Preview of the Smartphone Wars: Bloodbath Year 4: Smartphones Galore. This year will be pretty 'stable' within the context of this industry

So we're up to the Smartphone Wars, Bloodbath Year 4, Smartphones Galore. We've seen the iPhone 5 and Galaxy S4. We've seen Blackberry 10 and Windows Phone 8. We've seen announcements from Tizen and Firefox and Sailfish and Ubuntu. What will this year bring? I do think this year brings 'stability' and 'predictability' to what has been the most volatile industry in economic history of any 100 Billion dollar annual business or bigger (the handset industry is worth $240 Billion dollars annually and the vast majority of that revenue is from the smartphone side). And within the context of smartphones, that is 'relative' stability, less volatile than the past three years.

I've been doing this pairing now for the past three years, previewing the Bloodbath at the start of the year, and then after the final numbers are done, giving the total market review. So Bloodbath preview 2010 is here, Bloodbath Year 2, Electric Boogaloo 2011 here, and Bloodbath Year Three, Digital Jamboree ie year 2012 preview is here. Note for example my Nokia forecasts in those blogs for year 2011 and 2012 were THE lowest, worst predictions of anyone published in the industry - and I ended up being the one who got it nearest to the truth (which was obviously worse even than I could imagine). And yes, then I do the end-of-year performance reviews for all brands and operating systems, so for those final numbers, smartphone market results 2010 are here, 2011 is here and 2012 is here. So, now its my Bloodbath Year 4, Smartphones Galore. What to expect? Lets go through the biggest manufacturers and their operating systems in this preview

 

SAMSUNG - STARTS SHIFT TO TIZEN

 

So Samsung established itself as the world's largest smartphone maker last year, taking that title from Apple, in addition to taking the crown for the overall largest handset maker from Nokia. Samsung has passed the half-point of migrating its handset production from dumbphones to smartphones. It sold 215 million smartphones last year and had 31% market share. After seeing the Galaxy S4, we can be pretty sure that the Samsung sales juggernaut isn't about to stop any day soon. Samsung owners tend to be happy, they come back for more of the same, and inspite of many cheaper Android-clone makers appearing, Samsung still shipped 41% of all Android phones sold in the fourth quarter. If Samsung wanted, they could ride this train into the sunset, happy and contented. Except they aren't.

This is the year Tizen will ship. Tizen at least initially will feature Samsung's top phones, so imagine the Galaxy S4 but running an evolution of what we saw with MeeGo on Nokia's award-winning N9. And the beauty with Tizen is the carrier community around it, starting with NTT DoCoMo which promises to start to sell Tizen phones in Japan this year. Tizen's launch will be seen as the perfect case study of contrasts, how can Samsung now, as world's largest smartphone maker and world's largest phone maker, with the help of carriers, switch from the world's most used smartphone OS (Android) to its new OS developed with Intel (Tizen). And the intention is to launch new smartphones in parallel with the existing system but introduce first Tizen phones at the top end of the price pyramid, as flagships. This is exactly what Nokia had in its strategy prior to Elop selecting Windows. Nokia, as world's largest smartphone maker back then, and world's largest phone maker, with the help of carriers, was intending to switch from what was then the most used smarpthone OS (Symbian) to its new OS developed with Intel (MeeGo). The intention was to launch new smartphones in parallel with the existing system, and introducing MeeGo smartphones at the top of the price pyramid, as flagships. And contrast that with what Elop did at Nokia - as world's largest smartphone maker, against the wishes of carriers, abandoned world's bestselling OS platform, forced change to the smallest, developed solely by the evil empire, Microsoft, known as the widow-maker of mobile who bankrupts all its partners. The new phones were not introduced in parallel but to replace Nokia's existing platform and the launch was not at the flagship, but in mid-price level. Wrong, wrong, wrong, wrong, wrong wrong and wrong. But yes, now we'll see how Samsung does it 'right' - remember, my dear readers, as you see Tizen phones and their reception and support by carriers - and think, this could have been Nokia in 2011 when the N9 on MeeGo launched.

 

So at Sammy, we will mostly be watching what will the new Tizen phones look like, where will Samsung be launching them and how will they be received. I would expect a gradual but strong shift of Samsung smartphones from Android onto Tizen over the next few years. This year around Q4 it probably won't be more than 5% or 10% of Samsung's overall smartphones that run on Tizen. What is Samsung's overall market share range for this year? I think they're pretty safely in roughly the 30% range, say between 25% and 35% of all smartphones sold this year and obviously over 95% of those will be on Android for the full year.

 

APPLE - WILL WE GET PRODUCT LINE SPLIT ? (Finally?)

 

The echoes begging for a wider product line of Apple iPhones including a lower cost 'Nano' iPhone model are growing louder and louder. Some feel the Apple magic was exceptionally Steve Jobs and this company will now regress to becoming just another tech brand, and that it might be severely overvalued right now. Others think its Apple, has the world's best loyalty in all the tech it manufactures, and the hysterial will return by the time they start talking of the next iGadget. Here on our blog, looking very tightly only at the smartphone wars (ignoring the enormous success of the iPad for example which is obviously part of the iOS ecosystem), the iPhone market share growth has been anemic since 2009 when it was 14%. Since then the iPhone market share has grown but very mildly, barely exceeding the growth rate of the industry, to 16%, 19% and 20%.

But when translated to all phone sales, Apple's share is 12%, and trying to expand to the other 88% who buy far cheaper phones currently than the iPhone, phones literally 30 times cheaper than the iPhone and yet have a small color screen for rudimentary internet services - Apple is hitting a wall in terms of market share growth. Yes, Apple iPhone growth this year will be astonishingly strong in any case, simply because this industry will grow by at least 30% maybe closer to 40% and will be as near to 1 Billion new smartphone sales that it won't make a difference. If Apple wants to regain strong market share growth and defend its second-place position in smartphones from the hungry Chinese makers, its about time to release a lower-cost basic iPhone targeting in particular the Emerging World markets, and priced near half of what the current lowest-cost iPhone 5 costs (we are talking full unsubsidised price here, not the 'with contract' price that for example Americans are used to seeing. The real price of a new iPhone is not 179 dollars, its 650 dollars...)

