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November 07, 2014

Comments

Tomi T Ahonen

I removed the KPOM comment about CDMA2000 vs WCDMA because of several clearly erroneous claims in it (which sounded like CDMA2000 propaganda). Combined CDMA and GSM operators were repeatedly commenting in public in the middle of the past decade about the two systems. CDMA2000 was a rubbish system designed for US crappy environment that prioritized REACH over CAPACITY. It was for desperate US carriers attempting to patch holes in the CDMA network. Only WCDMA was able to deliver 3G quality which is why every carrier who operated both CDMA and GSM went after trying both with WCDMA. So sorry, that was not a topic in the original blog, I won't allow this nonsense now to come in, a decade after that issue was decided.

KPOM don't bring that nonsense up again unless I blog about 3G standards

Tomi Ahonen :-)

Tomi T Ahonen

KPOM - also don't put words into my mouth. I have never said the US market is not relevant or not significant. I repeatedly point out its the second largest smartphone market (until India eventually passes it) and has about a fifth of the world's market.

I removed the comment obviously that made this statement which you KNOW is not true. Don't do that again.

Tomi Ahonen :-)

Tomi T Ahonen

Phil W, LeeBase and others - on the apps economy. LeeBase you KNOW this, we've had this discussion several times, I am very disappointed you pretend not to know. The trend is CLEARLY away from iOS to Android, expanding from one country to the next. The markets are tipping over one by one and no trend is in the other direction. It is not only inevitable but its happening now in 2014. I gave you stats on this before, I don't have them on hand now to again repeat but come on, lets not pretend its not happening.

For the others - yes its happening, first in markets where Android-to-iOS balance is greatly in Android's favor like South Korea and India but constantly more. The global tipping point will happen soon, going with first more unit sales on Android, then more installed base on Android, then more apps on Android, then more downloads on Android, then more revenues on Android and advertising on Android. It is inevitable and ALL TRENDS are in that direction. The last countries to follow will be USA, Japan etc where iOs has its best markets against Android.

LeeBase - really! We had this discussion. You are not that stupid that you'd have forgotten. I even got you the stats as I knew you were intersted. I am really disappointed in you.

Tomi Ahonen :-)

Tomi T Ahonen

On Apple share of global handset market, today about 2/3 of total handset market is smartphones (very roughly speaking) so you can take Apple smartphone market share ie 13% and remove a third of it to get the global handset market share which is about 8%..

Tomi Ahonen :-)

Tomi T Ahonen

BTW the analysis by Huber around maybe comment 200 or so, with the extended car analogy (luxury vs premium) is spot-on and very well explained. Totally agree.

Tomi Ahonen :-)

Tomi T Ahonen

Hey regulars here...

WHY would you test me? Why when you KNOW I say no discussion about the profits and I have exhibited clear policy of deleting them, you bring it up? That means INEVITABLY that I will delete your comment. You are aware that it takes me one click to delete your precious contribution but you have to go through all the silly hoops here with Typepad to get your comment posted. Why would you deliberately post something that you KNOW I will shortly delete? What is it that I am not getting? Is there some value to you in this 'game'? Don't bring the stupid stuff into your comments, because OBVIOUSLY that means that also the good part in your comment (if there was any) will be gone.

Well, its your time. If you want to continue testing me, go ahead but then you skate onto thin ice. Those who have been blocked forever from this blog usually got that way from continously pestering me and breaking the rules.

SPECIFICALLY - don't open that can of worms about whose profits are bigger. We don't do the profit debate here. You KNOW that.

Tomi Ahonen :-)

Tomi T Ahonen

Wow that was a bizarre comment by AndThisWillBeToo

"The rivals can easily adjust and do superficially similar phones with mostly similar feature sets, and some features always better than - the iPhone 3G. They can do that in their sleep, release a dozen such phones from each of the big four rivals (I am deliberately discounting Motorola as they are in disarray) before Christmas into the 150 dollar to 250 dollar price range and if your iPhone has 40 to 50 rival handsets by Christams, each designed "to beat the iPhone" you bet this is far stronger competition than the iPod range ever had from Creative Labs"

Yes I said that. And its true. iPod held a FAR bigger market share in musicplayers than iPhone was ever able to reach at its peak. An army of iPhone-clones appeared from all major makers and they vastly outsell the iPhone. So AndThis.. exactly where was I wrong on this prediction?

"Apple has to release more than one phone model per year else its market share growth will stagnate. I believe this year 2010 will drive that lesson home to Apple HQ loud and clear."

