Bloodbath update, whats up with Samsung, Android, SonyEricsson and the others

I wrote updates of the Q3 results from Nokia and Apple, now the numbers 1 and 2 of the smartphone bloodbath. What of the rest of the contenders and pretenders. This is still a quick survey only, am still struggling to get back to 'current' on all of my blog postings, but lets get this over with. A few major observations of the rest of the gang.

RIM - remember, while RIM lost its 2nd biggest ranking to Apple in this Q3, RIM still grew unit sales of Blackberries in Q3 to 12.4 million. It is expanding the popularity of its phone in the consumer segment driven by the youth, and is making major advances in various markets of the emerging world. In India RIM rankes number 2 behind Nokia, on the Latin American continent, RIM is the number 1 smartphone maker with 40% of that market. We also need to bear in mind, that RIM grows unit sales every quarter-on-quarter, while Apple makes huge jump in Q3 of any year but then for the next 3 quarters, Apple sales are relatively flat. So if the current pattern continues, then RIM will 're-take' its position ahead of Apple iPhones sometime in the Spring of 2011. And then Apple likely would leapfrog RIM again in Q3. That may be an interesting 'see-saw' battle of market shares for a couple of years to come.

Samsung - wow. I told you the Galaxy was hot, but how hot? Samsung grew unit sales of smartphones by about 250% in just one quarter and are now the fourth largest smartphone maker - overtaking HTC. Most of Samsung's 7.85 million smartphone unit sales were Galaxy smartphones running on Android, which currently sell about 2 million Galaxies per month globally. I just retweeted today news from Japan, that the Galaxy has replaced the iPhone 4 as the most popular phone sold in Japan - and do remember, the Japanese are not very likely to accept a 'South Korean' phone as 'worthy' to use in Japan, yet the Galaxy has done that for Samsung. Meanwhile their Bada based Wave phones sold about 1.5 million units in Q3, getting as I have said, the best new smartphone OS launch, since the iPhone - yes, Bada has a better launch first quarter and a half, than Android even had. So for all those who think Bada is doomed - think again. Samsung is the strongest of the global players to go against Nokia the champ in smartphones.

I am projecting Samsung to pass Apple in Q1 of 2011. And because of Samsung's global footprint and carrier relationships and a vast product portfolio, its one rival who, once it passes Apple, will not need to worry about Apple re-taking it.. Samsung is destined to become the second biggest smartphone maker next year, as I have been predicting on this blog for a while. It is inevitable, if you understand the mobile phone market, not just obsess about whose phone is the best (obviously the iPhone is the most desirable phone, but while the Ferrari may be the most desirable car, it is not the world's bestselling car)

HTC - is the fifth biggest smartphone maker and the irony is that they've just had their best quarter ever, and are hot with both Android and new Microsoft Phone 7 based smartphones, yet they were just overtaken by Samsung. Yet, HTC is the little smartphone maker 'that could' like the little train that could in the children's story. They keep outperforming the market expectations and doing great things. But they are so small in the big picture of the world - not a Top 10 sized phone maker - so their smartphone performance is going to be a smaller side-note to this industry when the story is written at the end of the decade. But good performance none-the-less.

Motorola? There are some who claim that Motorola's smartphone strategy is 'working' or is somehow saving Motorola. Lets be very clear. In 2006 before the iPhone launched, Motorola was the second biggest mobile phone maker, held 21% of the world market, sold nearly 200 million mobile phones, were profitable, and offered both dumbphones and smartphones. Samsung took a similar situation in 2009, and converted it in one year to a market share of 10% of smartphones while retaining profitablity and holding onto its dumbphone market share. How did Moto do? It slashed and burned its dumbphone market share, abandoning most regional markets and now sells less than 3% of all mobile phones. How did that transition to smartphones succeed? They managed to grab - drum roll - 5% of the smartphone market share. That is miserable! That is pathetic. And this they did with massive profits, yes? No, they lost so much money in this time that the company is being split and sold in pieces. For Q3 they made a miniscule profit. Yes, there is the 'right way' to convert your existing dumbphone user base to smartphones (see Samsung) and the wrong way (see Motorola). Not an impressive performance. But yes, Motorola who was number 2 in dumbphones, is now number 6 in smartphones..

