Bloodbath Year Four, Smartphones Galore - Q3 Results, all market shares

So we now have the numbers about as good as we can hope to get. All four major analyst houses have given their counts of the total market size, and all 4 agree we've passed the quarter billion sales level per quarter this quarter, so yes, the average we are working from is 254.3 million new smartphones sold worldwide in Q3 of 2013 and this year is very well on track to pass 1 Billion total new smartphones sold. The global migratoin rate is 55% and the global smartphone average price in Q3 according to IDC was 317 US dollars. So its now a 300 Billion industry by annual revenues in 2013, not total handsets, just the smartphones part.. Bigger than Hollywood, bigger than Gaming, bigger than Music, bigger than Radio. In fact bigger than all four of those, combined. About the size of the global PC industry by revenues (far more by annual unit sales obviously). Nice biz eh? Lets do some numbers!

BIGGEST SMARTPHONE MANUFACTURERS BY UNIT SALES IN Q3 2013

Rank . . Manufacturer . Units . . . Market Share . Was Q2 2013 . . OS systems supported (coming)[ending]
1 (1) . . Samsung . . . . 84.1 M . . 33.1% . . . . . . . ( 31.9% ) . . . . . . Android, bada, Windows (Tizen)
2 (2) . . Apple  . . . . . .  33.8 M . . 13.3% . . . . . . . ( 13.4% ) . . . . . . iOS
3 (5) . . Huawei  . . . . .  13.4 M . . . 5.3% . . . . . . . (   4.9% ) . . . . . . Android (Tizen)
4 (4) . . Lenovo  . . . . .  12.3 M . . . 4.8% . . . . . . . (   4.9% ) . . . . . . Android (Tizen)
5 (3) . . LG  . . . . . . . .  12.0 M . . . 4.7% . . . . . . . (   5.2% ) . . . . . . Android
6 (6) . . ZTE  . . . . . . . . 11.6 M . . . 4.5% . . . . . . . (   4.6% ) . . . . . . Android, Windows (Firefox)
7 (7) . . Sony . . . . . . . .10.3 M . . . 4.0% . . . . . . . (   3.8% ) . . . . . . Android
8 (8) . . Coolpad/Yulong . 9.1 M . . . 3.6% . . . . . . . (   3.6% ) . . . . . . Android
9 (9) . . Nokia . . . . . . . .  8.8 M . . . 3.5% . . . . . . . (   3.2% ) . . . . . . Windows, [Symbian]
10 (10) . HTC . . . . . . . .  6.3 M . . . 2.5% . . . . . . . (   3.1% ) . . . . . . Android, Windows
Others . . . . . . . . . . . .  52.6 M
TOTAL . . . . . . . . . . .  254.3 M
Source: TomiAhonen Consulting Analysis 15 Nov 2013, based on manufacturer and industry data
This table may be freely shared

Yes, this quarter it happened. Yet another death in the Bloodbath of smartphones. We've seen past giants like Palm, Motorola, Ericsson die and now goes the biggest. Nokia the inventor of the smartphone who at the start of our Bloodbath series towered over all rivals, will be sold to Microsoft. There the Nokia/Lumia unit will live for some years, struggling to find business, until some day Microsoft decides its too expensive to fight for a tiny slice when they see Windows Phone can never become something like say Xbox, and will pull the plug. Nokia/Lumia at Microsoft will go the way of the Zune, the way of the Kin. But yes. Another death in the Bloodbath. 

Meanwhile on the charts? Nothing much new really to report. There is that dogfight for third place, jostling between Huawei, Lenovo, ZTE and LG. Sony was in that fight but seems to have fallen a bit behind. Coolpad ie Yulong was no flash in the pan, it is solidifying its 8th ranking. Blackberry is still solidly out of the Top 10. Sammy rules on the top = all hail Samsung the king. And as I wrote separately already, we've now seen 'peak iPhone' in smartphone market share. Apple is very unlikely to achieve annual level growth in its smartphone market share this year, 2013, for the first time ever. That is why they launched the parallel discount models in bright colors, the iPhone 5C. But those are still priced too high to save Apple's growth trend in market share. Yes, Apple will obviously produce another record Christmas Quarter but growing only in units (and yes, revenues and profits) but its market share is now in decline. Unless they lower the 5C model range prices, that decline will continue..