 

I am 'sure' that Apple will split the product line at some point, and start to release two (and eventually more than two) new models, one at the top end to replace what is now the iPhone 5 series, and another significantly cheaper with near half price and more basic technical specs and probably a less sexy exterior, more plastic in parts, not quite that slim, etc. But when will we see that? There is growing speculation that such a 'Nano' model is in the works and might be released for the Autumn of 2013 in time for Christmas sales, with the new iPhone 5X model at the top end, the new flagship, released earlier, like the last week of June. This would be very healthy for Apple's position.

So, if Apple continues with only one iPhone model, they will struggle to hold to the 20% level for the full year 2013, give them a range of 15% - 20% but if they release a parallel lower cost model, then by Q4 they could have combined iPhone sales in the 25% to 30% range.

HUAWEI - MORE MORE MORE

So then the hungry Chinese rivals. First up, Huawei. Huawei become the world's third largest smartphone maker last year and essentially all major analysts agree with me on this (I was the first analyst to call it). But still, in my calculations and those of many of the 'big 4 analyst houses' there is a considerable discrepancy in the overall Huawei shipment numbers. I believe most of the analysts have not yet calculated the Chinese market and Huawei's strong position there quite accurately, so they may revise their positions upward on Huawei. For Huawei, being strongly growing currently, the relevant number for us to look at is not the full-year 2012 sales, but rather the last quarter Q4 sales, by when Huawei was nearing 10% global market share.

Huawei is particuarly aiming for Asia and Africa. China has 1.3 Billion people, India has 1.2 Billion and Africa has 1.1 Billion (vs 330 million in the USA for example). China is well on its path to migrate phone users from dumbphones to smartphones (about 40% of new sales were smartphones) but India and Africa are still in the very early stages. That means, that whatever existing 'installed base' smartphone user loyalty exists, is very small, compared to the new sales that will come this year and next. If someone does have a loyalty to Blackberry or Nokia's Symbian or Samsung on Android or bada, those are a tiny slice of the market that is now emerging. As Huawei offers a broad range of smartphones at low costs, running Android, they are poised to take more share and should be a strong growing brand this year. They should end the year somewhere in the 15% market share level, say 12% - 17% as their target range with higher numbers towards Q4 than the full year numbers. And let me suggest that if Apple doesn't give us a Nano iPhone this year, Huawei might outsell the iPhone in smartphones by Q3 (if the iPhone 5X launches for Christmas) or by Q4 (if the new iPhone 5X launches for the summer). For the full year, Apple is still likely to hold to its 2nd place ranking but for perhaps one quarter this year, Huawei may jump Apple and then it will be a big run for 2nd place into year 2014.

ZTE, LENOVO, COOLPAD - GROW GROW GROW

And honestly, I can't find currently major differences in the pack of Chinese makers that follow. ZTE is the biggest of the rest, and have the widest available country and carrier footprint. They had about 5% market share. Lenovo only entered the global Top 10 last year (displacing Motorola) and Coolpad is just outside the Top 10 currently at 11th, waiting to displace Nokia which is happening probably now in Q1 of 2013. Lenovo started its global expansion last summer heading to Russia, India etc and Coolpad is about to follow on those footsteps. Each of these three will grow in size this year, grabbing market share and climbing up the Top 10 chart.

 

Lenovo by the way is in the rumors about possibly buying Blackberry (the company previously known as RIM) and also some rumors about possibly buying Nokia. They have admitted they are considering if some corporate purchase would make strategic sense. If Lenovo buys either Blackberry or Nokia (or maybe HTC, which must also be on their radar) then obviously add that market share to their total. Very briefly, HTC would be perhaps the 'easiest' integration being an Android manufacturer, but it would not help i the enterprise market. Both Blackberry and Nokia (what used to be the E-Series business) would have strong fits on the enterprise side. Nokia would be the prize in terms of its patents portfolio and for Lenovo would give the strongest phone brand of Africa and recently also strongest of India and China, but Nokia would come with a lot of baggage obviously, many parts would need to be sold that Lenovo wouldn't care to own. With Blackberry, Lenovo would inherit the BB10 OS platform, and should be expected then to use that as its new alternate OS to run alongside Android. Same with Nokia and Nokia's MeeGo and to some extent even Symbian. HTC would not yield an OS platform and related apps ecosystem. But I will now deal with Lenovo as an independent entrant alone, in this analysis.

So for the year, ZTE should grow into the about 7%-8% range, Lenovo get into the 5% range and Coolpad enter and stake a solid Top 10 position in the 3%-4% market share range for the year.

BLACKBERRY - LIGHT AT THE END OF THE TUNNEL (Or is the light an onrushing train?)

 

I think last year, 2012, was Blackberry's Annus Horribilus and they should recover this year (but please note, my past Blackberry forecasting history is nearly 100% wrong, they seem to be the one brand that I just can't get a proper handle on haha). BB10 is not the ultimate 'Jesus system' to save the company and restore its 20% market share position, but its good enough to stop the rot. Then we have a strong, loyal, and addicted user base who were waiting for a modern Blackberry. Now they have them. It should stabilize Blackberry and perhaps allow for modest rebound. I think Blackberry will end the year roughly where it was by Q4, but has a modest upside. Lets say their range is 4% to 6%. The big problem for Blackberry is, that the corporate business is steady, so in bad years that part of their client base will erode very slowly, but in good years, that part of their business will also grow only very slowly. Its not like the consumer space, where if you have a hit phone, you can have enormous sudden growth (like say, the Motorola Razr almost a decade ago).

