Bloodbath Q3 Snippets from the Smartphone Wars

So a few quick notes from Bloodbath wars.

Huawei reported Q3 numbers at 16.8 million smartphones. That is up 8% from Q2 and gives a preliminary market share of 5.3%. Huawei's handset business is profitable.

Microsoft reported 9.3 million Lumia sales for Q3 which is up 21% from the transition-quarter Q2, and gives Microsoft a preliminary market share of 2.9%. They may pop back into the Top 10 depending on how Sony and Motorola do. Microsoft of course is still making huge losses with its Lumia unit. MIcrosoft is also now in the process of removing the Nokia branding of its Lumia smartphones so new models will be identified as MIcrosoft Lumia (only, no Nokia). For all the Microsoft propaganda about its 'growth', note that this ex-Nokia smartphone unit hasn't even recovered to the level of smartphone sales it sold in Q2 of 2012, more than 2 years ago. So don't drink too much of that cool-aid. The Lumia unit is not in 'growth' it is in 'recovery' and has far to go before it would have its head above water-level. 

Xiaomi reported very strong continued growth, another 24% from Q2 and hit 18.7 million units of smartphones sold and has a preliminary market share of 5.9%. Xiaomi is profitable of course.

And a word about Nokia the networking company. They are dropping hints that they might come back to handsets as soon as the exclusivity period with Microsoft using the Nokia brand is over. That would be nice.

Also in the rubbish bin: Amazon. They write off most of their investment in smartphones and now sell their Fire smartphones in bargain bins. (Told you so?)

Full Q3 numbers of course will be done when we have all the data (expect it early to mid November)

Comments

[Paul Ionescu]

@TomiAhonen

> And a word about Nokia the networking company.
> They are dropping hints that they might come back
> to handsets as soon as the exclusivity period with
> Microsoft using the Nokia brand is over. That would be nice.

Hopefully this time there will be Nokia Android phones!

[cornelius]

@Paul Ionescu

Ever heard of Nokia X?
Nokia Android phones would be nice but Nokia Sailfish phones would be much more interesting. Not only from a revenge point of view but I personally like Qt more than Java.

[Paul Ionescu]

@Cornelius

>Ever heard of Nokia X?

Sorry, my bad. I didn't explain well. I meant Android phones as their main phone (i.e. the most manufactured one). It would be great to have the Google Play Store by default. Nokia X does not have that plus Nokia X was a side approach (more Lumia phones were sold than Nokia X)!

> Nokia Android phones would be nice

Exactly!

> but Nokia Sailfish phones would be much more interesting.

I really hope that Nokia does not go this way! At least not in the next 4-5 years.

[WonTheLottery]

Although Tomi pointed out Huawei's overall growth in volume he didn't mention their sales of mid-to-high-end devices has doubled, something that should worry Apple as well as Samsung. At this moment Samsung's high-glamour devices are a similar price to the iPhone but Huawei's are considerably cheaper.

Xiaomi's devices look excellent too, I'm looking forward to them being available in the UK, I think their volumes could sky-rocket when they hit Europe.

It looks like Android devices will continue to get simultaneously better and cheaper.

[KPOM]

Apple and Samsung have reported their numbers, so shouldn't they be in this analysis? @Leebase, I agree that the current quarter will be interesting. The iPhone 6 and 6 Plus are selling big and prompting a lot of upgrades. My guess is that Samsung will still have the lead in raw unit shipments, but it will be close, and profits won't be any contest at all.

[AppleTurfer]

@KPOM - also note that Apple gained more in sales units than either of Huawei or Xiaomi. Less percentage growth but more actual growth. I agree Samsung is likely to keep the title of number 1, but it's shocking that Apple might get close.

Apple's market share may continue falling, but the competition is actually losing ground. The distance between Apple's sales and number 3 are further apart, and the distance between Apple and Samsung are getting much closer,

[RottenApple]

The usual suspects post their typical nonsense again.

@AppleTurfer:

Ask yourself: How much of Apple's 'growth' is actually just their yearly release spike? It has gone like that for years, and every time someone predicted some magical growth pattern - and yet every year things quickly returned to normal after all the iSheep got their new iToy. It won't be much different this time, even though the spike will be somewhat larger due to the pent-up demand for larger screens.

@Leebase:

Yeah, whatever. As Tomi said, for Microsoft it's not growth, it's just recovery of lost sales.
And claiming that the company as a whole is profitable is just smoke and mirrors and doesn't change anything about the fact that the smartphone unit that got bought for a huge pile of money is burning yet more money - and will continue to to so. WP wouldn't sell shit without lots of bribes and the Nokia brand - but wait! The Nokia brand will be discontinued soon - so things may turn very badly...

@cornelius:

If Nokia goes non-Android again, they'll suffer the same fate as everybody else:
- Microsoft is still a disaster after 4 years of Windows Phone and it's only their money that keeps it (barely) afloat.
- Blackberry is as good as dead
- Amazon also fell hard.

In short: Not one single competitor succeeded with this approach and nothing is going to change anything about that in the future.