BIGGEST SMARTPHONE OPERATING SYSTEMS BY UNIT SALES IN Q3 2013

Rank . OS Platform . . . . Units . . . . Market share . Was Q2 2013 . . Manufacturers in Top 10
1 (1) . . Android . . . . . . . 204.3 M . .  80.3 % . . . . . ( 79.0 %) . . . . . Samsung, LG Huawei, ZTE, Lenovo, Sony, Yulong/Coolpad, HTC
2 (2) . . iOS  . . . . . . . . . . 33.8 M . .  13.3 % . . . . . ( 13.4 %)  . . . . . Apple
3 (3) . . Windows Phone . . 9.3 M . . .  3.6 % . . . . . (  3.9 %) . . . . . . Samsung, Nokia
4 (4) . . Blackberry . . . . . . 5.9 M . . .  2.3 % . . . . . (  2.9 %) . . . . . . (None)
others . . . . . . . . . . . . . . . 1.0 M . . .  0.4 % . . . . . (   0.6 %)
TOTAL . . . . . . . . . . . .  253.4 M
Source: TomiAhonen Consulting Analysis 15 Nov 2013, based on manufacturer and industry data
This table may be freely shared

This race is over. Android has now passed 80% of new sales and the only meaningful rival is iOS at 13%. Yes, Windows Phone is now 'the third ecosystem' by new sales (not anywhere near that by installed base) but at 4% market share that is a hollow victory indeed. At least Blackberry is so troubled, it is no rival and Samsung's Tizen keeps teasing us but still nothing to see. Hey, Sailfish gets its sales now before Christmas as Jolla starts its entry into the smartphone wars. First Jolla smartphones will be selling at least in Finland, hopefully also very soon in China..


INSTALLED BASE OF SMARTPHONES BY OPERATING SYSTEM AS OF 30 JUNE 2013

Rank . OS Platform . . . . Units . . . Market share  Was Q2 2013  . Main Manufacturers of current base
1 . . . . Android . . . . . . . 959 M . . . 64 % . . . . . . ( 58 %) . . . . . . Samsung, Huawei, Sony, ZTE, LG, Lenovo, SonyEricsson, Coolpad 
2 . . . . iOS  . . . . . . . . . 308 M . . . 20 % . . . . . . ( 20 %) . . . . . . Apple
3 . . . . Symbian . . . . . .   97 M . . .  6 % . . . . . . (   8 %) . . . . . . Nokia, Sharp, Panasonic, Fujitsu
4 . . . . Blackberry  . . . . .  62 M . . . 4 % . . . . . . (   5 %) . . . . . . RIM
5 . . . . Windows Phone . . 40 M . . . 3% . . . . . . . (   2 %) . . . . . . Nokia, Samsung, HTC
6 . . . . bada . . . . . . . . . . 20 M . . .  1 % . . . . . . (   2 %) . . . . . . Samsung
Others . . . . . . . . . . . . . . 16 M . . .  1 % . . . . . . (   1 %)
TOTAL Installed Base . 1,504 M smartphones in use at end of Q3, 2013
Source: TomiAhonen Consulting Analysis 15 Nov 2013, based on manufacturer and industry data
This table may be freely shared

So congrats Android. When you add tablets, Android active user base is over one billion already. By end of the year we will have more than 1 Billion smartphone users alone on Android, and globally, more Android users than all forms of Windows, including desktops, laptops, netbooks, tablets and smartphones... wow. I did tell you last year, that Android has won the war, but still, who would have thunk it. In our lifetimes we were to see the king Microsoft toppled. Well, if Nokia could die the Microsoft death, why not Microsoft itself?

Thats your market picture now at the end of Q3 of 2013.

Comments

[Alex Kerr]

What's the current story with feature phones?

It's only just mid this year (I think) that smartphones sales have overtaken featurephone sales. There are currently less than 2 billion smartphones in use in the world, but 4 billion featurephones (effectively baby/low-end smartphones) and 1 billion dumbphones (can only make calls and texts).

Ericsson in their latest Mobility report project around 4 billion featurephones still in use in 2019. So they're not disappearing anytime soon...

I'd be interested in what current usage numbers are, especially in the developing world.

[eduardo]

"until some day Microsoft decides its too expensive to fight for a tiny slice when they see Windows Phone can never become something like say Xbox, and will pull the plug."

I could be wrong, but I think Microsoft is going to stick with Windows Phone for a very long time, no matter how poorly it sells. That is because MS is a personal computing company, and it understands personal computing is going mobile, and so it simply has to keep trying to get into the game.