SonyEricsson - the smartphones business is trivial for the former giant dumbphone maker. The big expectation is now the rumored Playstation phone, which some Sony executives finally admitted, that there is a PSP phone project in the works, but would not confirm when or what form factor or even whether it would be sold as SonyEricsson or perhaps a Sony product.

Others, not much worth mentioning. There was a rumor that Google might resurrect the Nexus phone range with a Nexus Two but that rumor was squashed by Google. Garmin the GPS guys left the smartphone business, not a big surprise there.

OPERATING SYSTEMS

Symbian and MeeGo - Nokia's Symbian is now shipping its S^3 version which by early reviews seems good enough, but by no means better than the leaders like the iPhone or Android. But Symbian has come a long way and is now a viable touch screen UI. But Symbian received very unwelcome news when the last two global handset brands in its family announced they are quitting Symbian. SonyEricsson and Samsung both reported that they will no longer provide handsets using Symbian. It is not the end of multi-vendor support of Symbian, as it is still used by NTT DoCoMo specified featurephones in Japan, so there are several million Symbian operated phones selling in Japan every quarter, but that is about the extent of Symbian now. Its Nokia and NTT DoCoMo, N & N..   Meanwhile MeeGo is slated for first phones to ship in 2011.

So lots of huge news for Android. They are now the second best-selling smartphone OS, and sold 20.9 million smartphones in Q3. They are rapidly approaching the levels of Symbian and the big fight will be in 2011 when will the Android family grow bigger than Symbian. Three interesting caveats, one, Samsung's Android 'loyalty' is suspect, as it will definitely shift support to its own Bada OS during 2011. Secondly, what of Nokia's shift from Symbian to MeeGo. As premium Nokia phones will feature MeeGo, there will be a gradual shift away from Symbian. And then what of HTC? It built its origins on Windows Mobile. It is now a big Android maker, but are committed to Phone 7. Next year may see HTC shifting some vital support away from Android to Phone 7. It makes the Symbian vs Android battle royale even the more interesting.

What else? Sharp is to release its 3D phone on the Softbank network in Japan before Christmas. It will be an Android phone. You can expect it to be featured in Sharp's 'return strategy' to return to major markets as a phone maker. Having a 3D display will give Sharp a lot of visibility early in 2011 when that phone launches in new markets.

Palm? HP has been very lazy in pushing its owned Palm unit, and this is a market that very bizarrely HP is neglecting. Not a 'mobile first' strategy over at Palm.

Phone 7, Microsoft's OS is now shipping in the first phones. It is getting good reviews. But the family of brands supporting Phone 7 is far smaller than what once supported Windows Mobile. Microsoft will be struggling to grow to any meaningful market share.

Thats my quick views to the bloodbath. I will keep monitoring the space and reporting on major developments.

Comments

[HCE]

Wow! I might just be the first to comment on this article. Let's take the smartphone makers one by one.

1. RIM - If the iPhone does indeed come to Verizon in Q1 2011 (and perhaps also to T-Mobile), I don't think RIM will re-take the smartphone lead from Apple again. RIM will hang around as a major player for a long time because of its strength in the corporate sector but year-over-year, their market share will probably slowly decline.

2. Samsung - Mostly agree with your view but I am not completely confident of how quickly Samsung will overtake Apple - because of iPhone coming to Verizon. That will give Apple a boost in a couple of quarters that are usually quite weak for them. However, another year and unless Apple throws in some variety to their offerings, Samsung could well overtake them. Being Apple, you're not going to see much variety but for them to keep ahead of Samsung, you'll need some variety at least. Windows Phone 7 is a big unknown for them - a good debut for Windows Phone 7 and they might even overtake Apple in Q1 2011.

