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« Apple results Q1: Yes the unit sales are down but that is not a sign of any trouble at all | Main | Explaining Apple in One Graph (That nobody else is showing) - Why no reason to panic, why it all makes sense, and why future also looks great »

April 29, 2016



Vintage Tomi !

More of this please and less of US politics :)

Tomi T Ahonen

Hi Tochi

Thanks. I'll do these whenever there is any cause to write, but come on, most of mobile is pretty dull nowadays haha... but really do appreciate it that you liked it. And also on politics, don't worry, in just about half a year the contest will be over, then it will be a 3 year pause until the next Presidential election with Hillary's re-election. So even the political stuff won't last too long...

Tomi Ahonen :-)


So the smartphone sales dip is explained by an anomalous surge exactly one year ago, caused by the belated arrival of large-display iPhones and the pent-up demand it unleashed.

Makes a lot of sense.

How has the overall mobile phone market evolved during the same period (i.e. smart, feature, dumb phones altogether)?

This should give an indication of how bad/good the fundamentals are. For instance, if the non-smartphone sales drop faster than smartphone sales are growing, then some trouble might be brewing in the migration process.

And a remark:

"Apple's entry-level iPhone 5 SE."

Given its price point and features, the iPhone 5SE can be characterized as lower high-end or perhaps upper mid-range, but certainly not entry-level.


TBH that you think iphone 6 boosted the whole smartphone market to such high level is just ridiculous. Iphone 6 maybe is 2 % of total smartphone market. And Iphone SE and galaxy s7 is also just a very small part of the whole smartphone market. Now maybe we will see 5-7 % YoY growth but no way it will depend on Iphone SE or galaxy s7, it will depend on the 50-150 $ smartphones.


What Tomi wrote about Apple being at fault is actually literally true.
Q1 2014: 282.6M smartphones, 43.7M Apple
Q1 2015: 340.8M smartphones, 61.6M Apple
Q1 2016: 334.8M smartphones, 51.1M Apple

Notice that the decline in Apple sales is actually bigger than the total market decline.
So if Apple had grown at the same or almost the same pace as the rest of the market, we would not see a decline this quarter.


A very strong driver for smartphone growth is the fact that smartphones get cheaper and cheaper, so cheap that they are almost at the same price point as the dumb phones. India and Africa will buy more of these cheap smartphones because they offer more features than the feature phones (pun intended) and because third world populations can afford them. The low price is the main growth driver.

Apple just announced a very low guidance for this quarter. Apple will continue to sell less phones compared to last year, and probably less than market (at least in the second and third quarters). Maybe Apple will do well in the last quarter, we don't know yet, but all signs point to mediocre improvements in Iphone 7. My bet is that the Iphone 7 will fail to excite the masses. I think Apple will shed market share this year.

Tomi, please keep writing articles about politics. Now I have two reasons to stop by. Double dip is sweet.

Tomi T Ahonen

Hi E, Pekka, chithanh, Wayne and cornelius

E - good points and question. The overall total handset market grew last year but only slightly. The smartphone part grew faster than the dumbphone part declined. On iPhone 5 SE you are correct, at a 400 dollar price tag (unsubsidised in USA, plus shipping and local taxes for rest of world) is not an entry-level smartphone. Its an entry-level iPhone. Similar to how a Porsche Boxter is not an entry-level car, its an entry-level Porsche...

