A Bloodbath for 2010: the Smartphone market preview

The big battle this year in mobile will be in smartphones. Not because of reasons many pundits and analysts now suggest, that somehow this is that everybody caught the iPhone fever or that Google somehow energized the field with its Nexus phone. No, those are overhyped views with an overly US-centric view. Remember that differing from most high tech and media industries like computers, TVs, air travel, advertising, military spending, music, movies, rocket science etc, where the US tends to reflect about half of global spending of the given industry. That is not so in mobile telecoms. US cellphone users (about 285 million subscriptions) represent only 7% of the global subscriber base of 4.6 Billion. While Americans are now getting heavily into smartphones, Forrester just today reported that the total installed base of smartphones in the USA is only 17%. The EU projects that for the EU region, smartphones will be half of all phones this year.

While the American pundits, journalists and analysts obsess about the iPhone, Palm, Google etc devices, that is not the main battle. Its a side-show in the big global fight for smartphones. And while some North American players are indeed quite strong - RIM is the world's second largest smartphone maker behind Nokia - this battle is now heating up considerably for 2010. Some very powerful players are bringing in their A-game. And both market leaders, Nokia and RIM have refocsed very hard for this upcoming battle to be able to respond to the challenges. Most other smartphone makers have not caught on. The battle will be brutal this year. It will not be pretty.

NOKIA

The reports of Nokia's demise were premature. Even Nokia's own analysis got it wrong for the third quarter of 2009 when they reported a serious decline in their market share. After all numbers came out, turned out that Nokia had had only very minor 1% fluctuation in its smartphone market share, and as is usual, Nokia's smartphone market share remained well above its global handset market share, itself the best in the world.

Last year analysts were not impressed with the N97 and then there was confusion about Symbian vs Maemo and what of Nokia's Ovi store for apps and various smartphone content and services. So where do we stand? Nokia's market share in smartphones is as big as number 2 and number 3 combined, and more importantly, Nokia's smartphone market share is better than its overall handset market share. And they are doing this with a mobile phone manufacturing juggernaut which has been profitable every single quarter of the decade, while each of their big 5 rivals has struggled and posted numerous unprofitable quarters along the way (the last quarter Nokia posted a loss, but not with its handset unit, the loss was due to its infrastructure unit NokiaSiemens Networks). Typically at least 2 of the rivals are unprofitable and in some quarters all four have been so.

Do not put any credibility to any "Admob" stats or pay too much attention to Nokia 'failing' in the US domestic market for smartphones. If the choice is to be the desired smartphone brand in the 93% of the world's phone market that is not the USA, or the 7% that is the USA, Nokia has certainly made the right call to its strategy.

But it won't be easy going. A couple of years ago, the Symbian operating system was owned across several giant handset makers (Nokia part owned with SonyEricsson, Samsung, Motorola etc) and had over 60% market share. Now being only Nokia's owned operating system, its installed base is about 50% of the world's smartphones and currently sell a little over 40% of the world's smartphones. Note that most of that decline was various non-Nokia phones shifting away from Symbian. Nokia's own Symbian sales level is very stable. But it is not growing, it is in slight decline. So don't mistake Motorola and SonyEricsson and Samsung (and others) shifting away from Symbian as somehow a 'Nokia decline' in Symbian. Nokia Symbian is still very healthy at or about 40% on an annual sales level.

What is Nokia doing? While it introduced Maemo to power high end smartphones, Nokia is aggressively pushing the Symbian system down to mid-price phones where 'feature phones' used to be. It is expanding its proportion of touch screen devices (to position more against the iPhone) and more importantly, expanding its proportion of QWERTY phones against the Blackberry. Some very promising news came out of the UK this past December, that Nokia is back as the top preferred phone brand among UK youth in the Mobile Youth survey of phone brand preferences.

Most of all, any analysts should keep in mind, that thephone market is not an open 'free market'. There are severe distortions by the enterprise/business segment, and the carrier/operator subsidy model in many countries. I explained these in my blog about smartphone market share secrets last year.

The key point to take away, is that Apple says openly that its best markets are in those countries with strong operator/carrier subsidies. They do not do as well in markets where customers pay full price for the phone (the real price of an iPhone 3G on AT&T is not 100 dollars, even Americans pay the real price of about 600 dollars for their iPhones, but the remaning nearly 500 dollars is hidden payments in the 2 year payment plan). Meanwhile, in every single market that is open, ie carriers do not subsidise most phones and the phone makers get to sell their own phones directly - and which are not controlled by a domestic maker or makers (like in South Korea for example) - Nokia is the run-away market leader in all phones, and in smartphones. For any analyst who suggests Nokia is 'losing' the game against the iPhone, that should give some pause. In all markets where there are no subsidies to distort the picture, Nokia wins hands-down...  And Apple itself admits it struggles in precisely those markets. Who makes the "most desirable" phones when we take price into the equation? Not necessarily the single best phone for internet surfing, but rather a series of phones to suit mass market tastes? Thats Nokia, hands down. As big as number 2 and number 3 combined.

Even with all that, expect Nokia not to grow market share this year in smartphones, and very likely to lose some in 2010. The competition is coming from every angle and the big leaders will likely feel the heat. Nokia has been aggressively moving downstream in price and gets some solace that its price points are difficult for smaller brands to match, but its going to be a very rough year. And whether any newcomer focuses against the iPhone or the Blackberry, they will automatically also then target some part of Nokia.

