Tidbits from Smartphone Wars incl some App Store Number Updates

Quick notes that are of interest to those watching the smartphone wars

 

Tizen has reportedly sold about 500,000 units in India since launch. Thats a far cry from the market lead Tizen took in neighboring Bangladesh but its still consistent with about 2% market share for April-June quarter in India, just on one handset model the Z1. 2% in the first year in Emerging World markets would suggest a bit over 1% global market share which for a first-year launch of a new OS is strong in this late stage. Samsung is rumored to be launching Tizen for China, Russia, Malaysia and Sri Lanka next and a second smartphone, rumored as either Z2 or Z3 should also be out before the end of the year. This is still SLOWWWW like molasses, Samsung is not showing the typical South Korean speed on Tizen but lets see. We might end up getting BOTH the Z2 and Z3 and maybe even more countries. 

in other Samsung news, the flagship S6 (incl Edge) has passed 10 million unit sales according to South Korean press sources but - as we expected - this is the slowest growth to 10M in three years, the S6 is underperforming both the S5 and the S4 in now quickly they hit 10M sales. The early promises from Samsung of 20 million orders seem not to reflect the reality in the stores, and those orders have been reduced or delayed and now there seems to be inventory buildling up and the production capacity is being reduced.

Blackberry rumors now say they are considering switching to Android (or launching an Android BB alongside their own OS). Can that save the company now? Yeah Blackberry on Anrdroid would be just as relevant as HTC on Android. So no, it won't. What can save Blackberry is doing a proper physical keyboard WITH a large screen touch-screen. That miracle can only be done one way, by doing a slider/folder form factor. If Blackberry pigheaded management were to try this, they would find big success. What OS that ran on is irrelevant. If they insist on doing physical keyboards with tiny screens (or ridiculous form factors like Passport that still don't have a proper wide screen but are hideous for the pocket) they will die. If they do those lousy touch-screen non-physcical keyboard Blackberries they are an iPhone or Android copycat without any of the benefits, and will die. There is only one way for Blackberry to survive - a hybrid phone that has BOTH the physical keyboard AND a large touch-screen of 4.5 inches or more. A slider-folder. Going Android will cost them $$$ without any gains. Good luck with that.

Huawei... wow, they announced 10 million smartphones shipped during one month (May) which suggests a 120 million run-rate for the full year 2015, well ahead of their goal of 100 million this year. Expect to see good numbers from Huawei in the next quarter or two.

On iPhone.. brace yourself. That day will come when iPhone UNIT sales will also stall and be flat. I think we've now seen the first iPhone analyst to suggest that may happen this Oct-Dec quarter 2015. Its Wells Fargo who are expecting 75 million iPhone sales in the fourth quarter of this calendar year. Now, one swallow does not signal spring and the Q4 sales level depends almost totally on the new iPhone models to be released in September which we have not yet seen. It can be far better than this but brace yourself, this moment is now coming our way, if not this year, very soon. We are going to start to have quarters where iPhone sales are FLAT vs previous year, zero growth. Why, because of their premium-price strategy which guarantees that the iPhone can never win the market share wars and we've seen the continuous erosion of their market share since the peak a few years ago. I do expect year 2015 iPhone market share to be down again but I will reserve judgement on Q4 (Oct-Dec) quarter sales levels possibly being flat, until we've seen the new iPhone models of September. Still, this is the first warning from someone thought of as an Apple analyst. We will hear more such warnings coming and the reality will hit if not this year, soon.

Lenovo reassigned its mobile division boss and said smartphone profits are down. Price wars in China the main reason why. As Lenovo is the third largest smartphone maker (owns Motorola) and the Lenovo side smartphone business has been profitable (Motorola makes a loss, isn't expected to return to profits util 2016) this signals rough times for all makers. With the strong Huawei growth, we might see a switch of the 3 and 4 positions in the rankings for Q2.

HTC is in merger rumors. Asus is now mentioned as possible suitor and HTC says they don't want to be bought by an Asian buyer.. (who else would there be, Apple?)

LG is reporting the G4 has been its best flagsship yet by sales and now LG plans to release a second flagship later this year, likely a phablet-version of the G4 to capitalize on its specs and popularity vs lesser-specced iPhones and Galaxies. We should see good numbers from LG now that the G4 is out for almost the full quarter. (ComScore's latest US market share numbers say that among Android brands LG is up while Samsung is down)

Lumia continues to be dead. Windows Phone continues to be dead. When is Elop fired from his post running Microsoft's biggest loss-producing business unit?

GFK gives us rare numbers on the regional split (via Tuoi Tre News) of total smartphone units sold (in Q1) and also - very useful - the revenues per region. Their count is somewhat below what other sources tell us but still, this is interesting international split telling us that two thirds of all new smartphones are now sold in the Emerging World and 60% of the revenues are earned there.

