Apple 20.3M iPhones in Q2. WOW. Throws gauntlet to Nokia and Samsung: stakes claim at biggest smartphone maker status

So the first of the 3 biggest smartphone makers has just announced Q2 results. Apple announces 20.3 Million iPhones. Wow. That is a monster quarter by Apple not because it grew by 9% quarter-on-quarter (three months ago the iPhone grew by 15% quarter-on-quarter) - the reason this is superb performance, is that Apple managed the growth in both unit sales and market share - is that there was no new iPhone 5 released for late June.


UPDATE 21 JULY - Yes, Nokia Q2 results came in at only 17.3M smartphones. Apple has toppled Nokia. I now only await Samsung results (May 29). We know the biggest is no longer Nokia. Depends on Sammy's performance whether its Apple or Samsung. Congratulations Apple for passing Nokia in only 4 years. Wow! (here is the link to my blog on Nokia Q2 results analysis which includes the paragraph also on 'A Tale of Two Steves' comparing Steve Jobs and Stephen Elop)


So, I am tentatively projecting iPhones's market share to be 19%, up one percentage point from 18% in Q1. Apple is now closing in on selling 1 out of every 5 smartphones on the planet. Awesome for the smartphone brand which is by far the most expensive phone among the major brands (ie excluding the luxury phones like Vertu and Tag Heuer etc). Apple obviously grew revenues and grew profits massively this past quarter. It also reported excellent sales in its iPads and Macs. Only iPod sales declined (being partly cannibalized by the iPhone and iPad).

How does this set the stage for global hegemony in smartphone handset makers? Its an awesome first salvo in the battle among the big 3. We hear from every market that Nokia sales in smartphones are down. Nokia will report on Thursday. Nokia sold 24.3 Million in Q1 and its quite likely Nokia's fall in sales will drop it below the iPhone in smartphones (but Nokia will likely remain the world's biggest mobile phone handset maker when we add 'dumbphones' where Apple is not even nearly rivalling Nokia, there Nokia's real rival is of course Samsung). But yes, if Nokia reports sales that dip under the 20M level, so any smartphone sales level in the 'teens' (19M, 18M, 17M etc) then yes, iPhone will have jumped past Nokia and relegated Nokia from the top dog status in smartphone makers for the first time in smartphone history (as Nokia invented the space and has been biggest smartphone maker from the beginning up to now).

If so, it was this blog who first called it on 6 June, that Apple has passed Nokia in smartphone makers.

But that is before we have Samsung Q2 numbers. And Samsung will report on 29 July. The gossip around Samsung talks of a monster quarter there. In Q1 Samsung sold 12.6 Million smartphones and under normal times, it would be nearly impossible for one brand to jump from under 13 Million to around 20 Million in one quarter, but these are not normal times. After the Nokia smartphone customer give-away of the Stephen Elop 'windfall' when the Symbian Nokia phone sales collapsed from February, now is the time for rival smartphone makers to gobble up all those disgruntled Nokia Symbian customers. Obviously Apple has taken 1.7 Million of those. But the analysts around Samsung are estimating something around 19 Million smartphone sales for the South Korean maker. Samsung mobile phones unit CEO just yesterday released a bullish statement about the full year 2011 Samsung smartphone sales, saying that Samsung will exceed its 60 Million smartphone sales target (up from 25 Million sales in 2010 making Samsung the fastest-growing smartphone manufacturer this year). It means a Samsung Q2 could be tantalizingly close to the Apple 20.3 Million number. My gut says Sammy will not quite make it this quarter but Nomura earlier in June already called it for Samsung to have become biggest smartphone maker this quarter, so it will be very close and if they have a surprising surge, they could have done it. We'll know on 29 May.

Where did the 1.7M unit sales growth come from? Apple obviously has benefitted from the Nokia give-away, but also remember RIM reported a decline in smartphone sales for Q2. And RIM's loss in Blackbrry sales was specific to major losses in the North American market (while growing international sales). So the iPhone has taken some of Blackberry's American Pie, while another part of iPhone growth came by spoiling Nokia's European Vacation. Was there also perhaps for Apple a China Syndrome, we will probably know soon as we get the various analysts reporting in and the data filtered and analyzed.

Meanwhile please remember, on the platforms for smartphones, Google's Android is by far the biggest now, and they sold about 49 Million smartphones in Q2 so yes, Android selling about 2.5x more smartphones now globally than the iPhone. So while Apple is likely now the world's biggest actual mobile phone smartphone handset maker, the operating system with most smartphones sold will continue to be, with an ever-increasing lead - Google's Android.