The only reason I could see for a change in the near future is if MS's new president has some radically new direction for the company, though it is very hard to see what that could be.

[N9]

@Baron95
IE is not the most used browser in Europe. Chrome is. Windows is of course the most used OS, but many people hate it. xbox seems to be doing OK. There Microsoft was able to buy themselves into the market by spending an incredible amount of money.

[Winter]

@Baron95
We can put a price on how much Windows is loved: MS have to sell WP handsets at a $100 discount. Windows phones are sold at a loss. Nokia's deficites grew faster the more WP handsets they sold.

Also, one of the cross-polinations from WP is Windows 8. The OS that single handedly crashed the sales of new computers.

[New Reader]

Hi Tomi.

I was wondering if you're gonna do the BlackBerry article just like the one you did to nokia. I love it.

Hi Baron.

You seems like a stupid iSheep that sang a broken record.

[E.Casais]

@Alex Kerr

"What's the current story with feature phones?"

This is why any analysis worth its salt must also deal with figures on installed base, not just market share.

Just look at Apple: a market share of 13.3% does not look spectacular. If it were the installed base, compared to 80.3% Android it would raise questions as to the minimum relative profitability of apps needed to compensate for the disproportionate market size factor.

At 20% vs. 64% effective installed base, the situation looks rather different.

[Winter]

@E.Casals
"This is why any analysis worth its salt must also deal with figures on installed base, not just market share."

Today's market share is tomorrows installed base. You have to include a measure of duration of use. I have seen very old and broken Nokia camera phones in use with teenagers in Asia.

With current throughput (18 months), the current market share will be the installed base in 2015.

[E.Casais]

@Winter

"Today's market share is tomorrows installed base."

Actually no.

To be correct, you assertion requires

(1) The same market share to hold steady for years; if market share varies, one cannot project current market share directly onto future installed base share.

(2) No hysteresis in device usage, i.e all devices replaced at the same rate. This does not happen. For instance: iPhones are basically renewed in a two year cycle, because they are sold with subscriptions. Android devices have a higher proportion of no-subscription buyers, hence probably a higher proportion of devices used for longer periods of time and renewed less frequently.

(3) No changes in device type preferences. A new class of emerging devices cause market shifts that break the relation between recent market share projected into future installed base. E.g. in the past, smartphone vs. feature phone, in the future possibly head-mounted displays (Google glasses) vs. smartphone.

Let me repeat my words:

Any analysis worth its salt must also deal with figures on installed base, not just market share.

Note the words "also" and "not just".

[happy horrse]

Great delivery. Great arguments. Keep up the great spirit.

[E.Casais]

@Leebase

You overlook some important aspects:

"it's just not a great business to be in like it used to be."

The important words here are "like it used to be". Every product goes through a life-cycle, and towards the end (declining sales, cannibalization by other product types) things become increasingly difficult for the multitude of players that had it easy during the good days. By then shaving costs ruthlessly, thinning margins as much as possible, reducing prices, and coping with declining sales become the rules of the game.

The same will take place with phones -- smart, super of phablets. It will happen with tablets. It happens with everything.

"the company making more money selling computers than the next top 5 competitor is the LOSER of the Windows/Mac wars."

The important word here is "Windows". Microsoft won that war -- against everybody: Apple, HP, DELL, Toshiba -- but also against other software vendors (e.g. OS/2, Lotus). Microsoft is still winning in that sector, no matter how much you may enthuse about the performance of Apple in its PC segment -- just look at how much cash Microsoft is still reaping from a declining PC business.

"Is the low end of the market a good business to be had?"

Despite some similarities, low-end must not be mixed with products in the descending path of their life-cycle. It is thin margins and low prices, but not declining sales. What observation tells us is:

(1) There is always a profitable business to be had in the low-end.

(2) If at all, it is the mid-range which is the most difficult segment to hold, and the most susceptible to the vagaries of the economy.

[Winter]

@Leebase
"Which low end provider is making decent profits?"

Any profit over the government bonds rate is a decent profit. Wallmart makes a profit and is doing well. Not with the margins of Apple or MS, but they can stay open.

And for Google, Russia and China never were important markets. So they did not lose them. For Gopgle the point was to keep their access to the Western markets open without toll booths by Apple or MS, or any of the telcos. And that has succeeded brilliantly.

[E.Casais]

"How have you established that there is a profitable business to be had?"

Whatever economic activity, whatever product or service there is _always_ a low-end offering which is profitable. There is no reason mobile phones would be different.