On the apps stores races, Apple just announced numbers which all suggest peak apps. The new app growth was 300,000 from June of 2014, this is the same growth rate as from 2013 (flat). The app downloads were 25 Billion from June 2014 to now which is same 25 Billion as from 2013 to 2014 (ie flat). Revenues paid out by Apple were $10 Billion dollars and yes.. that too is flat for two years now.

For contrast last month Google reported its Play Store has more apps than Apple and growing more, its downloads were already more than Apple (and growing) and while we don't have official Google revenue numbers, independent sources say they too are growing. We are reaching the cross-over point where more apps revenues are earned by Android apps than iPhone apps either later this year or latest next year. Inevitable is the word. Already there are more users of Android, more apps on Android, more downloads on Android, and the gap is only growing. Of course shortly there will be more revenues on Android as well, its now only a question of time.

Ok thats a few quick updates, we'll do the market data as that comes in (expect Q2 results to be done around mid Aug). I probably will do one or two of these update blogs before then, and when we get official numbers from some of the big boys, I'll do that analysis of course on the blog as the numbers come out.

Comments

[Jagdish]

Hi Tomi, as usual an extremely insightful article! and agree with your views, especially on the Windows OS. Nadella (Microsoft) seems to be in a bind now after in-heriting the mis-directed strategy of Mr Ballmer.
In my opinion it will require real balls of steel to admit this was a wrong strategy and endanger the livelihood of the (still) massive staff that migrated from Nokia to MSFT by way of shutting down the mobile phones unit. It remains to be seen how long the existing MSFT staff will continue to tolerate the loss making black hole which keeps gnawing at the efforts and profits of the Microsofts core business.

[Lullz]

@Tomi

I'll reply here instead of the previous blog post as you suggested.

Apple released a new official number during the WWDC telling that they have paid $30B to the developers. That number doesn't include the 30% cut Apple is taking.

The $25B number comes from here http://www.apple.com/pr/library/2015/01/08App-Store-Rings-in-2015-with-New-Records.html

I believe this is the most recent data we have from Apple app store and it gives us $5B in 5 months paid to the developers meaning that the actual revenue before the cut Apple took was $7.14B for 5 months. Tablets included, but we can still compare that to the previous numbers where tablets were also included.

[chithanh]

@Lullz
Is that totally app revenue? Or does that also include news/music/video subscriptions?

[Lullz]

@chithanh

Apple is talking about money paid to the developers meaning that it's for the apps. It doesn't look like news/music/video is included.

[chithanh]

@Lullz
I don't see that clarified anywhere. You sure that if you buy a subscription as IAP, it will not count like an App Store download or other forms of IAP?

[Lullz]

@chithanh

Apple was talking about developers.

[E.Casais]

"GFK gives us rare numbers on the regional split (via Tuoi Tre News) of total smartphone units sold (in Q1) and also - very useful - the revenues per region."

I believe a most significant item is the significant decrease in sales value in the whole of Europe (central, eastern and western).

From the figures in the article, I computed the average price of handset sold in the regions as follows (in USD):

________2014_____2015________%
LA_______288______273_______-5
C&EE_____265______200______-25
NA_______393______404_______+3
eAPAC____201______176______-12
MEA______298______278_______-7
WE_______443______394______-11
C________242______297______+23
dAPAC____579______580________0

Since total units sold in Europe are increasing, it would seem that people are going increasingly mid-range instead of high-end, or even entry-level in Eastern and Central Europe.

My personal guess is that in those developed markets economic woes are biting and making consumers more cost-conscious when it comes to acquiring new mobile phones. The discrepancy with North America (+3%) is striking.

As for China, those statistics indicate a massive reduction in units sold together with a massive increase in unit price. I do not know enough about the Chinese market to dare interpreting those figures.

[Vertti]

When assessing sales for a new model of the iPhone, Apple used an easy shorthand: “Each new generation sold approximately equal to all previous generations combined.”
Phil Schiller’s Law

Apple does not have any plans to slow down.

[RottenApple]

@E. Casais:

"My personal guess is that in those developed markets economic woes are biting and making consumers more cost-conscious when it comes to acquiring new mobile phones."

Of course that's only part of the picture. The European numbers show an aggressively competetive market where price fixing becomes increasingly difficult.

That's quite unlike the US where carrier subsidies are still used to hide actual prices.

It's also a sign that mid range phones are getting 'good enough' for the average consumer. Again a point that's heavily masked by US carrier subsidies.

[chithanh]

@Lullz
So the IAP subscription revenue would not be paid out to the developers?

@E.Casais
Some market researchers don't track all the Chinese white box manufacturers selling only to the domestic market. If a significant portion of the low-end market moved from name brands to them, this could explain why units decreased while ASP increased.