So, lets wait until we get the Nokia numbers before we formally celebrate Apple toppling Nokia from biggest smartphone crown. That is very likely to have happened now and we'll know in two days. And then we have to wait another week to find out if Apple has also taken the crown (or if it was grabbed by Samsung). But Congratulations to Cupertino! This is a MONSTER quarter once again. Full 10 out of 10 points for excellence in smartphone sales. With almost a year-old design, Apple still grows unit sales, increases revenues, increases profits, and increases market share. Excellent Apple. Truly great.

And two superb silver linings on the record-breaking quarter for Apple. We are expecting the next iPhone (maybe iPhone 4S or may be iPhone 5) and expected to be sold in late August or September. When that new iPhone comes to the market, it will be again Apple loyalists camping outside stores and long lines waiting for it. That hysteria will boost iPhone sales to a new record.

And we are also hearing ever stronger gossip of the lower-priced Nano iPhone (as I called on this blog for now more than a year) and whenever that is launched, hopefully by September, but at least please Apple release it in time for Christmas sales - that would be a huge further jump in iPhone sales. So expect a banner year for Apple in smartphones, clearly the master of the smartphone class in this Year 2 of the Smartphone Bloodbath.

Comments

[Joe]

Regarding Samsung, news just came out that a Senior Product Manager from RIM just joined them. Might push them even further in the future and is another downward sign for RIM.

[Earendil Star]

Fantastic performance from Apple, a real innovator.
I am really curious to see what Samsung's results will be: I saw it's Galaxy Pad 10.1 and it's really gorgeous. This race is really cool to follow. We'll see!
And of course, I am really curious to see what will happen to Nokia... and if the bloodbath is confirmed, if TH Elop remains at the helm...
In any case, thank you Tomi for your insight!

[Sonicnights]

Wow, quick on the draw tonight Tomi. Can't wait for final results from Sammy & Nokia. It's like the world cup final for phone geeks, only it happens every 3 mnths :-)

[kevin]

Tomi,

Are you beginning to understand Apple yet?

Just last week, you were still projecting Apple was down in sales and share from last quarter, and repeating foolish nonsense about delays due to SIM rejection. I didn't see any point in repeating what I told you long ago, which was Apple projected this growth long ago (due to CDMA, white iPhones, additional carriers, additional distribution at Apple Stores and other points). They foresaw the opportunity to switch to a Sep launch that would allow use of the A5 chip, have more software/capabilities such as iCloud, and be more competitive (newer model) at Christmas. It's obvious that Apple's perfect quarterly streak of annual market share gains continues.

So again, the cellular handset market is changing, and the way one projects it needs refinements. Beyond the basics of carriers and distribution (which of course are still important), Apps, iCloud, media content, and a family of tightly-UI-related devices of different form factors are driving purchases (and multiple purchases).

[Tom Ross]

Tomi, 19 million is Samsung's official smartphone sales figure for Q2. They released an earnings preview on 07 July 2011. Apple wins Q2.

http://old.news.yahoo.com/s/ap/20110707/ap_on_hi_te/as_skorea_samsung

For the full year the race will be interesting. Apple is 7 million in the lead. They'll probably lose Q3. Q4 might be a tie. I could see both companies approaching 100 million units by the end of the year.

[@rodrigottr]

Apple could be 4 times more valuable then ExxonMobil if their ability on innovating on computing where not smaller then their ability on creating competitors.

Apple created the market of personal computers but who dominated it? Microsoft. How? Why?

While Apple created what would be the base of next 30 years of personal computing Steve Job's jealousy with what he creates, his perfectionism and obsessive compulsive controlling behavior made it's software stuck into Apple's hardware limiting the possibilities of personalization and prices high. Knowing this, Microsoft stole Apple's OS and licensed (windows) it for free to giant hardware makers while Apple got stuck into a little niche market.

Now Apple turns the mobile phones market into a market of pocket computing devices (smartphones). But who will dominate it? We don't know but surely won't be Apple.

How? Why?

Steve Job's jealousy with what he creates, his perfectionism and obsessive compulsive controlling behavior made it's software stuck into Apple's hardware limiting the possibilities of personalization and prices high. Knowing this Google copied Apple's OS (Android) and licensed it for free to giant hardware makers while Apple got stuck into a little niche market.

Surely we cannot say that 20% of smartphones it a niche market. But we can bet that Apple won't have the same growth on cheaper devices markets when dumbphones be completely substituted by smartphones. As we all know, Android is having an excellent performance on cheaper smartphones. And there is another reason why Apple is going to create more competition: their tight control over everything creates pressure from the environment for new OSes.