Pekka - I hear you, it sounds unbelievable or 'ridiculous' except this blog ALWAYS goes by the math, no matter how many times that has seemed ridiculous for this industry. Once again the math is crystal-clear. The iPhone was on a DOWNWARD trajectory from 2012 to 2014. THEN came the 6-series and in the Christmas season, Quarters of Q4 of 2014 and Q1 of 2015, iPhone surged massively and for the full year 2015, picked up a point of market share. For two surge period the peak was well over 2 points of market share - that is EXACTLY the 'decline' now being reported. The size is EXACTLY what is now being reported. We speculated on this blog that perhaps the iPhone phablets were only a temporary surge in iPhone overall market or was it sustainable and iPhone would permanently hold onto a larger slice of the market. And around that period, Q4 of 2014 and Q1 of 2015, the 6 series of iPhones was roughly speaking more than half of iPhone's total sales which had over those two quarters a 19% market share so the 6 series was roughly speaking about 10% of the total global smartphone sales. Not 2%. Now the new flagship from Apple ALWAYS does well in the first full quarter, last year it was a far bigger jump and extended far longer.. into Q1 of 2015. This year's new flagship launch was not that big in its jump nor didn't last as long (as we heard many times, the manufacturing was slow, the components were slow, the inventory buildup was slow this time).

chithanh - thanks for doing the math. You're correct of course.

Wayne - that is exactly the point. I told you in the blog that the actual 'worry number' now of the first-ever dip in the overall industry was.. 2%. THAT is 'exactly' the number you calculated ie 15% of 15% (which is 2.25% obviously) but in reality its MORE than that, because the Q1 number we now need to count from is not TODAY's share, it is LAST YEAR's share (18%) but yeah.. over 2% in any case. As to non-iPhone market yeah. Easy to do that math. Was 280M smartphones sold in Q1 of 2015 and 283M sold now in Q1 of 2016. It is (of course) that same math, says the same story. If Apple is removed, the industry is not in trouble... What happened with Apple is not a disaster decline from last year, Apple reverted to form from years before. Last year was an ANOMALY over at Apple.

As to dumbphones migrating to smartphones, haha yes. It is only a theory of mine. I was literally the first to suggest it and today all major analyst houses have come to the same conclusion. EVERYBODY now expects all phones sold to be smartphones but they are not in agreement with the exact time of when that has been completed. Consensus opinion is around year 2020. As the industry has passed the 75% migration level and there is NO actual use benefit where a dumbphone would be better than a smartphone on anything other than price, there is no valid rationale to suggest the transition will not proceed to 100% but if you want to believe the dumbphone market continues indefinitely, you probably still use a VCR connected to a black-and-white TV set haha...

cornelius - thanks yeah we agree on the Emerging World low-end smartphones. On Apple guidance, note that the PC market (Macs) and tablet market (iPads) HAS peaked and the overall MARKETS are in decline. So at least a part of the total Apple decline is the continuing decreases in those MARKETS where Apple then has to fight for its slices in ever shrinking pies. There is no growth in the iPod and whatever early excitement was generated by the Apple Watch has now subsided. The smartphone market is NOT in decline BUT in smartphones, Apple's newest product just out is the cheapest - meaning even if Apple sees a healthy increase in UNIT sales of iPhones, the REVENUES would be down because the MIX of iPhones tilts away from phablets to the iPhone SE. This shift is even stronger due to lessening demand of the now-oldish 6S and 6S+ flagship and the strongly-surging rival flagships from Samsung their S7 which now enjoys time at the top of the price pyramid. This then would/should be fixed with the next iPhone 7 out this September.

So yes, Apple guidance is down. That guidance is not inconsistent with a UNIT growth of iPhones powered by the iPhone 5 SE - which is again why we look at the unit sales and market share on this blog, that is the best measure for our industry REACH - obviously this blog is not here to be a free strategy planning site for Apple or Samsung, they have big teams inside with their own numbers to do that. This blog is for insights, numbers and analysis for all others who want to understand the mobile market and its opporunities. Yes, Apple said the demand for iPhone SE exceeded their expectations. So for this quarter now under way, April-June - this will see strong sales of iPhone 5 SE but as its priced nearly at half of the flagships, obviously they'd need to sell nearly double in 5 SE vs an iPhone 6S+ to just hold steady in those revenues. I am not an Apple analyst and don't care if Apple scores big revenues or profits any one quarter. I care about the market and if the iPhone MARKET SHARE grows, it means more developers should know this and consider iOS as their second platform behind Android.. THAT is why I talk about the market share here (and compare to say Windows smartphones which are dead as a market).