 

SONY - THE BIG GROWTH STORY THIS YEAR

 

But if there is a company determined to get it right, with the CEO saying all the right things and the company having all the right elements, tools, brands and competence, it is Sony. Sony could now, as it is past its Ericsson partnership, see a new renaissance. Did you notice, briefly last year, Sony was the third biggest smartphone maker? And the CEO now says third is their target and that for Sony's consumer electronics business, 'mobile is front and center' to their future. That is the right message coming from a CEO who intends to be one of the winners in this space. Then add in Cybershot, Walkman, Playstation and all the potential of movie and music tie-ins and Sony could be onto a big year. They have usually sat at the higher end of the phone price points but have global reach and offered also mid-priced featurephones. As the prices of low-end Androids come down, Sony should be able to give us highly competitive, highly desirable Sony  branded low-cost smartphones to build market share while also offering some superphones to the top end as flagships.

I would also see Sony in the market as a possible buyer of one of the struggling smartphone makers (Nokia, Blackberry, HTC). For Sony's immediate short term gains, HTC would give the best fit as another Android maker, but Nokia's global reach, carrier relations and scale - plus its patents portfolio might be the more useful long term play, but accepting considerable costs of integrating the valuable parts of Nokia into the Sony culture (and selling off the rest, obviously, much of Nokia is what Sony would not want, like its dumbphones business. Sony has nearly completed its transition from dumbphones to smartphones). But like Lenovo, lets deal with Sony as only its own sales, excluding any corporate purchases, so Sony alone should grow and end the year with something like 6% to 8% market share. This year I don't see Sony returning to the number 3 slot but number 4 is very well in the cards for the Japanese electronics giant.

NOKIA - DEATHWATCH

 

Nokia is dead. It did sell 5% of all smartphones of the year 2012 only because its fall is so fast, the early sales in 2012 were more than 5% of the market. By year-end it was down to 3% and this, after the new Windows Phone 8 smartphones had been launched. Nokia celebrated making a 'profit' in its handset unit in Q4 which was due to smoke and mirrors, primarily due to selling Nokia's HQ building (without that sale all attributed only to the handset business, Nokia's handset unit would have reported a loss in Q4). And even if the low-cost dumbphones are sold at a slight profit per phone, the smartphone unit still generates about 20% loss per Lumia smartphone sold. This is no way to run a business. The Nokia smartphone unit was hugely profitable before Elop changed the strategy and immediately since he announced the Windows based strategy, the Nokia smartphone unit has reported a loss every single quarter since. It had never reported a loss prior to that moment.

So Nokia fell from 29% of all smartphones sold before the Windows strategy was announced to 3% last quarter when most of the transition to Windows based Lumia smartphones was complete. The Lumia series is spectacularly undesirable, the sales channel hates it, it is not generating sales (And Nokia's CEO repeatedly complains that while the phone handsets are technically good, the retail is not supporting its sales). The Lumia series seems to be designed to be hated by existing loyal Nokia smartphone owners so the return rates of the Lumia are astronomical and the loyalty is in the toilet. A recent study by Bernstein found that two out of every three new owners of a Windows Phone based smartphone wanted their next phone to be any other platform than Windows based. This is after the 17 out of 20 loyal Nokia owners who refused to take the Lumia to begin with, and are already lost to Android and the others. Yes, out of 20 attempts, 17 run away, and of the 3 who agree to try Lumia, 2 are so disgusted with it, they want any other phone for their next phone. If you can only get 1 out of 20 customers to remain with your brand, it means only one thing. It means the Windows Phone strategy is dead for Nokia, there is no life in that platform. And if you think Lumia 920 is the answer with Windows Phone 8, we just had the Finnish consumer magazine review of the phone which was hideously bad.

All this while Nokia wowed the world with the best camera ever installed in a phone, the 808 Pureview that ran on Symbian and sold last year - sold so well, Nokia could not keep up with early demand. Nokia reported that the camera is the number 1 feature loyal Nokia smartphone buyers ask for, yet is there a big sensor modern super camera on the Lumia series with an industry-leading sensor size and things like Xenon flash and other Nokia flagship staples for its cameras? No. Elop rebranded the Pureview to a basic 8 mp camera onto the Lumia series and now creates more disappointed Nokia buyers with this trick. Meanwhile Samsung's Galaxy S4 has a 13 mp camera, finally, 3 years after the Nokia N8 with its 12 mp camera, is Samsung's flagship offering a camera slightly better (on this one spec) than the Nokia flagship from 2010. Does any Lumia series even match that Symbian based N8 with its 12 mp camera. Of course not.

And we heard during MWC that Jo Harlow admitted that yes, many Nokia customers including carriers are requesting real QWERTY handsets. Thats no surprise as close to a third of Nokia's total smartphone sales had real QWERTY keyboards before Elop changed his strategy - but no, Nokia acknowledges customers beg for this feature, yet refuse to give it to them. No, there are none, and there will be no QWERTY keyboards on Nokia's Lumia smartphones. PS come here to Asia and see how many of Nokia's rivals offer a QWERTY variant in their portfolio... I am not suggesting all Lumia phones should have QWERTY sliders etc, but after ten Lumia models already, isn't it time Nokia offered at least one premium Lumia smartphone with QWERTY slider?

 

And before that is available, what moron CEO sees its customers begging for QWERTY, sees he has the award-winning MeeGo platform based N950 ready to sell - in fact manufactured at Nokia factories, and refusing to let that premium flagship smartphone being sold anywhere? Where the MeeGo based smartphones have Nokia-record loyalty and the highest-recorded resale values, vs Lumia having worst loyalty and zero resale value - if the CEO refuses a QWERTY based Lumia, then at least let them sell the N950 now in the interim? If there is truly 'demand' as Jo Harlow admitted. Only a moron CEO intent on destroying Nokia could make this decision to refuse the sales of the MeeGo based N950 to all Nokia markets (and obviously any next Nokia CEO would instantly reverse that idiotic decision)

 

Nokia life? I have been saying since the summer of 2012 that I expect Nokia to be sold any week now. I still think so. I have calculated in countless ways how Elop is the worst CEO in the history of corporate governance and has caused a world-record setting collapse of Nokia's core business. I cannot imagine any reason why the Nokia Board is letting Elop remain in charge unless its collusion or criminal abuse of Nokia shareholder trust (ie deliberately destroying Nokia while short-selling the stock, for example). When Elop admits his strategy isn't working but insists he will continue on it anyway, that is when the Board has to fire the CEO. As they didn't, it means the Board is incompetent too, and must be fired.