The Nokia (and probably Samsung) low-end phone business _is_ profitable.

"Which low end provider is making decent profits? "

If you insist on taking the margins on the highest-end devices as the gauge to assess the profitability of low-end categories, then of course nothing at all is decently profitable but the iPhone. But then the conclusion would be that only the iPhone makes economic sense -- which would be an absurdity.

" Of the biggest winners of the PC wars...Msft, Intel, Apple...who is best poised to win the war in mobile?"

I did not touch that point, but only remarked on the position of PC, phones and tablets in their respective life-cycles, and on the difference between low-end and end-of-life.

"I agree with you about the midrange."

And in what segment are HTC, Motorola, Sony(Ericsson) or LG mainly active? Right there.

[baby's only]

This is very interesting, You are a very skilled blogger. I have joined your rss feed and look forward to seeking more of your magnificent post. Also, I've shared your web site in my social networks!

[Winter]

@Leebase
You forgot Cyanogen who started a company to distribute their own Android distribution.
http://cyngn.com/

You seem to be horrified by competition and free markets?

It is true that competition leads to lower profit margins. But over all, economics research has shown that this is actually "A Good Thing" for economic development.

Anyhow, Google was never in the mobile phone market for making insane profits on a mobile phone OS. Also, I think those in charge of Google are way too intelligent to assume they could corner the global mobile search and app markets. For one thing, they saw how both Apple and Microsoft failed in their efforts.

So, what is actually your point? That Google will have to compete on merit?

[N9]

@Leebase
Not sure how much those statistics can be trusted, but there seem to be quite a few cyanogenmod users.
http://stats.cyanogenmod.com/
Most of the users install the missing google apps. This seems to be illegal if they didn't get the apps together with their device in the first place...
Let's see how this works out...

[Winter]

@Leebase
"BUT - the good news is that others have been making progress on replacements to Google's services such that you CAN have a complete mobile OS experience based on the open source parts of Android and replacements to Google."

Cyanogen is building their own set of apps and services.
http://www.mobileburn.com/22029/news/cyanogen-inc-cyanogenmod-becomes-commercial-venture-with-new-installer-and-services-in-pipeline

@N9
"Most of the users install the missing google apps. This seems to be illegal if they didn't get the apps together with their device in the first place..."

From Wikipedia: CyanogenMod

Following a statement from Google clarifying its position[61] and a subsequent negotiation between Google and Cyanogen, it was resolved that the CyanogenMod project would continue, in a form that did not directly bundle in the proprietary "Google Experience" components.[62][63] It was determined that the proprietary Google apps may be backed-up from the Google-supplied firmware on the phone and then re-installed onto CyanogenMod releases without infringing copyright.

[Winter]

@Baron95
"Taken to an extreme, for instance, if HW prices drop far enough, it would be possible for Google to give the entire phone (OS and HW) for "free" and live off the ad revenue.

How would and purely HW manufacturer (e.g. ZTE or HTC) compete then?"

I have heard this tale for three decades now. Right from the first clones of the original IBM PC.

If it hasn't come true in thirty years, why should it happen now?

[Winter]

@Baron95
"Once Mobile Phones HW reaches the "good enough" state, prices will come down - and yes - perhaps subsidized to zero."

That only works if the "services" are massively over-priced. Like mobile contracts in the USA. In almost all of the rest of the world, competition has driven the margins down to a level where such subsidies are simply unsustainable.

BTW, the same has been tried with PC's. Every few years MS would come out with such a plan. Some other service providers did the same, but mostly to business.

[Spawn]

Those leaving in yesterday will never accept tomorrow. Fact is, we are living in an Android world. Its the OS number 1 by wideee margins. It tops every alternate. Windows? That is past and so is iOS. TODAY already. Just by looking at that already old numbers. There is no point in arguing with baron-windows-95 like minds who still live in a pre-internet era. Lets move beyond that. Its Android, today and tomorrow.

What does that actually mean? Android everywhere it means. Far beyond mobile. xbox1/ps4 are goig to be replaced. Automotive, TV, home-entertainment, it will all be Android. Niches like the classic fat desktop-bolide may not vanish just like mainframes never did. But they are niches, thats it.

Android as a framework, its APIs, are going to be adapted everywhere. A quasi-standard like win32 was for decades till it got aborted by its own parent and replaced with Android. Unlike the past the future is open specifications, open source code, open software. That's what Android accomblished, set in stones.