3. HTC - Not much to say I think. I think how well they do will depend on how the public responds to the Windows Phone 7 products. Android will, of course, continue to do well.

4. Motorola - Frankly, I don't see what you have against Motorola. Given the fact that they screwed up big time earlier this decade, I don't see what else they could have done to revive their company. At least, there is a chance that the company will be profitable going forward and they have a very good mix of products.

5. Sony Ericsson - No idea what these guys are doing. They took forever to move to Android 2.1 - they did it at the time when 2.3 is coming out. If their software is going to lag as much as this then they are not going to attract customers - no matter how good their hardware is. The so-called PSP phone is rather intriguing, though.

6. Palm - Too early to tell. I don't think you can blame HP for being lazy. The Palm deal was completed only 3 months or so ago. It takes time to come up with new hardware. They did release a new version of their OS - which is a good thing. Let us see what they have a year from now and then judge.

7. LG - No idea what these guys are doing. They seem pretty out of it as far as smartphones are concerned. They are going to be coming out with a lot of Windows Phone 7 devices, though, so they may yet make a comeback.

- HCE

[Johannes Peltola]

Good article as usual.
Personally I think the winners will be Apple in the short term, Samsung in the mid-term and Nokia in the mid-long term.
Android competition intensifies and will drive the margins of Android-dependent makers down (especially Motorola and LG), which will cause them to focus more on Windows Phone 7.
Samsung will make good profits with Bada in mid-tier smartphones, competing directly with Symbian devices.
The iPhone loses hype as Android and WP7 gain market share, and will be driven into its own high margin premium niche by Android and MeeGo unless Apple is successful in innovating and diversifying its smartphone portfolio.
LG and Motorola just don't have any sustainable competitive advantage and will lose when the margins start falling.
I believe HTC will survive as a flexible but small player that is able to transform when the market requires it to.
RIM has run out of ideas, and is in a tight spot to come up with something new.
Nokia has the best long term strategy for global domination, now it just has to deliver.

That said, my prediction for the order of drop outs is:
1.Palm
2.SonyEricsson
3.Motorola
4.LG

-These opinions are based on facts and hunches. I own Nokia stocks, which might cloud my reasoning.

[Matthew Artero]

Thanks Tomi for your hardwork and sharing with us.

In these comments we keep seeing the Apple fan boys brag about Apple being the most profitable but they are comparing apples to oranges.

Except for the iPod Apple doesn't really have the issue of new phones canibalizing its existing products. I think Nokia and Samsung have the right idea of converting their users to their higher end products.

We have seen comments here where Apple fan boys insist that Nokia and others should follow Apple's example and forget about lower end phones. Tomi now shows us that Motorola failed miserably at doing what the Apple fan boys suggest.

Apple has the freedom of a new commer with no customers to lose. Yes, maintaining those customers are costing Nokia at the moment but eventually they all upgrade just like we all do with our cars, computers, and so on.

Dumping them like Motorola did would send them rushing to explore other brands. Then the cost of fighting to get them back may turn out to be even more expensive then nurturing them into a conversion.

Apple is just not in the same position as the older phone makers. The older makers have something to lose that is worth protecting. If they succeed with their conversions we will say they were right all along. If they fail to convert their users we will still say they were right to try.

[kevin]

Motorola had to dump its dumbphones quickly because it was losing money on each one that was sold. It was not a low-cost producer like Nokia, so when Nokia drove a price war, Motorola was toast. It didn't have the luxury of time to move them to smartphones since it didn't have any at the time. As it is, during this last quarter, only 42% of its units sold were Android-based smartphones.