RIM

The amazing untold success story, far bigger story than Apple, is RIM. Blackberries were nerdy US centric business phones only a few years ago. Europeans and Asians would not take to the flat, wide, weird Canadian phones. Try as they might, even as American conglomerates took to Blackberries by storm, and started to call it the Crackberry - 75% of American business/enterprise smartphones are Blackberries (says Ostermann survey in 2009)

The rest of the world did not fall in love with Blackberries. But RIM plugged along and slowly got traction in many markets in the enterprise/corporate space. They did particularly well in Latin America. But then came the SMS texting craze even to American shores, and whether by design or by accident, the youth of the world discovered the Blackberry. Not your boss's phone, but your kid's phone. And success followed. About at the same time, again perhaps by design, perhaps by accident, RIM expanded its product line of Blackberries to more models and several of these were more suited to consumers. RIM added cameras to these, and what businesses previously were reluctant to accept - cameraphones - started to infiltrate the business phone space. But now the Blackberries were very well suited for consumer use.

First the overall numbers. Today one in five smartphones sold - actually already 21% by the third quarter of 2009 - was a Blackberry. Remember that only 17% of smartphones are Apple iPhones. Why all that hype about the Apple and total silence about the Blackberry? Partly because this success is on strange foreign shores. In Venezuela the bestselling phone brand - not smartphone brand - is the Blackberry. In Indonesia the youth most popular phone is now the Blackberry. In the UK survey of university students, UK is traditional SonyEricsson and Nokia 'back yard' - Blackberry is now the third most popular phone brand, not the iPhone.

On RIM, this is the only brand I can promise you, it will grow market share in 2010. Why? Because first of all, it has a 'lock' on the enterprise/corporate market. The business phone market will not shift simply because there is one hot new smartphone this quarter, like a Palm Pre or Motorola Droid or iPhone 3GS or Google Nexus One or Nokia E72. The business phone market is incredibly stable because business customer IT departments resist any change and any new systems to be added and to be supported. In the big US market, Blackberry can very safely rely on something nearly 75% of all business smartphone sold this year. It may fluctuate a little up or down, but it is incredibly stable.

At the same time, the Blackberry keeps making more inroads to business phone use in all other markets, due to its incredibly well optimized business oriented form factors, solutions and apps and services. The Blackberry is simply the best enteprise phone solution on the planet. Now they have President Obama as the ultimate unofficial spokesman, the Blackberry President. They have achieved such certifications as NATO level quality of security on their device so for any business users, this is really a secure and safe platform. Their non-US global business-oriented smartphone user base will grow disproportionately well, rivalled only by Nokia with its E-Series. This market share segment will be particularly secure from any inroads by any new operating systems like the Apple iPhone or Google Android or Samsung Bada. Not because the phone is bad, but simply because IT departments will fight tooth and nail against any new OS. A survey by TBI Research in 2009 found that 80% of US businesses refuse to have more than one operating system for smartphones - and in most cases that is now the Blackberry. This is an incredibly stable source of revenue and unit sales and subscriptions for RIM.

But its huge growth is that successful transition from business phone to residential phone. And while all the press, analysts, pundits and 'experts' obsess about touch screen smartphones, the truth is that far more QWERTY phones are sold worldwide than touch screen phones. The internet use is not addictive, but SMS text messaging is addictive as proven in university studies like the one at Queensland University of Australia. So while both inputs are of course desirable and have their proponents, the fact is, that QWERTY trumps touch screen. Why is Nokia now rolling QWERTY keypads to its cheapest non-smartphones? Nokia know this, they invented the QWERTY keyboard in the world's first smartphone, the Communicator 9000, and they were the world's first entity to suggest SMS might be addictive, a decade ago. Nokia know this.

But RIM have optimized their phones for mobile messaging. It is a perfect starting point. Then they have the Blackberry instant messenger, which appeals to the youth in particular as it offers free messages between Blackberry users. That in turn brings in a contagion effect, you want to have the Blackberry specifically, because your friends use it. And then there is the cool factor, suddenly the Blackberry is the phone all older teenagers and young adults want to have. RIM is right now in a sweet spot, all things going for them. It is no surprise, that in the shadow of the world's most spectacular high tech launch ever, the iPhone - RIM has consistently outsold the iPhone and grown its own market share.

I can tell you that often analysts and pundits even in the various early adopter markets like say Indonesia, where Blackberries emerged as the youth 'must-have' phone, inspite of their considerable cost differential above typical youth phones; the early experts were dumbfounded and could not explain it. I have heard various RIM experts say the same, that they are not sure exactly how and why, but are trying to learn this as much as possible and then capitalize on this knowhow.

I think it speaks volumes that Nokia is copying RIM not only with E-Series form factors, but now with cheaper non-smartphones adopting QWERTY keypads. Both RIM and Nokia know that the biggest single segment of the smartphone battlefield will not be touch screens, it will be QWERTY phones. And I would hope that at times the operators/carriers would be reminded of this too - that AT&T and O2 and other networks complain about congestion with the iPhone, but QWERTY Blackberries and Nokias do messaging, very profitable services for the operators... So its in the core profitability interests of the operators/carriers to promote QWERTY phones, not touch screen phones.

Anyway, all signs suggest that Blackberries are achieving 'must have' status among the youth. Youth fashions and desires can be fickle so this is by no means a guarantee of long term success, but for this year 2010 this bodes very well for Blackberry. As they are very secure to hold onto business/enterprise customers and see growth in youth markets, they are sure to pick up some market share points even in this very competitive year of 2010.