The new propitary can't be at the client-side any longer. Its atthe server-side. The services, all the inera tion, the cloud, the abstract thing thathas a copy of your client-data all the time if you don't fight it active off and care. This is Google's world, there services, your data, youself. This is the "new gold", the big money, the new lockin. Those who argue Google not profits from Android, from a client-side open source Android universe are not blind and stupid but just windows-95, caught in a 20 year old past that isn't anymore and will not come back. The landscape changed. Today isn't yesterday and arguing with xbox or IE market share is short mindee, hillbilly, redneck, small-town boy thinking. Get beyond it and adapt or be gone. That's why Ballmer had to go, why WindowsPhone lost has no way to catch up.

[E.Casais]

"Google and Amazon sell Nexus phones and Kindle tablets substantially below cost."

There is a difference between selling below cost and giving things away -- a difference measured in hundreds of millions of €/$, and possibly more. This is very painful to sustain over the long term.

"And it is not like they are being forced to sell them below cost"

There are very compelling competitive reasons for both Google and Amazon to do this.

Amazon had first to crush Barnes&Noble and other e-book reader vendors, and is now facing Android/iOS tablets, which it is trying to put down in the e-content business. It cannot do it with similarly priced devices that have a more specialized function (albeit arguably better at rendering content).

Google (through Motorola) is trying to bring Samsung down to a more "reasonable" size. Direct competition by HTC, Sony, Huawei, LG is not succeeding; it has to take matter in its own hands (so to speak).

"And operators subsidize many smartphone types to $0 with a plan."

Irrelevant in most of the world and for most customers.

"Once Mobile Phones HW reaches the "good enough" state, prices will come down - and yes - perhaps subsidized to zero."

If mobile devices are becoming computing devices, then one should compare their evolution and the forces affecting the market to those that impacted computers in the past. History is always revealing, but few bother to look into it seriously.

Was there ever a situation where computers were given away free and money made on software and services? No.

Why have software players like Microsoft and Google acquired hardware companies? Why is Amazon securing hardware suppliers? Because there must be some important synergy between HW and SW.

What can be that synergy? Making services/content/apps work better or exclusively on the hardware of choice of the vendor.

What is the benefit? Locking in customers in a platform -- and extracting the value both from services and hardware (since services work best/only on that hw, hence there are no genuine substitutes).

To be effective, doesn't that synergy require some exclusive, leading-edge computing hardware capability? Indeed, and this is exactly what the big players are doing: Microsoft acquired the world-leading camera and imaging capabilities of Nokia; Apple is developing its own components like the 64bit CPU (middle-term relevance) and the M7 (immediate short-term impact); Amazon has invested and secured e-ink technology. Several are looking into curved glass. I am sure Google is cooking something out of the Motorola patent stack.

In the end, doesn't it mean ecosystems centered on the hardware of those big players? Indeed, why do you think they are all pushing their proprietary maps, their own app stores, their own cloud and synchronization services, their own integrating messaging -- that work best only with their systems?

How does this compare to the computer industry? Welcome back to the 1970s-1980s. Entire software and hardware ecosystems built around proprietary architecture. Need top-class transactional services? IBM. Wonderful, most efficient proprietary I-O architecture -- for IBM tapes and drives, obviously. Best, most complete software library. Great integration services. Of course, if you want to network it is SNA or token-ring. And get used to EBCDIC and MVS or VM/CMS. Want process control for your industrial plants? DEC. Great machines, easy to program -- used with DEC tapes and disks, obviously. Great software library, with plenty of user contributions. Of course, for networking you need DECNET or Ethernet. Get used to VMS or RSX-11. Need document processing and management? Take Wang. Great machines. Of course, get used to WangNet, etc, etc. Need computing muscle? CDC. Great. Want a technical programming environment? Choose Sun. Or Apollo. Each one with its special version of Unix, each with its instruction set, each with its distributed file system. Etc, etc.

So if we are going into a similar world, how did the price of hw and sw look like? Expensive. Software was not cheap. And hardware was dear. To get an idea, take the fabulous margins Apple has on the iPhone: those of IBM, DEC, Sun -- all the successful players -- were the same.

Big players definitely fear commoditization. And that is why they are striving to avoid hardware to become "good enough" -- at least for them. It can be good enough for Asian manufacturers, but then, services will not run well, or not at all, on that good-enough devices. And then, the big players can always ask for a premium for their hardware -- after all, you want to enjoy those great Google/Microsoft/Amazon/Apple apps/content/services, do you?