hard to do, is to recruit one significant handset manufacturer to jump into the MeeGo camp, to replace Nokia as the 'strategic partner' of Intel, to drive the OS development. Where HTC had tried to buy Palm to get that OS, this could be a very good alternate option for HTC. As they see the Android army is a rough place to be seen and to be able to differentiate, and scale tends to rule in the Android family, so HTC might soon be relegated from second place to third or even fourth, it might make a lot of sense to consider becoming a smartphone OS supplier and become 'one of the big boys'. I am pretty sure this discussion has been had at HTC headquarters and at least preliminary contacts have been had. Intel was pretty upset when Nokia abandoned them so they'd love to have someone step in.
The other obvious candidate would be LG. I think LG is kicking itself for how poorly it executed the transition from dumbphones to smartphones, specifically in contrast to its neighbor, Samsung. And if Samsung has its own OS (in bada) then there is no doubt a level of pride involved at the HQ of LG, thinking that they too should have their own OS. It might be too expensive to build one from scratch, but MeeGo is ready to run. Why not join Intel and make MeeGo the primary OS for LG handsets.
As a long shot, I could even see Sharp going for it with Intel, or one of the Chinese brands, ZTE, Huawei or Lenovo. Even Motorola could possibly join MeeGo as of the big five Android makers (Samsung, HTC, SonyEricsson, Motorola and LG), Moto is the only one which has no other smartphone OS as an alternate strategy. And Moto was the second bestselling Android brand early, now they have fallen to fourth. So Motorola might want to try MeeGo as an alternate, perhaps. But like I say, its a long-shot. However, if Intel is to keep MeeGo alive and viable, they need a significant handset maker to commit to it, and soon. But its most likely that MeeGo will not be on even a million handsets this year, even with the one Nokia device included, and that means far less than 1% in market share for MeeGo, the newest OS for smartphones.
WEB OS (PALM)
And then we have HP and its Palm WebOS. Like I wrote in the above, I don't see strong growth for HP this year, they need to work at their carrier relationships and they would be happy to get to a 2% level in market share for the year, probably well below that.
Thats how I see year 2 in the smartphone bloodbath, as a preview. I will continue to monitor the space, we have too many manufacturers and too many operating systems for all to be healthy and profitable in this space. We should be seeing consolidation again this year, some makers pulling out. There are too many manufacturers and too many operating systems. It should be a very interesting year once again. Some will have excellent years as smartphone sales grow by something like 67%, but others will struggle and some will fail in the market. We will monitor this Year 2 of the Bloodbath, with quarterly results analyzed and periodic news reviews of the smartphones space from time to time. Stay tuned.
PS - if you don't like others to do the forecasts, and want all the data to do it yourself, remember the TomiAhonen Phone Book 2010 has all the facts for the handset industry effective to December 2010, all the market shares, regional shares, average sales prices, feature sets, brands, operating systems, etc in 98 charts and tables in a convenient 171 page eBook. For more, see TomiAhonen Phone Book 2010.