APPLE

Apple is also growing strong currently. They have been expanding their global footprint but it is a worrysome detail, that out of all iPhones ever sold, 43% have been activated by AT&T (Said AT&T late last year). The iPhone is the darling of Americans but doesn't seem to engender the same level of passion across the oceans. Yet 17% of all smartphones sold in the third quarter last year were iPhones. That is very good news for Apple and they keep growing year on year. Remember that as Apple only introduce one new model per year in June, they have that peculiar sales pattern where their sales grow in the second half of the year, but then always decline stronly in the first quarter of the new year. So don't be alarmed, but be prepared, that when the January-March quarter sales numbers come out in about April of 2010, there will be inevitably a decline in Apple market share. That is not a sign of trouble, it is only because the 3GS will be 9 months old by then - near-obsolete in smartphone terms - and the next iPhone is not due until June of 2010.

But its not going to be an easy year for Apple. The early strongly operator/carrier subsidised markets are all now 'done' and have the iPhone. As Apple tries to bring its ultra-expensive superphone to ever less affluent markets, it finds it hard to sell meaningful numbers. China is a perfect example, Apple was really struggling to get its iPhone to move in any relevant numbers in China. And its strategy of going with an exclusive carrier/network in major markets is backfiring (as I predicted) and they are now expanding networks in many markets. There is continuing speculation that the exclusive deal with AT&T will end as well.

Most of all, Apple faces severe competition in the consumer space. The 3GS was a good phone last summer but now is really showing its age already. 3 megapixels is very modest for a 600 dollar smartphone where other brands do 8 megapixels and in advanced markets like Japan and South Korea 12 megapixels is now the standard for premium phones. A flash? When can we see that? And no removable battery, no memory slot, no QWERTY keyboard, etc. Apple is seeing a lot of business going to near rivals who also offer 3 inch touch screens but in many ways 'better' features. And please Apple fans don't write about that. Yes, the Apple is by far the most user-friendly phone. But that goes only so far. And at some point Apple has to release more than one phone model per year else its market share growth will stagnate. I believe this year 2010 will drive that lesson home to Apple HQ loud and clear.

Anyway, Apple needs yet another hit this June. If they manage once again to do a magical phone that everybody loves, they'll be fine to the end of the year. But in 2007 when there were very few phones of a similar form factor, Apple had this 3 inch touch screen market segment to itself. Today every major maker offers 3 inch touch screens, and the competition is proving rough for Apple.

What is certain, is that for the start of the year 2010, Apple's market share will sink of course, due to an aging model line. Will it recover for the second half of 2010, will depend on how amazing the next iPhone will be (it will definitely be better of course). But now most new rivals are all targeting this Apple area - not the enterprise space where RIM is, and not the low price angle where Nokia is. The new competition will almost all hit Apple square center. Like the Google Nexus One right now.

I would say for the year, if Apple can hold onto its market share - remember the smartphone market itself will explode this year -so there is going to be a lot of organic growth for those who can hold onto market share, so that is still good news. I don't see much chance for strong growth, but it does depend on that one new iPhone model next June. It could be a 'must have' phone perhaps. I'd say the single best tool for Apple would be a QWERTY keyboard but I've been saying that since 2007 and of course Apple don't listen to me haha...

HTC

The fourth largest smartphone maker is not SonyEricsson or Motorola, it is Taiwanese HTC. They manufacture for example the Google Nexus One. But even before there was an Android operating system from Google, HTC was the fourth largest smartphone maker with about 5% of the market. HTC has often struggled with the lackluster performance of Windows Mobile - HTC was the launch smartphone for WinMo early int the decade (after MS suddenly pulled the rug out from under their first-annnounced WinMo launch handset maker, UK based Sendo, if you remember) - and HTC has been WinMo's standard-bearer ever since. HTC CEO said in 2009 that 80% of all WinMo phones ever made, were manufactured by HTC. So now that HTC is shifting most of their smartphones away from the Microsoft operating system to Google's Android, is coming as a very hard hit to Microsoft.

So HTC was already plugging happily along in the fourth place, and now they have been increasing the awareness of their own brand, and then they have the sudden added support of the Google brand. This is sure to bring growth to HTC.  How far can they grow? They are perceived as a small 'built-to-order' maker, and don't have the brand appeal of the Samsungs and SonyEricssons in the eyes of the big mobile operators./carriers or the independent handset resellers in open markets. But they are now on a good growth path. I think they're a pretty sure bet to increase market share in 2010.

FUJITSU

So the fifth biggest smartphone maker is Fujitsu out of Japan. What? You never heard of Fujitsu's smartphones? Thats because they mostly focused on the home Japanese market the past few years. In Japan the major smartphone platforms are Symbian and Linux, but most smartphones are 'crippled' by the operators/carriers with standard features and often the user cannot install apps like they could on a similar device in most other markets. Still, as a smartphone maker, Fujitsu is experienced and big. Plus they are one of the biggest makers of laptop computers so they have that synergy in distribution chain, brand and tech support.

What can we expect out of Fujitsu. Last year they said that they are going to refocus on the world market. Expect Fujitsu branded smartphones to appear in selected markets during the year. They are a luxury brand sitting right next door to China, it would sound like a good strategy to push into China. Japan often looks at Taiwan as their back yard, so its another obvious early target market. Beyond that, it will probably be random markets this year as they sample world tastes and see which markets would be receptive to the Fujitsu brand of phones once again.

Fujitsu have the advantage of learning about end-user preferences in the single most advanced mobile phone market, Japan. So they can bring ideas and innovations and technologies that have an advantage. I would expect that Fujitsu will be targeting initially the top end of the smartphone market, nearer to netbooks and web tablets, and going of course head-to-head with the Apple iPhone line. But if they can hold steadily onto about a 4% global market share in smartphones simply by selling in Japan, and now start to expand, expect them to grow organically at least a few percentage points globally.