I did say this and with the exception of Nokia's unforceen suicide, exactly that happened on a one-year delay and we got Apple's split in the product range in 2013 (lesson learned in 2011 not 2010). Are you accusing me of not being a valuable expert and consultant when I could not foresee the lunacy of Elop to Nokia collapse?

"If no new iPhone Nano (or QWERTY) is released in 2011, then Apple would be in the roughly 15% market share range"

I did say this before the Nokia collapse. Where was Apple's share when the model line was split (ie low cost 'Nano' appeared) 15.5%. I think thats a pretty darn close guess when I said to expect 'roughly 15%'

I could go on. I have no idea why you quoted me in that comment but I'm pretty proud of this blog and how accurate I've been. Incidentially AndThis, can you show us ONE other expert who said in 2010 that Apple has to split the product line or said in 2010 to expect iPhone market share to FALL to 15%...

I know AndThis wrote that in attempting to annoy me but gosh, I'll take those quotes very happily. Want to go find more, AndThis?

Tomi Ahonen :-)

Tomi T Ahonen

On that long-running 500,000,000 customers argument and why. This is a business driven by hit phones. There was a time when the Razr was the must-have phone on the planet. When that time passed, Motorola crumbled and died away. The iPhone was the next must-have phone. Its had a very good run. The differences from Razr to iPhone are plenty, starting with a robust ecosystem and parallel iProducts but the danger is, that you suddenly are last year's phone. Apple IS vulnerable to this and far more importantly, the Razr opportunity exists for every Top 10 maker. I did think the Sony Xperia Z1 had chances to be such a hit phone but it obviously wasn't. Someone may come next to have the next must-have phone and it might make the iPhone (and all its clones) instantly outdated. Just like how we now laugh when we see a Razr in a movie haha...

Just my two cents into that debate. Apple is very strong but its not a guarantee it remains the most desirable phone forever. Logic suggests it can't hold that forever in fact and someone else gets their Razr moment. What separates Apple from most handset makers is that incredible loyalty that likely even if the next LG Superduperphone comes along, the iSheep will loyally keep buying their iToys, so Apple won't see a collapse in sales, rather only an end to the growth or mild decline in unit sales... Thats as long as Apple keeps supplying uber-desirable iGadgets that feed the iNeeds of Apple fans. If there then was another say Antennagate, that would be a potential disaster-in-making.

Tomi Ahonen :-)

Tomi T Ahonen

I removed Baron95 insensitive comments about workers who truly do not enjoy their working environment in China, commit suicide etc...

Tomi T Ahonen

AndThis - yet another quoting me again? And again we AGREE ? I fully stand by my prediction that this year Apple market share WILL be down. Thank you for reminding everybody of that. Or do you really suggest it won't decline from 2013?

Tomi Ahonen :-)

Maggan

So, Tomi now that you are here, a question regarding Samsung and market share. I'm trying to understand how market share is not as ephemeral as this winter's sunny days.

Samsung have executed well, and have the largest market share, bar none. So what are the positive effects this accumulated market share has for Samsung now, that it has run into some rougher times? What are the positives in this for them? There must be some effects that come from this market share dominance, that Samsung doomsayers are ignoring.

Is the accumulated market share a cushion, guaranteeing that the fall will stop well before Xiaomi or Lenovo pass them?
Has Samsung established a minimum number of repeat customers, thereby ensuring relevance going forward?
Has the market share established also mind share, giving Samsung a greater than expected chance of rebounding with a slight change in strategy?
Is the market share a guarantee that they will stay relevant, and not collapse as did Nokia and Blackberry?

Market share dominance means something, but what does it mean?

/M

abdul muis

@Tomi

Regarding loyalty.

I think you were wrong on Apple iSheep loyalty. If you watch carefully, the Blackberry user, known as crackberry also have 'iSheep' loyalty. But that doesn't save BB from near-death. Apple user right now is just like BB user at the introduction of iphone time. Look strong!

Nokia also have strong loyal user, who might hate (or not) microsoft, but still love nokia, or maybe just clueless fans. As we can see that Nokia/Microsoft can still easily sell loads of phone in India.

My point is, loyalty is EARNED, not GIVEN. And with each mischief, loyalty eroded.