But yes. I do think Nokia will be sold. I think nobody who buys Nokia will want all parts of it but the patents portfolio alone is the biggest in the industry and makes Nokia a worthwhile investment for any major global tech player who wants to be big in mobile. Then Nokia's brand - still the bestselling phone brand of Africa, India and Latin America (this when dumbphones are included obviously) and recently also in China - is a great value. Nokia's technical brilliance is valuable, witness the 808 Pureview running on the obsolescent Symbian platform yet won every single cameraphone award of the year and still in 2013 beats every single other cameraphone on the market in comprehensive tests. In fact so good, under some conditions it beats stand-alone professional digital DSLR cameras even ! And Nokia has its Navteq unit, everybody likes maps and location tech. Then Nokia has its joint venture with Siemens for networks, NokiaSiemens Networks which probably most buyer-candidates would not want to keep so it would likely be sold. Nokia is still the world's biggest maker of dumbphones, so the buyer might or might not want that part of Nokia. Nokia has very modern high capacity phone factories situated strategically around the world near the major markets. If the buyer intended to do volume smartphone manufacturing, this is the biggest (and currently mostly idling) capacity available in the space. And so forth.

Who might be bidding? I think when the news breaks that someone is seriously considering - or even bidding - on Nokia, I think the dam will break and many suitors will show up, either alone or sometimes as a part of a buying consortium. I see likely bidders including some obvious names like Sony, Lenovo, Samsung, LG, Google, Apple, Microsoft, Intel, Panasonic, Sharp and ZTE. Note, Microsoft would want Nokia to remain in the Windows Phone ecosystem and any buyer would end that foolishness, so Microsoft's interest would primarily be to buy the Nokia Lumia unit, not the other parts. Then there are others who might be interested in NokiaSiemens Networks or parts of it like Ericsson, Alcatel-Lucent, Cisco and SAP. And I could see a dark horse interest appear for example from Dell, HP, Acer, Asus, Toshiba, Pantech, Coolpad, HTC, etc.

So look at Lenovo for example. They want to 'invade' Russia, India, Africa... If they do it with the Lenovo brand primarily as a smartphone, it is slow going, at the highly-contested top end of the market, and while they would make gains, it would be tedious. Or if they bought Nokia, they could instantly rebrand all low-cost Nokia dumbphones as Nokia-Lenovo phones, and use those new 20 dollar super-cheap Nokia dumbphones to hold Nokia's massive market share edge in those markets, while migrating the customers to organically switch from the Nokia brand to the Lenovo brand. Then offer low-cost Android based Lenovo smartphones - built in Nokia smartphone factories - sold as Lenovo-Nokia smartphones, and migrate the top end of the dumbphone/featurephone client base from Nokia featurephones to Android based Lenovo. Then two years from now, drop the Nokia name from these phones, keeping the Nokia brand alive only as the discount dumbphone brand as long as they still have a market.

If Nokia was sold to Lenovo and Nokia-Lenovo abandoned the Windows strategy, Nokia sales would stop collapsing and start a rebound (we hear repeatedly from Elop that it is the retail support which is lacking and that - as Elop admitted to Nokia shareholders last year - is because of carrier hatered of Microsoft now that it owns Skype). Whether that would be a strong or weak rebound, is anyone's guess. But if Lenovo offered in the short term, some MeeGo and Symbian based 'real' Nokia smartphones AND some new Lenovo Android based 'Nokia-Lenovo' smartphones - the carriers would be happy, the retail would be happy, the customers would be happy, the developers would be happy, and Lenovo would make far faster gains in the smartphone space than it could just by growing organically by its own brand. If the Nokia smartphone market share in Africa, Latin America, and non-China parts of Asia are roughly 25% today, and Lenovo could keep that migrating to their eventually all Android (and MeeGo) based Lenovo-Nokia smartphones over two years - that would be something in the magnitude of 60 million total smartphones per year by 2014 - excluding the Chinese market where Lenovo already is strong, and a Nokia boost could push Lenovo to biggest in its home market. But also note - those 60 million will never be sold using Windows Phone which is far too expensive a platform (license royalties, required hardware etc) and can't sell at low-enough price levels to make such gains. This only would work if the Windows strategy is abandoned and a low-end smartphone OS is used like Android or perhaps one of the other new ones.

But lets ignore the likely sale and splicing-up of Nokia into pieces. Lets look at Nokia prospects as a stand-alone smartphone maker with Elop somehow still in charge. The Q4 sales for Nokia across all its smartphones was 3% market share. It was down from 13% one year before, Q4 of 2011, which was down from 29% the year before, Q4 of 2010. No, this is not a sign of success in anyone's book. Can the bleeding stop? Maybe. Can Nokia stabilize its business in smartphones (when it still made a 20% loss per smartphone sold for Christmas 2012) I doubt it, but lets be very positive and say it can. I say Nokia's high end ceiling for this year is that 3%. I don't see it happening, I think Nokia will sell 2% of the smartphones of this year. But yes, 3% is the upside ceiling. And on the downside? When past collapses in the handset space happened, at these levels the companies went bankrupt and were sold (like Motorola, Palm, Siemens, etc). Nokia's bottom end, lets say 1%. So your target for Nokia for 2013 is between 1% and 3% and yes, at those levels Nokia has fallen out of the top 10 biggest smartphone makers, quite the irony considering Nokia invented the smartphone space and towered over its rivals when Elop took over, profitably selling so many smartphones - it was literally more than twice the size of its nearest rivals - and growing faster than those too, so Nokia's lead to Apple, Samsung and Blackberry was increasing, not them catching up, during 2010... Now just two years later, we are on a Nokia death-watch.

HTC - CAN THIS BE ANOTHER DEATHWATCH TOO?