SAMSUNG

Samsung had been giving smartphones lip service for many years. They had smartphones on just about every platform, on Symbian, on Windows Mobile, on Android etc. Now they have decided that it is a battle they want to enter and to win in it. And they have made that strategic commitment of releasing their own smartphone operating system, Bada. Samsung had previously held something like 3% market share in smartphones, but - in feature phones with touch screens - they already outsell the iPhone. All Samsung need to do, is to switch their touch screen phones from their proprietary operating system to Bada during 2010, and they will exceed the iPhone annual sales in smartphones... 

If executed perfectly, Samsung would seem to appear out of nowhere and in one year leapfrog Microsoft Windows Mobile, Google Android and Apple iPhone. Don't be surprised to see this happening. The South Koreans are nothing if not competitive, and they work day and night and weekends to achieve their objectives. And Samsung says in every market they intend to be one of the top 3, or its not worth competing. They have the scale to do it, and I am very confident within at least 18 months they will overhaul those three, lagging only behind RIM and Nokia. Whether it happens in 2010 remains to be seen how far Samsung is along its diabolical world domination plans. But they will certainly grow every quarter this year once the Bada phones are launched. Grow every quarter, mark my words.

I expect that during 2010 Samsung will push its Bada operating system aggressively to its mid range feature phones, and by converting these to 'smartphones' - they will achieve the most amazing market share growth ever seen in the smartphone space. Yes, in some ways its a bit of 'cheating' with accounting, but it fits the smartphone definition and Samsung will be grabbing headlines. As these will predominantly be touch screen phones, it will be seen as being head-on battle against the iPhone, even though in price it will more appropriately be a battle against market leader Nokia.

SONYERICSSON

A bit player in the smartphones space, SonyEricsson was one of the first major smartphones and has had very high end prestige and popular business and residential phones in that area, but only a tiny part of their total lineup. Since Sony released the Walkman and Cybershot brands to the SonyEricsson partnership, the SE phones have been in the mid-range of excellent dedicated musicphones and cameraphones. But the advent of the iPhone decimated SE's musicphone market and the brand has been struggling severely to find a place recently. SE has been losing global handset market share and its smartphones have suffered in that same process. Even that news out of UK university students preferring SonyEricsson as the second most popular phone brand is actually bad news for SE, as previously SE was tops. They are moving down in preference among even the youth. All news is bad news at SE.

Recently with the Symbian OS shifting to Nokia ownership, SE has little reason to particularly push Symbian in its smartphones and is shifting to Android. But the total shipments are low in numbers and the total brand is in confusion. I don't see SE particularly growing. They have to stabilize their overall handset market share first, and then worry about smartphones. This could be a good year for SE to ignore the wars in the smartphone bloodbath and find attractive niche markets elsewhere and stabilize their profitability. I've been saying dfor years now, that what SE needs is the Playstation phone, which could be a hit product. Remember that most of the paid apps on the iPhone are games. But yes, if the PSP  phone appears, SE could have a sudden surge. Else - and more likely not - I don't see them as growing. They will be in the 'other' category of smartphones and mostly ignored.

MOTO

Poor Motorola. They are so on the ropes. I wrote my open letter to them, that they should do SMS texting optimized phones to save the company (something RIM ended up doing and growing magnificently). But Moto have staked the whole company on one Android phone, the Motorola Droid, and now 'Do no evil' Google has stabbed them openly in the back with the Nexus One. Motorola is doing its best, but their global handset market share has been in total freefall for years - they have gone from 22% to 5% in three years! - and they now are feeling the breath of RIM in their neck, a pure smartphone maker who may overtake Motorola in total phones shipped some quarter this year.

It was a risky move to make a heavy move into smartphones. The Droid is not going to make meaningful inroads into the enterprise space for the same reasons that RIM owns that space and others can't get in. So the Droid has to fight it out in the high end of the smartphones, against the iPhone and high end smartphones from Nokia to Google to HTC to Fujitsu to Samsung to Palm to just about anyone..  But it was a popular move to US based investors, so Moto made its bed and now must sleep in it.

I don't see Moto having much chance outside the US market in this heated contest, to peddle its smartphone to consumers who had grown very tired of the Moto brand the last few years. Not in this year with so many exciting new smartphones appearing in the same price bracket. And the US market is not big enough to give Moto the gains it needs. I see Moto overall losing handset market share and being irrelevant in the numbers of the smartphone battle. Incidentially, ZTE out of China as a non-smartphone basic phones maker is about to pass Moto as the fifth biggest phone maker, so the fall from grace continues in any case, Moto is headed to the waste basket of the industry.

Motorola may appear on the charts for US smartphones with some market share, but nowhere near market leader RIM or second place iPhone. Too little too late. When will Moto close shop? At Forum Oxford we have already a Motorola death-watch... They are certainly already on the ropes

PALM

Palm sells only about 800,000 smartphones so apart from being a curiosity in the US market, they are irrelevant in the big picture. They don't account for one percent of the market and have essentially no chance of growing market share in this bloodbath of a year in smartphones. I would not be surprised if Palm passes onto history during this year.

LG

A more interesting player in smartphones is LG. LG is the third biggest handset maker out of South Korea and like Samsung, they have pretty much ignored the smartphone space. But - remember the original 'amazing' looks of the iPhone? That totally radical one button touch screen flat 3.5 inch screen wonderphone when first shown by Steve Jobs in January 2007?