Tomi T Ahonen

Maggan

Great question. Actually market share is a measure of achievement, it is no guarantee of management sanity into the future. It is always dynamic ie adjusts to real market conditions. While usually a good, competitive and market-oriented giant will be on top of market share - ie they do their marketing well and I mean marketing broadly so including pricing, product design, distribution etc, not just advertising - that is no guarantee of success into the future else the top guy would remain on top forever. But we've seen for example in cars the lead shift from Ford to General Motors to Toyota and back to GM again in the past 100 years. What market share gives you is larger scale than any rival so you get the advantage of scale. If all other things remain the same, then you because of larger scale, are more able to fight price wars or give discounts or make bigger profits than the next tier rivals (in mass market competitors, not particular niche competitors).

Samsung also HAS achieved a solid run of profits every single quarter since they became the biggest smartphone maker just like how Nokia reported a profit every single quarter for which they gave the information, out of their smartphone unit until their collapse started. It is not - however - about how 'BIG' the profits are. Nokia also reported at times shrinking profits to the degree of alarming investors. This blog is not about short-sightedness of investors and whatever assumptons and expectations Wall Street happens to consider into any one stock evaluation. This is about sustainable profitable business. In terms of sustainable profitable business, the Samsung smartphone business is among the most healthy in a very volatile industry where Samsung itself suffered many quarters of losses in the previous time when they lingered in the second tier of smartphone makers. Since they became biggest, they have been safely profitable.

What the press now panic about is the shrinking of profits. That is stupid. Every company goes through cycles when at times they are more profitable at times less so. Compare to Sony, LG, HTC which have all been loss-making in recent quarters, some regularly into and out of profits/losses. That is when there is real trouble in the handset maker. Not Samsung. It is solidly profitable - BUT - because it managed to do incredibly big profits for a while (thanks to the Nokia collapse and Samsung's agility to quickly capitalize) they created a totally unsustainable expectation in the minds of investors that somehow Samsung as a mass market brand can sustain 'Apple-level' profis of a luxury niche brand. Absolute bullshit thinking by Wall Street - exactly the kind of debate I don't want on this blog. That is just silly. Samsung was lucky to be the beneficiary of the Elop market give-away from Nokia. They should send a nice bonus cheque to Elop of a couple of million just for that. But it wasn't sustainable. So the panic you read about in the Wall Street oriented business press is that naivete about the handset industry, where people who didn't know what Samsung is or was, suddenly fell in love with it, not understanding the situation and now feel burned.

Let me say a few words also about the extent of the position. Being biggest is not just scale for your factory. It is scale in sourcing. No supplier wants to upset the biggest manufacturer so the biggest maker gets both guarantees of parts and best prices for parts. This helps profitability. Scale translates into distribution of marketing costs across a wider base ie savings. Scale means shelfspace dominance where stores have to stock more of your product. Scale means distribution support by essentially everyone because every channel wants to sell the brand that is biggest. Which supermarket doesn't want to have Coca Cola on its shelves haha. Scale allows more staff in anything from engineers to design your products to marketing research staff and budgets to resaerch customers. Scale means larger factories where costs again are saved. Scale means larger shipping units and their savings. So usually the company which achieves a market leadership position in a given competitive global market (in the consumer goods space) rarely loses it except for some disaster (eg Toyota brakes, or the 1970s oil crisis which exposed GM's cars as too much gas-guzzlers for the sudden spike in fuel costs). Being biggest gives you yes, a cushion to allow for more mistakes - and allows for (some) more reaction time. Like they used to think at Nokia, no matter how piss-poor a given year's flagship might be, it would still sell 10 million units any year...

There is no guarantee against stupidity. There is no guarantee against management mistakes. There is no guarantee against market changes or against disasters. But being biggest gives you the best protection against all those factors because you can also mitigate against market segment issues (like sudden shifts in tastes) because the largest player can offer goods in the widest range of market segments (from iPhone clones as Galaxy class to dual SIM ultra-low cost dumbphones for Africa, in the case of Samsung, something Apple cannot afford to do. Hence if the luxury market were to suddenly shift/vanish - like say premium VCR market was suddenly cannibalized by the DVD players - Samsung is again more isolated from a segment market change than any other rival including Apple).

But apart from scale, there is no other concrete benefit out of being biggest. Yes, it also gives you bragging rights. But compare to PCs or cars or TV sets or cameras or blue jeans or running shoes, being the market share leader is what all major players aspire to become. Because it gives you scale.

Tomi Ahonen :-)

KPOM

@Tomi, a 75% drop in profits year on year isn't normal variation. Apple's fluctuations in 2012 and 2013 were. There is a legitimate concern that Samsung's mobile business model is not sustainable and that they will just become another commoditized Android producer powerless to stand up to Google's attempts to reassert control over its "open" platform. Nokia can tell you how ephemeral the advantages of vertical integration and a large market share are. They were able to scale down into "dumbphones" too. They were where Samsung is now. And they were in decline before they hired Elop. Symbian was going nowhere, and Meego was largely irrelevant.