[E.Casais]

@RottenApple

I agree with your remarks, but I observe that the decrease in unit price in Central and Eastern Europe is steeper (both in absolute and relative terms) than in Latin America, which has a similar level of unit price, and where pre-paid also rules.

My conclusion is that Europeans, who might have previously favoured high-end devices are downscaling their purchases according to an economic cost-benefit calculation: money is getting tight, but fortunately the price/quality ratio of mid-range devices is now, as you say, good enough. They are not yet at the point where they entirely postpone new purchases, but they are reducing their budgets for handsets.

[Vertti]

Apple iPhone ASP goes up when everybody else sees their ASP go down. This is a interesting year when we see more companies finding them between rock and the hard place. And at the same time Apple increases it's lead.

[Wayne Borean]

There are rumours that Apple has been working on a search engine of their own, and that they will market is as not keeping any of your data.

If true, this could be a huge boost for them. There are people concerned with all of the data Google vacuums up. Exactly how many of them would move to Apple we don't know, but adding more value to the iPhone (and Mac) is how Apple has historically increased sales.

Apple knifed Microsoft in the back quite nicely as revenge for past slights. They've already taken some of Google's business away (maps), so I could see them going after the core...

[RottenApple]

@Baron 95:

Definitely wrong about Nokia. Take off your godforsaken American glasses for a while!
Just because Nokia was a no-show in the US doesn't mean they were elsewhere. Had Nokia released a somewhat competetive device in 2011 they would have stood a chance. Of course, because such a device would have primarily sold in Europe and Eastern Asia, people like you would have written it off as 'insignificant'.

The problem was: Nokia DID NOT release a competetive device in 2011 - at least none that got a serious marketing push. What doomed Nokia was the plain and simple fact that at the most critical point in time of their corporate history, when everybody was waiting for their laggard business to finally move forward, they instead announced to blow it all to hell.

About Blackberry: Keyboard or not - nobody cares anymore. They are dead in the water with a market share bordering on non-existent. So whether they upgrade their hardware or not - it doesn't matter. As an ecosystem the platform is dead and won't be resurrectable. If they release a keyboard-slider-Android phone, they may gobble up the small number of users who still need a physical keyboard. But when factoring in that all other manufacturers certainly do market research as well, common wisdom would tell that at least one would have gotten it right, if there was some actual demand. But still, there is no high profile keyboard phone, which, I think, tells us a lot.

[E.Casais]

"I still think the best suited is Huawei or ZTE - which needs a western recognized consumer brand."

From a corporate perspective, Huawei or ZTE would indeed be a good fit. Regarding the second part of the argument, however

1) Huawei and ZTE are already "western recognized consumer brands" already in smartphones, and for a long time in USB wireless sticks;

2) HTC is also a well-recognized brand, but its woes in the past several years show it is not recognized in a positive way.

[Lullz]

@chithanh

"So the IAP subscription revenue would not be paid out to the developers?"

Services like in-app subscriptions are included in the app revenues. This is just the same as the subscriptions on SMS based services are included in the SMS revenues.

[Winter]

@Wayne
"There are rumours that Apple has been working on a search engine of their own, and that they will market is as not keeping any of your data."

That is already available on Startpage (which is located in the Netherlands)
https://startpage.com/eng/protect-privacy.html?hmb=1

They claim: "Since January 2009 we do not record our users' IP addresses anymore."
(most of the value of the search data has no need for IP addresses)

Maybe Apple will team up with them?

[chithanh]

About slider keyboards: most people I know who like hardware keyboards have given up hope. Some have bought a bluetooth slider keyboard cover for their iPhones and Galaxies which isn't great but does its job.

So no, I don't think that anybody will be swayed by new BlackBerry hardware alone. The current rumors about Android could be a dual persona phone where one is the secure BB10 environment and the other is Android (maybe even with Google Apps) for entertainment. That is at least something which could conceivably work.

@Lullz
So that the $30 billion figure includes subscription IAP is at least somewhat plausible.

@The fake Tomi
I give you 2/10 for that, at least you are trying now. But you still need to look up the definition of "consistent" in a dictionary.

[Lullz]

@chithanh

"So that the $30 billion figure includes subscription IAP is at least somewhat plausible."

Subscription based app sales are app sales. Money is money.

[Spawn]

Tizen Z1, $88 at muthofon. The specs and free services attached leave me with the impression Samsung doesn't make profits on them. Kind of cheap-Lumina effect. The question raises how well this Z-devices do when in direct competition with Android - no pricing and free services advantage.

http://www.tizenexperts.com/2015/06/rumour-next-tizen-smartphone-to-be-the-samsung-z3-launch-2h-2015/
I hope the Z3 comes but doubt it cause of past track records. If it comes and is sold in markets I may regain some hope. But till then: Tizen is a dead horse (sorry Ash).