The looks of the iPhone, exact dimensions, etc, were considered in January 2007 to be a copy of an industrial design winning LG phone - from 2006. Apple designers cleverly copied an award-winning LG design to create the 'wow' factor in 2007, because LG had not brought this phone to the Western markets (we eventually saw the consumer version of it as the LG Chocolate, released in Europe before the iPhone launched in the USA in 2007). So LG knows fully well how to do this type of phones and form factors. They just haven't bothered to do that as a "smartphone" so far. But the LG Chocolate was Europe's bestselling phone at one point in 2007 and in its lifetime has sold more units than all iPhones.

If LG feels like they'd want to have a major market share in smartphones, they could do the same as Samsung, introduce a smartphone OS to the next edition of the Chocolate and having a far cheaper phone of the popular touch screen and 3 inch screen form factor, they could easily outsell the iPhone 'as a smartphone' within about a year - to 18 months. But that 'step' is not even taken yet, as Samsung did announce its Bada operating system and will clearly now fight for the smartphone space, LG has not made any such bold announcements. At the CES this week LG has introduced two smartphones and they made noises that they'd like to get more market success in smartphones. If they so desire, they can become a massive global rival in no time. Remember in scale as a handset maker they already are far bigger than any North American phone makers including Palm, Apple, RIM and Motorola.

OTHER JAPANESE

There are actually seven handset makers out of Japan and several have expressed interest last year in moving abroad, or 'returning' to the overseas phone markets that the Japanese brands (other than Sony/SonyEricsson) abandoned a decade ago. Some of the brands will not be doing it as smartphones but some may. We have powerhouse electronics brands there like Panasonic, NEC and Sharp. And the biggest of the Japanese handset makers is Kyocera. Any of them may find it suddenly appealing to capture part of the limelite in smartphones and do a nice little splash some time in 2010. But I don't see them taking big market shares in smartphones but keep an eye out for the GSM World Congress in Barcelona in February for any surprise announcements.

DELL

Doesn't it seem like every PC maker is suddenly doing smartphones? Dell is also in the game now. They will be releasing their first smartphone in America on the AT&T network. Dell will struggle severely for early years in their entry, in building carrier relationships with the 160 or so significant mobile operator/carriers and the 600 overall; as well as hundreds of national resellers in so many markets. They will find that the smarpthones market is totally different from the PC market and that normal free market rules do not apply. And that to get scale, they have to move downstream and diversify fast - like Blackberry has done. I don't see them being a global powerhouse yet and won't register in the one percent market share range this year, but they are yet another brand doing high end internet-oriented smartphones (against the iPhone).

GOOGLE

Google's entry into the smartphone space is seen by some as going back on their word (that they do not intend to be a phone maker), and by others as stepping severely on the toes of their Android handset maker partners. The Google Nexus One suggests there will be a Two and more, so it seems like Google has made a strong commitment to become a handset maker brand, whether their phone is physically made by HTC or not.

Initially the Nexus One is energizing the US focused tech media and analysts into a frenzy but I would think this will subside. It is a phone positioning at the iPhone end of the consumer market, as a pure touch-screen device and labeled a 'superphone' in the US market, it is already attracting direct comparisons to the iPhone. Price wise its conveniently 10% cheaper. But Google has the advantage of not limiting the Nexus to one carrier only. And quite alarmingly for the iPhone US market aspirations, the Nexus will be both in a GSM and CDMA version (T-Mobile first, but Verizon version to follow). Google also has the Vodafone networks as reseller partners so it will make quite a splash globally as well.

Because it goes against so many other similar Android devices and tries to fight against the iPhone head-on, I don't see them replicating Apple's first year success of 10 million units, so the Nexus will be very low in the single digits even if all goes well. But behind the scenes, many Android device makers cannot be happy and there is probably a lot of lobbying to stop Google from this path. They may find a device maker revolt and be forced to pull out. On the other hand, most of the Android partners have poor options right now - Windows Mobile 6.5 is not much of an option and going back to Symbian means supporting rival Nokia - Google may well be seen as the lesser of all evils (as opposed to 'do no evil')

MICROSOFT

Microsoft once had 30% of the smartphone market share. Yes thats true. Today they are vanishing fast. They have seen many Windows Mobile handset makers shift to Android and Samsung launch their own OS, so expect WinMo to keep losing market share. The worst news, one could say devastating news was that HTC decided to focus on Android for this year, as they won't do WinMo 6.5 devices and await WinMo 7. Microsoft has promised WinMo 7 will be released at the end of this year but so often in the past Microsoft's launch dates have slipped and the WinMo handset community and developer community have no reassurances that Microsoft has woken up to mobile and is taking it any more seriously now as it has in the many years of the past. (My open letter to them has been read widely at Microsoft HQ but they still don't get it).  

Microsoft has to expend a lot of resources to support WinMo 6.5 and develop 7, all while their market share seems to be cut in half quarter after quarter after quarter. One wonders why they bother, and there is a deathwatch for WinMo also at Forum Oxford already. There is no light in this tunnel and one wonders at what point MS simply decides to throw in the towel and not bother to fight for this dwindling opporunity, especially as the fight heats up so much this year with so many fresh new players and far more modern operating systems.

WHAT OF APPS STORES?

Haha, Apps stores are a total non-story. They do not matter one iota in the big battle for smartphones this year, but you will hear all kinds of silly stats and forecasts and billions of downloads. That will not determin the market success. I told you what decides market success globally in smartphones. I also told you the media's silly obsession with app stores is pointless. But I furthermore said that app stores are a good trend, and eventually, in many years from now, we may have real value out of app stores. Whenever you hear 'app store' mentioned in 2010 safely skip the story, it is meaningless to smartphone market success. Don't fall for the app store hype.