So in the end all we can say is that story repeats itself.

[@rodrigottr]

On keeping too high margins while behaving unfriendly with many players Apple is always bringing trouble to themselves and closing themselves on a position that they must innovate or innovate to keep the lead. Which is bringing pressure over a competence that normally doesn't works fine under pressure. If they drop the ball, then they will be in trouble. And that is something that can happen soon or later as Steve Job's health is not very good and as the company still depends too much on him to many decisions.

Perhaps, the apogee on this quarter is the turning point for its decline.

[PERUS]

I knew it and I can't wait to get the new iPhone this year^^
Soon or later they have enough power to push operators.

Yes, they paid one time fee and on-going royalties to Nokia but it's peace of cake compared to what they currently have. They can buy Nokia easily if they really want to.

It's better to keep fighting on Samsung cases because at the end if they win, Apple could probably get an exclusive deal agreement i.e. for latest (and cheaper) hardware components. And could sell two or three different iPhone types for different price-segments.

[Jimmy Joe]

One rumour I've heard is that the low-cost iPhone will the 3Gs which will receive a price cut whene the new phone is announces. It makes sense to me: it's a proven product and zero additional R&D.

[Rocking Robin]

Why isn't Apple releasing numbers for individual phone sales? iPhone 3GS is now going for equivalent of $20-$40 in some countries and even in America, it's $49 I think. Developing countries are snapping up this model. So to say these sales are just all iPhone 4 is lame. Let's get the real scoop on iPhone 4 sales..... anybody can sell or give away cheap iphones 3GS or androids at $20 a pop!!!

[Tomi T Ahonen]

Hi Joe, Earendil, Sonicnights, kevin, Baron95 and LeeBase

Joe - thanks. Yeah RIM is bleeding

Earendil - yeah me too! Sammy results have me almost awake at nights now as I am eagerly waiting for July 29..

Sonicnights - haha, good comparison, totally agree yes. We are witnessing tech history being made.

kevin - that was below the belt, kevin and you know it. I was not the only analyst who projected iPhone decline - in fact EVERY other Apple analyst that I saw, projected a decline, most of them a bigger decline than I did (And I said it was conceivable Apple would grow sales, due to Nokia collapse).

The reason for the iPhone growth was not CDMA phones, AT&T still outsells VZ by 2 to 1. The reason is not iPhone White. The reason is clearly Nokia collapse. Go to Apple's second best market after USA: China. Before February, Nokia market share was 72%. It is now 22%. Thats your bonus 1.7 million iPhone growth right there.

But I totally agree with you that the market is evolving and the tools to project it also need to evolve. I try my best and I dare claim I am still the most accurate forecaster of our industry - and we forecasters also all say, no forecaster can be 100% right and no forecast can be 100% on the money unless by accident. That is simply not the nature of forecasting haha. But honestly, kevin - which other source told you in mid-February that Apple would be taking market share from Nokia due to the Microsoft announcement? Can you show me one other source that said so by say Feb 18? Do you really mean to say, this blog is not mostly in the right ballpark?

Baron95 - yes, you are totally right and it is a significant point I should have mentioned. Apple's profitability is spectacular, driven by their huge desirability globally. But you also know I have an allergy against discussions about levels of profit (it is important to be profitable else you are not viable in the long run, but the AMOUNT of profit is more of interest to the investors than those who study the platforms). I do not want this blog polluted with pointless debates of today's evaluation of a given stock based on the latest gossip about some profits etc... But yes, in this case I could have mentioned it, you are right.

LeeBase - and so, if Apple releases an iPhone Nano, it is by your opinion automatically the appropriate time to do so, and perfect timing, because it is Apple. But for a professional analyst of this industry with far longer history with smartphones than Apple, cannot suggest that the timing for the Nano is perhaps earlier than when Apple releases it? A bit unfair I'd say :-)

Also you should remember, you read the blog - back last spring, when I explained why it was the right time to do the Nano, was that the format was like the 3GS but with some critical differences to create a new actual handset that is visually distinguishable. The business logic was valid back then, that the Nano could be done with roughly half price of what was the iPhone 4, and with roughly the same profit margin.

Then you make several statements that are simply not true. That there was no Nokia gift to Apple? See my comments in the above about China. Same is true of most European major markets. The evidence is clear that Apple's gain came out of Nokia's losses in those markets (and from RIM's loss in the USA).