And who says Apple couldn't scale down into low-end markets or vertically integrate if they wanted to? They certainly have the cash to make large acquisitions or invest in factories. They have made a choice not to do so.

The question comes down to whether developers care about Samsung or Google. If Samsung remained dominant and could flex its muscle, developers could well embrace Samsung-specific initiatives such as the S-Pen, TouchWiz, S-Health, and accessories. If Samsung becomes just another Android OEM, then it is absolutely irrelevant to developers whether Samsung, LG, Lenovo, or even Nokia is "#1" in terms of market share. The real comparison is Android vs. iOS. Android has the volume and iOS has the premium segment of the market that ensure that developers will pay attention to both of them. But if Google is able to reassert full control, then they pose a threat to developers through their ability to control the user experience, just the same way that Apple locks down critical elements of iOS.

Phil W

@KPOM the analogy between Samsung and Nokia is not valid. When Nokia started to get into trouble it didn't have an contemporary OS (or at least not ready for market) and all of its competitors did. Samsung is not in the same position, no other manufacturer has a more modern OS than it does, so its recovery depends more on making sure it has strong portfolio of products and improving the build quality (I agree with Tomi, I've not been overly impressed with Samsung's efforts in that direction). Its scale will make it a tough company to beat if it gets these things right. It should remember that its real competitors are the other Android OEMs and not Apple. If it focusses too much on Apple it will have problems.

Phil W

@Leebase, I think you are missing the point. Tomi was talking about market share size bringing scale advantages against other companies playing the same market share game ie all the other vendors not called Apple. He explicitely excluded Apple because its business model is different and follows different rules.

winter

@Baron95
"They can buy ARM and stop all external design sales. They can buy Qualcomm and stop all outside sales."

No, they cannot for obvious legal reasons.

AndThisWillBeToo

@LeeBase
"Apple's downward marketshare started sometime in 2010"

Don't mix Tomi's "I was first to say that..." year to Tomi's reported years. Apple full year market shares as reported by Tomi:

2009 7%
2010 16%
2011 19%
2012 20%
2013 16%

That's full year, global sales. You're off by 3 years.

Winter

@Boron95
"Yes they can. Apple is not in the chipset business, so there are no laws that prevent Apple from buying either."

But Apple is in the smartphone business. So they legally cannot monopolize necessary components.

RottenApple

@AndThisWillBeToo:

Why do you so persistently ignore everything Tomi says and try to misinterpret his numbers?

It has been made very clear that the growth in 2011 and 2012 are a direct result of Nokia's implosion. Of course creating a 20-30% void means that other competitors will fill that up, and that of course includes Apple.

@Baron95
"Yes they can. Apple is not in the chipset business, so there are no laws that prevent Apple from buying either."


So if I am understanding you correctly you are suggestion that Apple should act like the Mafia and use criminal tactics to eliminate the competition?
Of course in most jurisdictions this would ring all alarm bells and provoke the most severe of reactions.
But of course one needs a crook to cook up even such ideas.

The comments to this entry are closed.

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    Tomi Ahonen is a bestselling author whose twelve books on mobile have already been referenced in over 100 books by his peers. Rated the most influential expert in mobile by Forbes in December 2011, Tomi speaks regularly at conferences doing about 20 public speakerships annually. With over 250 public speaking engagements, Tomi been seen by a cumulative audience of over 100,000 people on all six inhabited continents. The former Nokia executive has run a consulting practise on digital convergence, interactive media, engagement marketing, high tech and next generation mobile. Tomi is currently based out of Helsinki but supports Fortune 500 sized companies across the globe. His reference client list includes Axiata, Bank of America, BBC, BNP Paribas, China Mobile, Emap, Ericsson, Google, Hewlett-Packard, HSBC, IBM, Intel, LG, MTS, Nokia, NTT DoCoMo, Ogilvy, Orange, RIM, Sanomamedia, Telenor, TeliaSonera, Three, Tigo, Vodafone, etc. To see his full bio and his books, visit www.tomiahonen.com Tomi Ahonen lectures at Oxford University's short courses on next generation mobile and digital convergence. Follow him on Twitter as @tomiahonen. Tomi also has a Facebook and Linked In page under his own name. He is available for consulting, speaking engagements and as expert witness, please write to tomi (at) tomiahonen (dot) com

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