IN SUM

What will it look like after 2010 is done? I see Nokia in the 35 to 40 percent market share range. RIM will grow to the 22 - 25 percent market share. Apple may hold onto about 15-18 percent share depending on how 'awesome' the next June 2010 version of their iPhone is. Samsung is likely to grow at least past the others with Bada to fourth place and will certainly eventually overtake the iPhone, but that I see happening more in an 18 month scale than this year. Still they will be a solid number 4. I'd put them around 10% give or take a few points.

HTC will be the biggest of the smaller players due in large part to Google's Nexus and its brand. It will help sell any HTCs. I would say HTC grows but to something like 6% or 7%. At worst they hold fifth place at about 5%. Toshiba is going to push abroad, expect them to battle HTC. LG is a dark horse, depending on if they go full steam suddenly into smartphones or are happy to do touch screen feature phones.

The other brands will be in the roughly 1 percent or less range including Motorola. SonyEricsson, Palm, some other Japanese makers, Google's own brand (double-counted in HTC above), and Dell. Should SonyEricsson do a PSP phone (most likely then as a smarpthone) that would give SE a big boost. And I'm pretty sure we'll see more PC makers rushing to a smartphone near you, like Lenovo, Acer, HP, Toshiba etc.

It will be a bloodbath in 2010 and we will be keeping score in the media often. The only thing I urge you to keep in mind - the US market is totally not symptomatic of the rest of the world. Only one in 12 phones sold in the world is in America, so don't think the biggest battlefield will be on those shores. No, the big battles at the high end of the price range will be in Western Europe and the low end of the smartphone battle will be in Asia. Those are the markets where this war will be won or lost. But it will be an interesting year in mobile.

Addendum - someone commented asking me to explicitly mention my background, that I have been employed by Nokia in the past and that Nokia is still a customer of mine. That is true, and I say so countless times in my books and on this blog and when I speak in public; but perhaps it again needs to be repeated? I left Nokia HQ in 2001 and my last post with them was the Global Head of Business Consulting. Perhaps I should also state that earlier in my career I was employed by a company that was an Authorized Apple Reseller as one of their Apple/Mac trainers, so I probably also have a strong positive Apple bias. Since 2001 I have been an independent consultant. I do not disclose any customers of my consulting who do not first openly acknowledge their relationship with me. Nokia has been kind enough to do so, so yes, Nokia is one of my reference customers. Out of this list of handset makers, so too my reference customers include RIM, Motorola, SonyEricsson and LG. There are others on this list who have not yet disclosed in public that they have used me. Note that in this blog I am positive of some of 'my customers' (RIM and LG) and negative of others (SonyEricsson and Motorola) and am both positive and negative of Nokia. I am known for speaking the truth as I see it, even when this means that I am critical companies that have given me consulting work. The amazing thing is, they do respect that, and keep giving me more work. But yes, if you need to hear it, yes I am a Finn, I was employed by Nokia up to 2001 and they are still giving me consulting work, as do four other companies in this list.

PS - two items may be of further interest to visitors. A video of my presentation of the mobile industry - nicely showing my slides as well, side-by-side, entitled the next four billion (mobile phone subscriptions to the planet that has only 6.7 billion people and over 4 billion mobile phones) has been viewed over 3,000 times already and many seem to quite like it. Its at this link Tomi Ahonen keynote presentation from Picnic conference Amsterdam.

And for those who would like to read about some astonishing numbers of the mobile phone industry - more cameraphones than digital cameras, more alarm clocks used on phone than stand-alone alarm clocks etc, read my essay on The Nokia Decade.

UPDATE Feb 10, 2010  - The TomiAhonen Almanac has now been released, it has 180 pages, 84 charts and tables (13 more than the 2009 edition) including a whole chapter dedicated to phones and smartphones. See sample stats, first opinions and ordering info at this story TomiAhonen Almanac 2010 Released.

Comments

[cycnus]

@David Rota
The price of MMS in your country is really crazy. In Indonesia the official price for SMS is around US$ 0.015, but after sending 8 SMS (around US$ 0.12), you got a free 300 SMS. And most operator priced the MMS almost the same price as SMS. Only the biggest operator have MMS rates twice the SMS.

But there's always a promotion. For example, the smallest GSM provider gives 1000 MMS each month on 2009. Several other provider gives 10 free MMS each day after you spend US$1 (if you today use the phone until it reach US$1, they instantly give you 10 free MMS to be used before 24.00 midnight or it's gone).

So, the price of MMS in Indonesia is next to nothing.

I also have a 70 years old relative that was capable of using computer, but only open email once a week, sending her an MMS is the easier method to be sure she saw the picture immediately.

Regarding the webkit browser, the phone you were having is too old. I believe you need at least S60v3FP2 or S60v5 to be able to see youtube directly on your phone. And I do believe nokia is doing the right way, because if I go to nokia conversations (conversations.nokia.com), I would not be able to see the embedded video if I'm using iphone because it's not on the youtube. but on nokia, I would able to see it.

This is nokia 5800XM playing youtube.
http://www.youtube.com/watch?v=SRq_VjEpqzo
a simple tap on the 5800XM screen will focus the phone on the video (full screen video).

[cycnus]

@Tomi

Regarding Bada,
I disagree with your point of view on the badaOS. I believe for non-smartphone, OS is unimportant, since user just want to be able to phone + SMS. Therefore if Samsung want to position bada as the S40 competitor, they might success.

But on the real smartphone, I don't think it would be easy for bada to be success. I think 3 already is a crowd. The choice between Symbian, Maemo, iphoneOS, RIM, android, WebOS, and bada is already too much. And for me, Bada seems like a bad decision. A great ambition, but making an OS is different from making a skin for OS.