[adi purbakala]

@appletufer

Apple sell patern is high in new product and decrease. The patern now more and more spike and go lower. So you cant judge apple one quarter but must see 1 year.

[KPOM]

@Rotten, the "beat" in Apple's fiscal Q4-14 iPhone sales, with only 9 days of iPhone 6 and 6 Plus sales suggests that we are seeing something different with this release. Remember, China wasn't even part of the initial launch this year, and was last year. My guess is that we are seeing an even bigger spike than normal because Apple finally has larger phones. That means in addition to the normal early-adopters and people coming off contract for the iPhone 5, we're seeing people who, all else equal, prefer Apple but had Android phones previously because of the larger screens. Apple's guidance for Q1-15 also suggests that they expect a blowout quarter.

@adi, Samsung will have higher unit sales for the entire year, but given that they have been about 50% ahead of Apple in unit shipments for a few years now, if Apple tops Samsung even for a quarter that would be significant. Profits won't even be close, since Apple has managed to increase the ASP with the 6 Plus and the 16/64/128 GB storage tiers.

And for those who didn't think Apple Pay was a big deal, consider that Rite Aid and CVS, two of the biggest supporters of the merchants' nascent "CurrentC" payment system, decided last week to TURN OFF their NFC readers specifically to block Apple Pay. Google Wallet was collateral damage, as it had been operating for several years with no high profile retail moves. So Apple Pay definitely is making waves here in the US.

[abdul muis]

@Tomi

What do you think the effect of Nokia comeback to Microsoft/WP?

[KPOM]

@abdul, I thought Nokia was precluded from making smartphones for a longer period of time. They can return to feature phones sooner, but no one's buying them anymore.

[AndThisWillBeToo]

@KPOM
You thought wrong. Nokia leased the right to use Nokia brand for feature phones to Microsoft for 10 years but Nokia at the same time can use Nokia branding for mobile (smart and feature) phones already in 2016. Very clear in the public terms of sales. Google it up.

[AtTheBottomOfTheHilton]

The most stupid strategy for Nokia now is do start developing Android phones. The competition in this area is extremely high and there is no way that Nokia can become profitable selling Android phones. There are several brands that lose money on their Android phones despite they are top notch.

Nokia should buy Jolla so that they get an in house operating system and Jolla needs Nokia in order develop the services around Sailfish.

I wish they would resurrect Symbian but that is likely not to happen :(.

[RottenApple]

@LeeBase:

Of course there is a spike. And of course the spike is considerably higher this time - because unlike last year, this year's iPhones actually do add some genuine value - making a lot more people buy them.

Furthermore, last year was a bit odd with Apple entering two new markets (DoCoMo and China Mobile) distorting the numbers. So growth looked better than it actually was - in fact, in many saturated markets, last year Apple experienced declines because the iPhone 5S didn't add much of an actual value. This was just hidden in the numbers added by the two new markets.

So what we get this year is an exaggerated spike because not just those who were bound to upgrade anyway will buy a new phone but also many of last year's holdouts. We'll essentially get the growth from two years all at once - plus the effects of having added these two markets which were just starting one year ago.

But as it is, the screen size upgrade is done now so whatever comes next year certainly won't match the unusual situation we have now. Next year's numbers will be a lot more representative of what happens now. It's surely great news for Apple but I wouldn't dare to derive a trend here.

@AtTheBottomOfTheHilton:

No, sorry, I cannot agree.
As I already pointed out, every single attempt to establish another OS has failed dismally. If Nokia tries, they won't fare any differently.

The OS is - with the sole exception of Apple (because they came first) - not, what you want to differentiate with. You want to differentiate by having better hardware or more unique features and servivces - but if you relegate yourself to one small little island where nobody else lives you are dead before you start.
You are regurgitating the same stupid argument that made Nokia adopt Windows Phone - and look what it led to.
Why do you think in the desktop world nobody aside from Windows has a chance? Only Apple manages to hold a few percent and the major reasons for this are that a) they can force feed their overpriced hardware on iOS developers, b) the herd mentality of Apple users and c) that for historic reasons many graphics artists stick to the system they started with. If it wasn't for these three groups they wouldn't be able to move anything on the desktop/laptop market - just have a look at Linux.
What makes you think that Nokia could overcome such an obstacle? Apple only managed to get beyond it, both in desktop and mobile, because they already had a significant foothold before the monopoly was cast in stone.

And why would you want to resurrect Symbian? It's a dinosaur, if that gets resurrected, Nokia will be laughed at, and only attract some nerds that can't shrug off the past.

@AndThisWillBeToo:

Yeah, don't you just like people throwing around numbers without showing anything to back it up?
Well, anyway, Samsung's best days are over, but since Samsung is not synonymous with Android - who cares? That's the nice thing here: Do sloppy business and someone else will take your marketshare. And Samsung had been criticized heavily for some of their actions, most prominently, of course, the constant complaints about their shitty UI.