Nokia (and Samsung), as low-cost high-volume dumbphone producer, continues to make profits on dumbphones, so it can keep selling them. Nokia has been offering smartphone upgrades to its users for a long time, but Apple upped the smartphone bar in 2008. Surveys have shown that Nokia has since lost lots of users to Apple and Android-based phones because its smartphones (including the N8) have not reached the new bar. But the good news is that there are still lots more Nokia dumbphone users who are converting to cheaper smartphones (such as the 523x and many E-series). Nokia has driven a price war on these cheaper smartphones as well, and that is putting a squeeze on RIM (who also doesn't have a good OS/UI at the iPhone/Android-level). Nokia still has time to offer a more expensive MeeGo/QT smartphone that reaches or exceeds the bar, but it really needs to execute, because each user lost to iPhone/Android today is one less for it to upgrade tomorrow.

As for Samsung, it's not clear to me that they have as much brand loyalty as Nokia, even though they have developed a decent reputation, so they can't count as much on blind user upgrades. But they do have distribution and low-cost production, so they should compete better, at any part of the smartphone price spectrum, than any of the other Android/Windows Phone 7 vendors.

LG's production costs are higher than those of Samsung and Nokia (but less than that of Motorola). Because Nokia drove dumbphone prices lower, LG started taking losses this year. In the conversion to smartphones, LG waited for MS Windows Phone 7 rather than go full-bore with Android, and that has taken longer than they wanted, which has left them behind the others.

[Matthew Artero]

Kevin,

Are you predicting the doom of the iPhone? Apple is not in a price war yet, but when it comes is it going to suffer the same fate as Motorola?

We know that when the price war starts Apple will not have the same high profits it has now. The older companies are already in a lean mode so when the price war starts they probably won’t be affected much if at all.

Saying that Apple will eventually have to deal with a price war is not an unreasonable thing to say seeing as how the iPod is no longer a big deal and Droid phones outsell the iPhone.

It’s only a matter of time for the other manufacturers to build up their war chests and position their manufacturing to target would be iPhone customers. If they can’t win at the same price of course they will try to win at a cut price. Thanks for the observation Kevin.

Here is a link to a news video showing cannibalized products. Something Tomi has been saying for a long time is continuing to happen. It even tells the percentage of dumbphone sells being replaced with smartphone sells in the USA; which means the time for the price war against the iPhone is getting closer.

http://financiallyfit.yahoo.com/finance/video-top-5-devices-losing-their-appeal-22777671

[Matthew Artero]

Tomi,

Are your dangerous slides publicly available online? 'The future of money and payments: Mobile Payment Industry Perspectives'

[kevin]

Price wars are effective when an item is at or approaching commodity status. An item reaches that status when there are really no further innovations or improvements to the item that matter to the consumer at that price.

I think the top-end of the smartphone has a long ways to go before it reaches commodity status. There are lots of additional innovative capabilities that users want added to their always-connected-computer-that-is-always-with-you-in-your-pocket, especially if the price doesn't go up. There are obvious things like faster 4G connections, mobile payments/NFC, and live TV. And there are less obvious things like linking it together with your computers, tablets, and home TVs.

At the same time, Apple is rapidly becoming a low-cost producer. They get the best prices and priority on flash memory; they get great prices on 3.5" displays and other components; they make their own highly-efficient A4 CPU (and its design/ development cost is amortiZed over multiple high-volume products); their OS, apps & developer software are leveraged over both iOS and Mac products; they sell lots of their products in their own online and retail stores; they manufacture and assemble in low-cost China. They sold over 23 million iOS devices last quarter, and should top 30m this quarter, which is about the same level of sales as all of Nokia's converged devices.

So a price war at the high end is unlikely for at least until 2012. Nokia awaits MeeGo, Samsung is just starting to ramp up smartphones. These devices have more room for innovation.

[sam]

Samsung reported "cumulative" sales for Galaxy S and Wave. Both begun sales in third quarter so about 1m wave and 5m Galaxy S in 3Q.