And then your line that its apps not SMS that drives the iPhone success. Again, the evidence is overwhelming, many consumer surveys clearly say, even for USA based smartphone users - the primary use of the smartphone is SMS. And when selecting a smartphone, apps don't factor in the top 3 reasons in any markets. Sorry simply not true.

Thank you all for writing, please keep the comments coming, and tomorrow we do Nokia..

Tomi Ahonen :-)

[Alex Kerr]

The only thing Nokia seem to be doing right (other than making the N9, which Nokia have now sidelined despite receiving rave reviews across the tech industry including from traditional Nokia haters) is with their plans for S40.

S40 is imminently going to be turning into a smartphone platform when they stick Qt on it ("core to the next billion" as Nokia state, all on S40 handsets). The industry REALLY is not going to like this, and is going to have to be dragged kicking and screaming into accepting it has become a smartphone platform (I say that in a future tense, it's currently almost a de facto smartphone platform but I'll play conservative and say it's not there yet).

If anyone disagrees with the notion of S40 being a fully fledged smartphone platform - when it gets Qt - then I'd like to know why not exactly? I can't think of a way of escaping that designation. S40 has touch, an app store, hardware specs easily in the smartphone range, will have a smartphone level SDK and app platform (Qt), Nokia Maps on S40, everything really. It is not yet announced that it will have multitasking. If it does not then that places it on a par with every iPhone to date (which still does not have multitasking by any non-Apple-marketing-BS definition of multitasking). And is the iPhone considered a smartphone?

So...S40 will become a smartphone. And sell some vast number per year. Hundreds of millions, leaving Apple, Android et al way behind in it's dust. So what will that do then to the figures and statistics. I expect lots of "yeah, but...", "no, but...", and desperate, desperate attempts from people to attempt to avoid classifying that future S40-with-Qt as a smartphone platform, but as long as they do it will be the elephant in the smartphone-room, and will sit there staring down the industry until people admit the truth :)

So, Nokia will own the low end low-end-smartphone space, big time. In numbers it will win. At the high end? Who knows? Surprises happen and maybe their WP phones will sell in big numbers? Personally I doubt it, but stranger things have happened. So the fight we're really talking about in this article, looking forward, is the high end smartphone space.

[kevin]

Tomi,
Didn't mean to hit below the belt, but I questioned your comments about Apple in your earlier blog posts these past three months but you didn't respond, and then repeated them at least twice more. I take that as you thinking you're right when you weren't.

Apple had gains in China but those started last year (on a smaller scale). But is Nokia going to be the source of everyone's gains? That's ridiculous; RIM and SE surely haven't taken advantage. Most thought (even you) RIM would be the main beneficiary as it offers similar QWERTY-phones to Nokia, whereas the iPhone is different than Nokia's best selling phones. Companies still need to execute, and Apple did by offering the white iPhone (which even you admit is wildly popular in Asia).

Though I'm not an analyst, in comments on earlier posts, I said that Apple would grow, not shrink this quarter. Many non-pro analysts estimated growth (though no one went over 20m). One could easily say that all the pros are now flummoxed by Apple's strategies and execution.

[Bill]

Tomi - you missed an earlier comment citing a press release from Samsung saying they sold 19M smartphones in Q2.

http://old.news.yahoo.com/s/ap/20110707/ap_on_hi_te/as_skorea_samsung

Also - worth reading Asymco for Horace's take on iPhone sales ramp. Essentially - he says that Apple may have been inadvertently limiting possible iPhone sales with their rigid 12 month update schedule. By delaying an update they were able to keep ramping production higher this year and thus sell more compared to earlier years.

My questions to you:

1. Thoughts?
2. Does Nokia introduce a new flagship model every 12 months? My thought is that they are slower than this - maybe every 18-24 months.

[kevin]

@Bill: That linked article quotes an analyst's estimate of Samsung sales, not an actual Samsung executive or spokesperson.

[kevin]

@Tomi: Altho SMS is something that buyers say they want and use, it's not a big differentiator between smartphone handsets, except for those that want a physical QWERTY-keyboard, as all smartphones pretty much provide SMS.

In other words, SMS capability is now a given, just like voice call capability is a given; what will cause someone to choose an iPhone over some other handset are the apps, content and simplicity of the touch user interface, and to a lesser extent, the closely-related iPad, Apple support, and soon iCloud.

[UGGs]

Thanks so much for posting these, they are fantastic! So bummed I missed what looks like a truly unique evening.

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[griffey max]

For most companies, this amazing realization has yet to dawn on them-and I wonder when they will finally take notice.