[WonTheLottery]

@LeeBase
As Samsung has fallen Xiaomi, Huawei and other Chinese manufacturers have risen. How do you think iOS will have fared against Android overall? My guess is after a brief boost from the new devices Apple's market share will continue to drop only further and faster. Samsung's high-glamour devices were a similar price bracket to the iPhone but Huawei's, Xiaomi's, Lenovo's, etc... are considerably cheaper. I don't even think Xiaomi's devices are officially available outside China yet so their increase is particularly impressive.

Samsung haven't thrown in the towel either, Samsung Construction have been building vast manufacturing plants for Samsung Electronics in Vietnam. The average salary of a factory worker in Vietnam is 1/4 of that in China and it's rumoured Vietnam's government has given Samsung a sweet tax deal too. Once Samsung have large scale production coming out of Vietnam they'll be better positioned to slug it out with the Chinese manufacturers.

[KPOM]

@WonTheLottery, Apple's share of the total phone market is increasing, albeit slightly. The distinction between "smartphones" and "feature phones" is fading, particularly as there are lots of cheap devices running older versions of Android.

Apple will see a big boost this year with the iPhone 6 and 6 Plus. Next year will likely see a leveling off, as Apple returns to a more normal replacement cycle. What will be interesting to see is whether they continue to sell both the 6 and 6 Plus as mid-range models, or sell only a single iPhone 6, and reserve the larger form factor only for the 6S Plus.

If they keep both, we can see that in 2 years they'll have a relatively inexpensive large phone, which should help them make further inroads into China. OTOH, if you thought that the current iPad lineup is confusing, imagine Apple juggling 6 different models (6, 6 Plus, 6S, 6S Plus, 7, and 7 Plus) in multiple storage capacities. No wonder they are trying to consolidate carrier models and promote an Apple SIM. I think their dream world is one in which an iPhone is an iPhone is an iPhone and customers can choose whichever carrier they want.

[WonTheLottery]

@KPOM
"Apple's share of the total phone market is increasing, albeit slightly."

Ever since Q4 2011 Apple's market share every quarter has been lower than their market share for the same quarter the year previous.
e.g.
Q1 2013 17.5%
Q1 2014 15.3%

Q2 2013 13.0%
Q2 2014 11.9%

More here: http://www.statista.com/statistics/266136/global-market-share-held-by-smartphone-operating-systems/

Xiaomi have already taken Samsung's number one spot in China, their rise is astonishing, this is a company that didn't even exist when Elop took charge at Nokia. I certainly hope we're going to see Xiaomi and Meizu join Huawei in officially offering their devices in Europe.

Look at the Meizu MX4 for example: http://www.engadget.com/2014/09/02/meizu-mx4/
This is a beast and it's only $290! (or $390 for the 64GB version)

If these Chinese manufacturers start expanding beyond their own shores it's not just Samsung that will feel the heat. As I said before Samsung's high-glamour devices are in a similar price range to Apple's, that's certainly not the case with Huawei, Xiaomi and Meizu.

[KPOM]

@WonTheLottery those are Apple's smartphone market share statistics. I'm talking the entire phone market, which is relatively static. What's happening is that the low end of the market (the sub-$200 market) is moving from featurephones to cheap Android devices.

Xiaomi will need to change their designs in order to sell their highest end models in Europe or North America. The Xiaomi MiPad looks like an iPad mini with an iPhone 5c shell. Apple would sue them to no end if they released that in any Western market. They can get away with that in China because their IP laws are still relatively weak, even compared to the EU.

[KPOM]

@Leebase, Apple probably does have a "what comes next" issue in 2 years (next year will still see a fairly healthy upgrade cycle from the end of 2013 contracts in the US). In an interview with the WSJ yesterday, Tim Cook admitted that iPhone will continue to make up most of their revenue and profits for the foreseeable future. Apple Watch is obviously going to be an accessory, since they won't report unit sales and will be lumping it in with iPods, Apple TVs, and accessories into the "Other" segment. It's more a way of getting 5-10% of iPhone buyers to spend another $350+ on something else (Greg Joswiak didn't exactly deny it today when Walt Mossberg suggested that the high-end watches will sell for thousands of dollars). Mac is resurging but is in a very mature market. iPad sales are declining, and with Microsoft aiming squarely at enterprise with the Surface line it remains to be seen whether the partnership with IBM will help it there.

[WonTheLottery]

@Piot
Let me help you with your comprehension problem:
Q4 2011 23.8%
Q4 2012 20.9%
Q4 2013 17.8%

Now try the same exercise with the quarter of your choice. You might have to find other sources for later periods (e.g http://www.idc.com/prodserv/smartphone-os-market-share.jsp) but you'll see exactly the same pattern.

@KPOM
"Xiaomi will need to change their designs in order to sell their highest end models in Europe or North America. The Xiaomi MiPad looks like an iPad mini with an iPhone 5c shell. Apple would sue them to no end if they released that in any Western market"

A UK High Court judge already forced Apple to publish a public apology to Samsung on their website and in UK national newspapers for making just such an accusation about the Samsung Galaxy Tab back in 2012. Apple then received further punishment for trying to hide the apology on their website. Do you think Apple will want to come back for more humiliation?