And why is HTC in such bad shape? They keep reporting bad news per quarter, and you think it cannot possibly get any worse, and then it gets worse. If Samsung is able to sell on the Android (and some Windows) platform so highly desirable premium phones, why can't HTC also on Android (and some Windows) platforms do the same? The HTC fall would rank as one of the worst in handset history were it not for the spectacular collapse of Nokia and the simultaneous crash of Blackberry that we saw in the past two years. The HTC troubles have gone almost unnoticed. But yes, they are down from their peak as high as 12% market share in early 2011 to 3% now and falling. Where will HTC end? I think they are also in the danger of dropping out of the top 10, but as their business is not unprofitable (they only report ever diminishing profits) I think they have a chance. I'll say HTC is in the 2% - 4% range for the year and might hold barey onto a Top 10 ranking. But yes, HTC might very well be suddenly sold this year.

LG - ON THE COMEBACK TRAIL

 

LG is now on the mend after they abandoned their loss-making Microsoftian misadventure and joined the Android fold. LG had hoped the 3D displays would be their miracle cure, it didn't pan out but they have turned their loss-making phone business around, now only doing Android (and famously stating that there is no demand for Windows Phone based smartphones, something Samsung also later confirmed) and are on a steady growth trajectory. They were a bottom-tier Top 10 maker, and I expect their growth to be modest this year so they'd stay in that grouping, but expect LG to end the year in something like 4% to 6% in size.

OPERATING SYSTEMS

Then we have the OS wars. Android dominates the world today and I don't see them losing their lead, but maybe see parts of it chopped away, a little bit, by the newcomers, towards the end of the year. Again, lets do this in order of their sizes

ANDROID - TO BE FLAT

Android powered two thirds of all smartphones sold by year-end and that would be roughly the scale they will achieve this year too, lets say between 60% and 70%. The Blackberry and Windows Phone base is too small to make big impacts to Android under any scenarios, the only other platform which will matter to Android is Apple's iOS. If Apple does split its iPhone range and introduce a lower-cost iPhone, expect the lower end of that scale for Android, if Apple sticks this year once more to only one iPhone model per year, then expect the higher end of that scale for Android ie near 70%.

The new OS platforms (Firefox, Tizen, Sailfish etc) will not achieve scale this year to do more than a couple of percentage points of market share, which will come primarily from the Windows and Symbian share, not so much from the Android share, initially. But also, I think especially with Samsung launching Tizen and Huawei already committed to launching on Tizen this year, we will see the peak of Android sales, as the world number 1 and number 3 smartphone makers start the shift away from Android to Tizen towards the end of the year. Intially it will only be flagship type premium phones, more profits and prestige than volume, but its a start. And then Firefox and others will also do the same in the second half for various mid-tier makers. Likely Android peak market share will hit Q2 of this year and might be as high as 75% momentarily if we havent' seen a new iPhone launched at the end of June.

 

Note, this year Android will replace Windows globally as the OS powering most computers in use (when smartphones and tablets are included in the calculation). That will be a nasty wake-up moment for Microsoft investors and owners and partners. That the 'impregnable' Windows PC desktop space ecosystem has been conquerred, by Google's Android? No wonder Google already released a laptop/netbook running Android. Google intends to power the vast majority of all computing platforms from our desktops and tablets to our eyeglasses, televisions, clothing, cars etc. Yes, Google and Android have won the IT platform war of the century, beating Windows like a rented mule, just like I wrote last year.

iOS - FLAT OR NICE GROWTH (Depends on prodcut line split)

Apple's iOS in smartphones will be identical to the Apple iPhone share in the above. I don't have more to add, it will be in the 15% to 30% range depending on whether we see 1 or 2 new iPhone models this year.

BLACKBERRY - REVIVAL'ISH

The Blackberry OS was the third bestselling OS last year and will also be so this year. The story is the same as in the above, so the target is somewhere in the 4% to 6% range.

SYMBIAN - GONE

 

Symbian was still the fourth bestselling smartphone last year, when it finally only powered Nokia branded smartphones alone, and saw Nokia aggressively migrate the user base from Symbian to Windows Phone. By Q4 the Symbian share was down to 1% and Nokia's CFO Timo Ihamuotila has said that was the last quarter of meaningful Symbian sales levels, it will be rounded off to 0% market share for year 2013. Bye bye Symbian, you deserved better than this.

BADA - BING, BADA-BONG

Samsung's bada was the fifth biggest OS still by sales in 2012, but as Samsung started to ramp down bada in its migration to Tizen, the sales fell towards the end of the year. This will be another platform which will have sales so slight, they are rounded off to 0% market share in 2013.

WINDOWS PHONE - SUDDENLY CANCELLED?

So Windows Phone was early to the market, to try to heed the operator/carrier community's call, to want a third ecosystem. Yes, they want a third ecosystem to balance out against Android and iOS. Microsoft and Nokia had this story to themselves for two years. They achieved what? 3%. Microsoft before this story, held 4% of the smartphone space (when Windows Mobile and Windows Phone were added together). If you go from 4% to 3%, selling 'we are your third ecosystem' to a market which honestly is begging for a third ecosystem - it can only mean one thing. The carriers won't have Microsoft anywhere near their ecosystem(s). Hence you have heard carriers flocking openly to embrace Tizen and Firefox this year, launching tons of handsets this year, with carrier support and subsidy and commitment. That is your 'third ecosystem' not this Windows ploy.

They are not idiots over in Redmond. We already heard Microsoft Chairman Bill Gates admit to an interview that while Microsoft was early to the smartphone races, it failed in gaining carrier support and the current strategy is incapable of winning the race. The current Windows Phone strategy 'prevents' the chance of success. It is therefore, in Bill Gates's evaluation, a failure. Not a failure of being early and discovering a market as it emerged (which incidentially, happened when Bill Gates himself was still in charge). A failure in execution instead, under new CEO Steve Ballmer. Gates was not ready to call for Ballmer to step down - that may come this year - but I think its pretty obvious Gates sees clearly that Windows Phone will never become the third ecosystem, and probably thinks the billions sunk into it is good money thrown after bad money. That could be better spent on the desktop PC and cloud computing and Xbox and other places where Microsoft still has a chance to be a major player.