[kevin]

Examples of Apple's low-cost prowess are the iPad, iPod touch, and the new AppleTV. The iPad was definitely helped by starting out only being sold in Apple's own retail stores, where Apple gets to keep the retail markup for itself, and where the costs of operating those stores are spread across all of Apple's products. And given the must-have-for-Christmas-gift popularity of Apple's products, you can be assured they get pretty good deals at Best Buy, Radio Shack, Target, and even Walmart. Apple has figured out how to turn it's intangible brand into real dollars.

[Romain]

Hi Tomi,

I don't think we've read the same reviews Of Symbian 3...
The ones i read weren't really positive
And from my own experience it us just an incremental improvement over S60 5th ed, with true touch controls rather than The quick and dirty touch awareness they added on top Of their touch unfriendly s60 ui

[kevin]

"Peter Chou, chief executive of HTC, had previously said he saw “little value” in HTC running its own application store. But he has also said that it was no longer enough for HTC to simply customise the standard Android user interface with its own “skin”: “It is not enough to be skin-deep. We need to go bone-deep.”"

Samsung taking the lead in Android-based smartphones (plus its low-cost producer status) seems to have caused HTC to plan to open its own app store and rethink what it's doing with Android and Sense UI. Altho still a bit cloudy, it looks like HTC may be planning to fork Android for its own purposes. Maybe even in combo with its just-arriving WP7 phones. See rest of article at http://www.ft.com/cms/s/2/7a16b2fe-ea92-11df-b28d-00144feab49a.html

[Brian S Hall]

Great numbers as always!
On my site, I rank the Samsung Galaxy as the best smartphone that is not an iPhone. Still, these Samsung numbers are surprising.

[John Carter]

Android will surpass in my opinion all the other operating systems. Simply because of google's intentions...open source is king ! :>

[Johan R]

Tomi, what's your view on the "missing" 77 million phones, i.e. Gartner reporting 77 million more phones sold than IDC. Also, Gartner seems to claim huge growth for "other" manufacturers than the top ten... Any comment?

[Tomi Ahonen]

(Thank you for the comments. I will respond to all individually)

Hi HCE, Johannes, Matthew and kevin

HCE - Ok.. Good stuff. On RIM, you are only thinking US market with VZ, remember RIM is taking world by storm, in youth segment. RIM's US market share has been in gradual decline for a long time. On Samsung, we tend to agree but your point again about VZ iPhone is US only, remember Samsung has 2nd widest reach of handset partners in the global carriers (behind only Nokia). So they are not particularly dependent on US market, but even so, Samsung is on all 4 carriers already with Galaxy.

On Motorola, haha ok, yeah, at this point what else an they do. But they messed it up badly before. Now they are lingering in 6th place smartphones.. See how quickly Samsung overtook them. LG could do the same if LG gets serious, meanwhile ZTE is gobbling up the abandoned ex-Moto markets and will become Android smartphone challenger to Moto soon as well.

Johannes - great forecast, thanks! We'll monitor it on the blog and do come back and we'll return to it when the flies start to drop haha..

Matthew - thanks, yes you put it very succinctly, thanks. That is exactly the point, a new 'only smartphones' maker does not have to migrate phones. Its not the same race, and long-term success will not be judged by the same metrics. Thanks

kevin - good points, thanks. I would disagree a bit on the Moto part, they had both smartphones and low-cost phones back in January of 2007 when the iPhone was launched, so if we use that time-frame as our evaluation point, the Moto management messed up on both counts, with expanding their smartphones reach at the time, and with migrating the dumbphone population. But other than that, I think we agree on much..

Thank you all for writing, I will return with more direct comments

Tomi Ahonen :-)

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hello

[gadgettown]

I am excited about this electrically charged laptop challenge . I hope it works out. I like your blog. its very funy.
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[Caesar]

I thank you for the reference. I usually don't like buying products without trying them first, if you have a light version I can try, I will and if it's any good, I'll buy it.

[white iphone 4]

mon commentaire ont été mangés. Quoi qu'il en soit, je voulais dire que c'est agréable de savoir que quelqu'un d'autre a également mentionné ce que j'ai eu du mal à trouver la même information ailleurs

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