I bet my money on nokia, since they will make Symbian and Maemo source compatible with QT. I also think that iphoneOS/RIM/android wouldn't be gone in 2010. But Bada as a real smartphone OS in 2010 is like a maiden voyage entering a big storm. It would be interesting if they can beat the veteran palm webOS. I love palm, own a couple of their device, and think that their loosing the war just because 3 is a crowd. Therefore this would be very interesting for me.

[Sean]

Stumbled accross this post thanks to a pointer from @janchipchase - really excellent analysis and then debate in the comments, as a non-telecoms person, I was impressed by the passion with which the various viewpoints are held. I think mobile computing aka smartphones are an economic game changer, think PC but times ten. The traditional key success factors for mobile handset makers in this context while remaining necessary to get right will no longer be sufficient going forward to guarantee success. Success will rely on functionality and more precisely user experience. And I suspect killer app will be finance. A bank/atm/brokerage account/risk management device in every pocket. Which is why I suggested that Nokia use its huge market share and global reach to start making the transition now, and not cling stubbornly to their present business model for the next 15 years without building the business model that will inevitably replace it. I don't know what that business model will be - I suggested it could be a 21st century bank http://parkparadigm.com/2010/01/12/nokia-banking-people/ - but whatever it is, it's almost certainly different from what they have today and requires them to figure out which part of the new 'industrial stack' they want to play in (and hopefully dominate.) (cf. http://www.parkparadigm.com/2009/12/28/platforms-markets-and-bytes-video/ )

[cheap computers]

Nokia's smartphone market share remained well above its global handset market share, itself the best in the world.

[Tomi Ahonen]

Hi Davide, JB, cygnus, Davide (2nd), cygnus (2nd and 3rd), Sean and cheap

Thank you all for comments and for so many of you returning and debating the issues amongst yourselves. I will answer each of you of course

Davide (both replies) - First on iPhone, yes we agree, its primary innovations were on the UI and it was - as I say time and again - the only truly transformational phone ever, the single most important phone of our industry, more important to the industry even than the 'first' handheld phone by Motorola all those years ago.

On Google Android, I think here is a lot of potential, probably more so than with the iPhone OS/X because Android is open source and Linux based. I would expect it to evolve far more rapidly than Apple can, partly due to many handset makers involved and most of all being open source. So if it initially is not impressive, do give it a bit of time. I am not a programmer, but I do think that the iPhone OS/X design 'has to' suffer from the fact that its roots are in the Mac (PC) world - as variation of the Mac OS/X similarly how Windows Mobile has roots in the PC based Windows, where Android was built from the ground up as a smartphone OS. But as I said, I am not a programmer and there is more to making an OS succeed than strictly being 'best' haha..

As to RIM, Nokia etc 'ignoring the changes' - I think that is not a fair comment. Apple is clearly the best at making devices usable, but seriously - its first phone was not 'even' a true smartphone and even now its OS does not allow multitasking for example - so it is rather 'inferior' even when compared to far older versions of Symbian. But where Apple conveniently ignored many established paradigms of the smartphone space, they were able to then optimize their UI to be truly great at what it does well. Meanwhile, RIM and Nokia have introduced touch screens already and in many ways attempt to 'copy' Apple. Obviously they don't do it as well, initially. If you remember Windows 1.0 it was a horrible OS compared to the first Macintosh OS, but after some years Windows got ever better, and eventually, while Macs were always better, the differences became such that only real geeks and nerds would even notice. That is what will inevitably happen in mobile as well. The first 'lead' that Apple has, will be enormous. But the rivals will try to close the gap, and by focusing on areas where the gap is greatest, soon the rivals will be 'similar' while not probably ever totally catching up to the iPhone (just like Windows never caught up totally to the Mac).

Onto your second comment, about Italy today - yes there is bad pricing with MMS in many markets but I believe you can get far cheaper MMS rates as well as a user. And remember MMS is a multimedia - media - messaging channel. It is not 'optimal' for user-to-user messaging, ie for you and me to send pictures - even though it is suited for that. MMS is optimal to deliver media content, news headlines, pictures, videos by TV news, soap operas, magazines etc. And advertising obviously. In most markets where MMS is big, the majority of its revenues is derived from media, not person-to-person messaging. Now, think of the total user base. The total PC population that can access the internet is now about 1.2 billion. But MMS is used by over 1.7 billion people. So if you are the New York Times or CNN or whatever media brand, you can reach a larger audience via MMS - and be paid for your content. That is the big opportunity in MMS and its a shame that a top end smartphone like the iPhone did not support MMS.

Then on watching video 'because screen is so small' - let me just say this - don't think Davide that the mobile media (ie 7th mass media channel) is intended for you and me. It is intended for our teenager aged children and grandchildren. They have no problem at all watching video games and movies on their Nintendo Gameboys and PlayStation Portables. MTV said that their biggest lesson in developing mobile video content was that their viewers - young viewers - were TOTALLY ok with viewing 30 minutes at a time on the small screen, so rather than offer 5 minute 'snacking' on the phone, they now offer full 30 minute episodes of MTV content like Jackass etc. Don't think the screen won't work because you Davide won't do it. Think of teenagers, they certainly will. That is the future of this medium.

JB - very true, the majority of SMS users do indeed use T9 today, by wide margin. For them an 'upgrade' to touch screen will be welcome. BUT - I would argue for most who are 'addicted' to SMS, they will far prefer a QWERTY to a touch screen virtual keyboard. I think the touch screen virtual keyboard will be popular with 'digital immigrants' ie us older fogies who once used a laptop or desktop, and who then want a familiar experience, but for true digital natives, who have always been using SMS, they will go directly to QWERTY keyboards. Blackberry massive youth appeal globally speaks to this in just about every market.

cygnus (all 3 replies) - thanks. Very good points and thanks, perfect examples of the reality in the Emerging World countries and how MMS, SMS and browsing on phones is happening there.