Microsoft has recently cancelled some of its costly big programs like the Zune music player and the Kin youth phone. I think the Windows Phone project is now in jeopardy. If for example Nokia were to be bought by anyone other than Microsoft (and/or not selling the Lumia unit to Microsoft) then the Windows Phone project would die an instantaneous death. Note, Windows 8 on the desktop is safe, as is Skype on that platform, but the smartphone dream at Microsoft would die instantly. This, because of the remaining Windows Phone manufacturers, Nokia sells 77% of all Windows Phone based smartphones. If Nokia pulls out, Windows Phone is instantly dead. And separately, I would not be surprised, if after Tizen and Firefox launch, and carriers enthusiastically support those, and several hot new phones appear often from brands who are supposedly Windows partners (remember recent comments from LG and Samsung that there is no carrier demand for those phones), that Microsoft announce some kind of 'migration plan' to the Windows 9 PC based OS platform that effectively ends the stand-alone Windows Phone 8 and its future. Then the Windows 9 would be a tablet-PC platform only (that theoretically also supports smartphones). And no major handset maker would remain to bother to make those smartphones - all while TWO healthy new ecosystems thrive as Tizen and Firefox...

 

By the way, almost perfectly in time, Microsoft has just announced that Windows Phone 8 and Windows Phone 7.8 will receive 'mainstream support' including security updates for only 18 months and that means mainstream support will end before year 2014 is over. What Microsoft has to decide before now and then, is will there be another newer Windows Phone version (like 8.5) or will they abandon the platform. I would be sure they are busy making those calculations right now at Redmond, if the decision has not already been made (which, after the Bill Gates comments, to me seems even more likely). Its been very clear that the Nokia experiment with Microsoft has been a total failure, they held 2% market share with Windows Phone before Nokia joined the game, and now after Nokia has 'migrated' all its customers to Windows Phone, the ecosystem still sustained for year 2012, a market share of... 2%. Billions poured into the process and no gain. I think we can read in Bill Gates's comments that this is the project he most wants to end as a waste of effort at Microsoft.

If Windows Phone is not ended, I can also see, it would be in Microsoft's DNA, that Microsoft keeps pumping Billions into the eternity-project that is Windows smartphones, to ever diminshing returns. They did hit a peak at 3% market share in two quarters in the past year (but lifetime Windows smartphone peak was 12% five years ago, so its been misery ever since), I don't see them having such luck this year, but will be closer to 2% if Nokia stays onboard for the full year and Elop remains in charge of Nokia. To be safe, lets say their range is from 1% to 3% as their market share target for the year, and don't be surprised if Microsoft throw in the towel after Tizen and Firefox launch and carriers offer strong support of those platforms...

TIZEN - STRONGEST OF NEWCOMERS

 

Then we have the new operating systems. I place Tizen a little bit ahead of Firefox for the primary reason of NTT DoCoMo's clear stated interest. NTT DoCoMo controls half of Japan's mobile market and has almost total control of the handset specifications that are sold to its customers. NTT DoCoMo was fully committed to Symbian until Elop suddenly ended that path, and had been seeking any alternative that was viable, that was not part of Stephen Elop in any way. So Nokia's options were immediately unacceptable in Tokyo. But they found a perfect pairing in Samsung and Intel, with Japan's long history of Linux based smartphones, Tizen is a perfect solution. NTT DoCoMo will aggressively migrate its smartphone base from Android to Tizen starting this fall, with the first flagships coming from Samsung, Huawei, Panasonic and NEC.

The Japanese market is closely monitored by the other advanced Asian countries, Taiwan, South Korea, Singapore, Hong Kong etc - so the moment top new phones appear from Japan's market, powered by Tizen, and featuring Samsung, Huawei etc, you can expect they will find an eager market in the advanced Asian countries too. I think Tizen is pretty safe to be in the 2% range of global sales by year-end, ie at Q4 of 2012, but not much more, and for the full year, they will maybe find their share rounded off to 1% if they are lucky. But it will be far stronger sales growing into 2014 from that strong start.

FIREFOX - ANOTHER STRONG ENTRANT

 

Firefox has more carriers and more handset makers signed up, but the handset makers are in markets where the carrier doesn't have as much control of the handset space, often sell phones without contracts ie pre-paid accounts and the manufacturers are more of the second tier variety. Yet, its certain, Firefox OS will be launched this year and will see support in many markets, led by Spain and Telefonica. Spain is one third the size of Japan as a market so I do expect the total early success in absolute numbers to be smaller for Firefox than Tizen, but the race will then be on. All you need is one hot phone that everybody wants, and you can have a winner. I'd say Firefox has about 1% market share by Q4 and for the full year won't register 1% yet. But they will grow and become stronger into 2014.

As I mentioned before, I am totally convinced that the carrier and retail support will jump from what little exists for Windows Phone to Tizen and Firefox (and Ubuntu and Sailfish) so the primary early market share gains for Firefox and Tizen will not come from Android, iOS or Blackberry, they will come primarily from Windows Phone and technically, what might have remained of Symbian at that stage (and obviously in the case of Samsung, cannibalizing its own bada in the migration to Tizen).

UBUNTU, SAILFISH - MAY SURPRISE

 

I see these two only as niche players this year, launching maybe a few handsets on very marginal brands and trying to gain some attention and win some awards with innovative designs etc, to get attention in a year more focused around Tizen and Firefox (And BB10 and the next iPhone etc). Ubuntu is the African Linux based open source project and Sailfish you may better know as the OS used by Finnish newcomer Jolla ie as an evolution of the Nokia-abandoned MeeGo project.

 

A SURPRISINGLY STABLE YEAR

 

So I think after three very volatile years, we should/could see a relatively stable year now. The Nokia carnage is over, the Nokia dividend ended up going disproportionately to Samsung. The Blackberry blood has been spilled and it should now be stabilized. Android's rapid rize has reached near its peak, it should now also stabilize. The growth and declines will be more with the smaller manufacturers, picking up a few points of market share for especially some Chinese makers, and the new operating systems, led by Tizen and Firefox, picking what remains off the corpses of Windows, Symbian (and bada). This industry is however very highly competitive. A one hit phone could suddenly turn a bit-player into a contender and whatever platform that phone happens to be on, could become hot too. HTC, LG, Blackberry are all companies that have the ability to make a comeback, and if Nokia fired its CEO and ended the Windows misadventure, Nokia could easily bounce back too releasing a series of MeeGo powered smartphones instead.

Should you care what I think of the smartphone space? Well.... I just happen to be the most accurate forecaster of this industry, have been for more than a decade now. Check out for example how major analyst houses got their Windows Phone forecasts 'slightly' off the mark and compare to mine. Or take a look at this set of forecasts about Nokia market shares including mine.. 

One plug - if you need data on the handset market, please see my TomiAhonen Phone Book 2012 for all the data on handset features, installed base, market shares, operating systems, etc. More info here TomiAhonen Phone Book 2012.

Comments

[Lasko]

Samsung did actually make another smart move in preparing the field for Tizen - having a dig at the competition, again. Well, this isn't smart - or new - in itself, but it is interesting to see who they dig at. Not their obivous competition, iOS, or their current partner, Android, but rather the wannabe third ecosystem Windows.

http://online.wsj.com/article/SB10001424127887324077704578358283252725470.html

"Smartphones and tablets based on Microsoft's Windows operating system aren't selling very well. There is a preference in the market for Android. In Europe, we're also seeing lackluster demand for Windows-based products."

So we do not even have 'mixed' customer and carrier reception for Windows (Phone) 8, absolutely tanking sales figures for all of the three systems, Windows Phone 8 , Windows RT, Windows 8, and the struggling major partner Nokia we also have the worlds largest and most well known manufacturer, Samsung, deliberately acting against Windows too (most probably to push Tizen).

Good luck, Windows Phone and Nokia. Good luck, Mr. Ballmer and Mr. Elop.

[Tester]

I still wonder whether Tizen will end up successful or not - especially in the high end market.

It all depends on how much the customers value app support. Those who do are unlikely to switch to an unproven low market share platform.

I also wonder how much influence the carriers really have. Apple's success is an indicator that ultimately customer demand decides. Otherwise Apple would never have been able to extort the carriers like they did. On the opposite end we have Windows Phone. Despite carrier dislike there have been a handful of heavily advertised and heavily sponsored launches - and where did they end up? Due to lack of customer demand they all failed - miserably.

I think Tizen has to be really good to succeed. If it can't match Android's quality I won't give it any chance in the market - and in that case it won't matter how much it gets pushed. The system needs to offer what the customer wants, otherwise they stick to Samsung's Android phones - or if Samsung abandons Android switch manufacturers. If push comes to shove, a Sony Android phone is just as good at running Android apps as Samsung's offerings. I like my Galaxy not because it's a great Samsung phone but because it's a great Android phone.

Firefox? Sorry, no apps, no smartphone, if you ask me. In my book this ranks as a featurephone OS, nothing more. If Firefox is supposed to be smartphone, then Asha is, too, and many other low end touchscreen devices. I think this can only be sold by deceiving unknowledgeable customers and they'd be in for a rough awakening later, meaning little chance of selling upgrade phones later.

[Fubar]

Tomi. The business and portfolio rationale for a Qwerty in Nokia line up was made strongly (based on a quantitative research study) almost 3.5 years ago by people the Nokia Consumer Insights team to the Smartphone Portfolio teams (that Jo Harlow headed)...and ignored....so there is a pattern there.

[Winter]

The big growth in mobile the coming years will be in the low end. 5 Billion mobile phone users all switching to smartphones. The first one to make a good, robust Smartphone for $50 will really sell billions of hand-sets.

So I think any platform that targets the "High-End" will remain marginal. Remain only Android and Firefox as contenders. If Firefox OS has the first decent $50 smartphone, they could make a real splash.

Note that any OS based on Linux can include a Dalvik VM and have instant App support.

[zlutor]

yet an other bad news... :-(

http://www.valuewalk.com/2013/03/nokia-corporation-adr-nok-windows-phone-sales-weak-baml/

'In addition, BAML analysts did some research on European acceptance of the Windows phone. According to their analysis, it appears that the devices lost market share during February, most notably in the U.K., Finland and Germany."

[ejvictor]

Tomi:
What do you think of the possible evolutionary forks created by ability for carrier branded phones manufactured by ODM's and cheap flagship phones created by the likes of Blu products sold directly to consumers? The heavy lifting of building ecosystems is complete, the Android APK and QT are the winners in the App war.

So companies like Jolla can yell from rooftops "Come, we will build you a great unique device!" Blu is yelling own a GS4 clone for $299... Carriers (especially USA carriers) want to stop subsidizing devices and they want to gain control back from the "consumer electronic brands".

[Hansu]

Tomi mä skriivan tän sulle suomeks saat poistaa sen whateva 1. Se kuluttaja lehden vertailu oli helkkarin tasaväkinen ja kauppalehti repi siitä ison jutun niinkuin aina ja 920 voitti engadgetin ja gizmodon lukiakyselyt ja ketä kiinostaa Marttakerhon testi ei ketään 2. usko vittu jo Symbian on oli paska järjestelmä teknisesti se oli WIN 95 Kosketusnäyttö mailmassa joo kamera softa oli hyvä mut kaikki muu oli päin helvettiä siinä se oli hidas ja kömpelö ja Nokia olis nyt lappu luukkulla ja jos symbianilla oltaisiin jatkettu. Mä olen samaa mieltä siitä että operaattorit vihavaat mikkisoftaa ja miksi. Ainoa harmillinen asia siinä on että WP8 ei ole mikään huono käyttis oon käyttäny kaikkia kolmea ios android ja WP8 ja se on itseasiassa aika hyvä paljon parempi kuin symbian paitsi ehkä kamera softan osalta mutta kaikki muu on paljon paremapaa ja mun on vähän vaikea uskoa tota skype kommenttia koska skype oli jo sovelluksena iOS ja androidilla ennen ku WP tuli ulos. Mitä Meegoon tulee sinä itse kirjotit että se ei ollu Elop joka tappoi Meegon se oli johtokunta joka oli jo päättännyt siitä ennen kuin hän tuli. Yks kysymys miks nokian osake laski O-P Kallasvuon aikaan vaikka he tekivät myyntiennätyksiä?!?. Tomi sä oot hyvä analyytikko, yks parhaista mut Symbianilla ei Nokiaa pelasteta not by a long shot
This is written in Finnish I would like to give Tomi a piece of my mind this will be deleted but I hope he reads it atleast

[Robert]

http://ben-evans.com/benedictevans/2013/3/18/googles-penetration-of-android

"Hence, the portion of Android that is neither Samsung nor in China is only 40%. That must make some people nervous."