About Bada, you make a great analogy - maiden voyage sailing into storm - and I do tend to agree it won't be easy. But Samsung have already committed to it. Now, lets assume for a moment, that the 'future' of the 'pocket computer platform' ie smartphones - will be determined to a disproportionate degree by its operating system, as happened with the desktop and laptop computers. If that is true, and Samsung is the second biggest phone maker but tiny in smartphones, it makes sense for them to make a strong play now into both smartphones and OSs. Clearly Microsoft is faltering as is Palm. Clearly Apple and Google are so new at it that they have not yet optimized the opportunity. And clearly Nokia is 'vulnerable' as it shifts from Symbian to Maemo in the long run. If Samsung ever wanted into this space, now is the right time. It won't be easy but they have announced it, and will definitely play this market for at least the next 2-3 years. And like I argued, Samsung - and only Samsung - can convert their existing portfolio into smartphone market share, which could easily jump ahead of all others except Symbian and RIM. If the media start to report that Bada is bigger than Android, WinMo and the iPhone, that would be huge news for Samsung and help them in their quest. But I totally agree with you, it won't be easy for them. I would bet far more on Bada than on Palm or WinMo though, what do you think?

Sean - happy to find you here. You make great observations. About the phone as the bank, yes it is 'inevitable' in the very long run, but we are talking decades not years. To do your full paycheck, pay for your utilities and your rent and car payments and groceries etc on your phone has been 'normal' in many countries like the Philippines, South Africa, Kenya, South Korea and Japan for many years; but the economic opportunity in mobile money is very weak. We - common users - are not willing to pay premium fees to bankers to handle our money on mobile. So either it requires very extensive re-thinking of the whole eco-system with massive cooperation with banks, credit cards, operators, handeset makers, points-of-purchase etc - like in Japan and South Korea; or else it works in markets where banking is weak, like in Africa etc. So yes, it will come, but it is VERY slow progress haha... But am happy you also see that. Incidentially, that (mobile money) does not need for the phone to be a smartphone, it can all be done in SMS or other very basic abilities.

cheap - thanks.

Thank you all for writing

Tomi Ahonen :-)

[cycnus]

Tomi,

I got your point about samsung, and I totally agree with you that samsung might have a better chance than palm/windows. Because, unlike palm/windows, their device already rule the world.

But I would like to point out, even nokia didn't convert most of their S40 phone to S60. And seeing Bada, I fell somehow that Samsung positioned bada as a Maemo/iPhone/Android counterpart. Therefore I would doubt that bada would fill the medium spectrum of their phone..... But.... nevertheless.... This year will be a very interesting year.

[David McClelland]

The iPod Touch reveals that the iPhone concept transcends the Smartphone space.

They are being purchased bulk for public schools in US.

Lump in iPad.

Would anyone buy any other smartphone without service? Has any other manufacturer proposed doing so?

Then I remembered Apple's true weakness: Hubris

[Tomi Ahonen]

Hi cygnus

Yes, very good point, it does depend a lot on where Samsung positions Bada. I would think that with Samsung's considerable investment in the whole world, not just attempting to fight for North America (again with Samsung taking more of a Nokia-like strategy than say Motorola, LG, Apple etc) - they would not try their own new-entrant smartphone platform focusing only on the top end (Maemo/iPhone etc).

Did you notice what Samsung came out saying, that they intend to triple their total smartphone sales this year - thats heading for 8% to 9% market share. If that is their published goal - and a very aggressive goal indeed - I think it comes back to the Bada strategy I outlined. Expect most of Samsung's new touch screen featurephones this year to be migrated to Bada... Mid range smartphones thus, not top end.

But yes, I have no insider knowledge of what they plan, I am just looking at 'obvious' strategic options for each of the players and their strengths and weaknesses. We have to see, it will be an exciting year

Tomi Ahonen :-)

[refurbished computers]

It is expanding its proportion of touch screen devices and more importantly, expanding its proportion of QWERTY phones against the Blackberry.

[cheap computers]

Many people believe that Apple has invented a whole lot of tech stuff, but that's not true, Apple integrates other's inventions, make them actually usable and turn them into unique, great products and bring them to the mass market.

[cheap computers]

It sounds great that Nokia is back as the top preferred phone brand among UK youth in the Mobile Youth survey of phone brand preferences.

[cheap computers]

It sounds great that Nokia is back as the top preferred phone brand among the youth in the Mobile Youth survey of phone brand preferences.

[Laptop Battery]

I have to assume that they will release a new browser based on their Torch Mobile acquisition sometime this year. If they do so, expect them to skyrocket up in the metrics that the media.

[دردشة عراقية]

Thank U Man

[duşakabin]

Its a side-show in the big global fight for smartphones. And while some North American players are indeed quite strong - RIM is the world's second largest smartphone maker behin

[pulse oximeter]

nice post! keep them coming

[white bowls]

I just love reading this post..Amazingly done..

[devlet hastaneleri]

is that IT departments will not determine phone types and will take on a different role - to secure networks against a variety of risks in a variety of handsets. It could make the business market far more volatile.

[banka rehberi]

hat is not so in mobile telecoms. US cellphone users (about 285 million subscriptions) represent only 7% of the global subscriber base of 4.6 Billion. While Americans are now getting heavily into smartphones, Forrester just today

[yer kaplamasi]

some more encouraging tid eep rolling in. Botswana reported a similar surge in Blackberry appeal among the youth as we've seen from Indonesia to Venezuela. Talkin