Google services and apps are not on Android phones in China. !! Samsung is pushing Galaxy brand over Android OS. Yeah, Google might be a bit nervous.

[Winter]

@Robert
"Android phones in China"

Given that Google has withdrawn from China, why should they care?

There is no way Google would be able to sneak back into China using Android. If Google want to have a presence in China, they will have to go in fully. They do not seem to want a presence in China.

In short, China is closed to Google for the time being. How Android is sold in China has little effect on Google. It is not as if there is an alternative to Android for Google.

[Pekka Perkeles]

With all these changes in 2013, I wonder if Skype will go away from the mobile segment.

Is that really what the market wants?

[J.O. Aho]

I think we will see Microsoft withdraw from the phone market, if they had decided to stay, they wouldn't mentioned a EOL for WP8 but just the shell come when they had released WP9.

[RottenApple]

Microsoft's announcements is very suspicious. If they planned a normal update it'd make no sense to EOL WP8 now. It'd just be replaced and go away.

By telling it now it looks like it's merely a means to avoid liability claims later when people find out they've been duped.

Anyone thinking about buying a Windows phone should be extremely cautious.

[vladkr]

@Pekka Perkeles :

What's interesting is that Skype has been judged partially illegal in France last week (actually it's illegal since the beginning, but authorities filed a new complain last week) , as it must be declared (but isn't yet) as a communication provider, and then it must comply with French rules regarding communications.

In short :

Either it stops providing Skype to phones communications, or it declares itself as a provider, and then act as a provider (allow emergency calls, allows judge-warranted interceptions, provide public services and so on...)

So according to the French law, Skype is indeed an operator, unfairly competing with mobile and fixed line operators.

[Mikko]

It's "annus horribilis" with and 'i' (not that I know any Latin).

[gordon]

@Tomi,

A quick question regarding your view of Apple:
You write that Apple must/should split their line and offer cheaper phones to increase market share.
But if I understand correctly, Apple was never about absolute market-share numbers - they want to target the small but lucrative share. Same as they will never offer a $350 laptop - they are not interested in the crowd that looks for cheaper laptops.
Do you think they really need to go after the people who are looking for a $100 phone? those people are not likely (or less likely) to spend money in the Apple eco-system (e.g. iTunes/App store).
Unlike other vendors that sell a phone (=hardware) once and never see a dime later (and thus, need to sell more and increase market share), apple keeps earning from iPhone users - so it will focus on users who can actually spend more money.

Do you see it differently? or have other reasons to think increasing market share is the way to go?

Thanks!
-gordon

[Earendil Star]

I would not write off Windows 8 right now... yet.

I believe MS is trying all it can to remain relevant in the smartphone arena.
No, they will not yield. It's not like the Zune, which was a diversion.
It's survival. They will possibly loose lots of money. But they will stick with WP.

Enter Windows Blue. Or will it be Windows Blues? We'll see.

Meanwhile, I was thinking at the MS trolls writing all along that Nokia had to choose WP because otherwise it could not differentiate...

WHAT A LIE! The only OS that really is antithetical to differentiation is... WP!!

All WP are exactly the same. Clones. Copies.

All with the AdTiles, those irritating squares and rectangles in endless motion that incessantly push ads over to you... Disgusting.

In reality, the one OS that allows for real differentiation is... ANDROID!!!

As everybody knew since inception.

A couple of examples:

1) Amazon
2) Samsung and its TouchWiz interface and bundled software, its pens, its notes, etc.
3) HTC with it's serious tile interface, not the childish Modern UI from WP
4) Nook
5) the Chinese versions
6) you name it...

Nokia should have continued its Meego transition path, but to differentiate, it should have chosen Android. That would have given Nokia a boost.

No need to give patents, Maps & other goodies to MS.
It could have kept hold of everything, without being forced to make gifts to Redmond.
It would have preserved its independence and profits. What really counts.
Now it's just an empty corpse, its sould being lost and void.

But helping Nokia was not was THT Elop was sent there for.

Jorma Ollila knows. Jorma should speak! Now!

PS: in other news... NO-ONE WANTS A WINDOWS PHONE OR TABLET!

[Earendil Star]

Of course I meant... "I would not write off Windows Phone 8 right now... yet."

Cheers!

[Jack1059]

Tomi you amaze me with your insights and clear analysis in all areas of smartphones, and I enjoy the reads. So why is the exception as you say with blackberry? What is it with blackberry that you can't seem to get a handle on? Especially since you continue to reiterate that the path nokia should have been on with meego, is the same path blackberry took with bb10. I'm not having a go at you either. It's a genuine question. We always read, carrier support is important. A clear migration path is important. A loyal user base to migrate to the new os is important. BlackBerry has all of those, but you only ever summarise them in a few sentences. Seems odd to me given blackberry is the new nokia. The nokia as it should have been before that idiot elop destroyed it with the boards consent. Anyway, my main point is more analysis with blackberry would be interesting to read.

[keitai denwa]

All the analysts glamouring how tizen will replace android at samsung are delusional. Just try yourself tizen 2.0 on the tizen developer phone - it looks (and lags) like android 1.5 despite running on very powerful hardware. The tizen UX experience so much behind WP and android that it's not even funny. Samsung has strong marketing, adequate HW engineering but fails at software engineering. Despite of being years in development, tizen is still deeply disappointing.

The only reason tizen exists is to have a negotiation leverage with google. The same reason why operators keep talking about "3rd ecosystem" - they don't really want one, they just want to keep google on toes.

[cycnus]

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