Now on the 7 series, Apple is at a difficult place where the reality is starting to hit that actually, the value in Apple is mostly the shiny beautiful object - as a pocket communications, computing and payments device - its not the best. It consistently lags in most features and is also regularly incompatible with the industry standards (which Android flagships are not). Meanwhile the gap in usability between an iPhone and a rival flagship which was an ocean in 2007 is now just a slight puddle now, and those who go back and forth, will find it essentially the same, similar to how Windows had nearly closed the gap to the Macintosh OS by say Windows 95. Never totally closed but by then the gap was so small, and the user experience so similar, anyone could easily switch from one to the other and find just about all the same functionality on both.

But Apple does have areas where it can generate big noise still, I am expecting waterproofing to come soon to an iPhone. That would make it yet one more 'big deal' but yeah, the kind of things a smartphone should have, we have somewhat tried all the gimmicks that didn't catch on (in-built Pico projectors, optical zooms, 3D displays) and any flagship will have quite similar specs now, also on a very similar form factor. Just like in cars, a top end luxury sedan by Mercedes will be quite similar to one by BMW to one by Audi to one by Toyota Lexus to one by Cadillac to one by Jaguar. Yes we can identify which is which by their looks, but the engines, the automation, the internal size, the comfort items, the electronics, the performance.. all are quite similar not like still say in the 1980s when there was a massive difference between some vs others. With that, the Apple loyalists will stay true to the iPhone (best loyalty of any phone brand) but it means its difficult to capture NEW customers. And some who tried an iPhone may want to go back to another brand (on Android) because of whatever they felt wasn't quite perfect with the iPhone (typically missing top-end features you can find on rivals or else missing the industry commonality features like haha microSD).

So I kind of agree with you, I think that day is coming when the latest flagship iPhone fails to excite the world. I don't expect it yet now. But when that happens, Apple could see significant erosion in both that year's sales and the next. The Christmas launch cycle makes Apple vulnerable to a poor phone - hurting it for two CALENDAR years, because the end-of-year iPhone surge powered by the new flagship is so crucial for Apple. I have said the ideal time is to release the new flagship in the spring, and the cheaper entry-level iPhone for Christmas, because Apple loyalists will stand in line at any time to power the surge. Do that in the Spring and THEN do the 'gift iPhone' model ie the entry-level iPhone for the Autumn launch to power a Christmas sales surge. That way the annual sales pattern would be 'optimal' for Apple with two launch dates per year. But we may see this shift coming in next years as Apple plays with its launch dates and might still expand its model lineup. We could see a 'tick-tock' pattern to the entry model, with a plastic iPhone 5 CE coming next year, into say the 300 dollar unsubsidised price level but I am expecting that to only happen once the market share gains from 5 SE end and thus the 5 CE model might not come until 2018.

PS thanks yeah. I like this discussion and obviously the smartphone wars trigger tons of comments, often hundreds in any thread. Clearly my readers want those blogs and will carry long heated discussion (which often to me seem repetitive) but yeah I greatly like also to do the political debates on my political blog articles, even with a far smaller readership. Its smart discussion there too and now looking back at just this year's political cycle, this blog has had some of the best analysis in the comments of any political site I've seen, thanks you you my dear readers who join me also in those discussions. I'll keep it up for as long as this year's race warrants it haha. We may be receiving a bombshell news item now on Monday when the Supreme Court is expected to rule on the 'DC Madam' sex scandal that may end Ted Cruz's political career quite suddenly and vividly.

As always my dear readers, keep the discussion going..

Tomi Ahonen :-)


Tomi, how do you see LG this year? The G5 seems to do everything right (replaceable battery, SD card, dual camera), but got some flak because of manufacturing issues in its first batch. But now they seem to be fine.

And this year they were also early, the G5 was released only days after the SGS7 (instead of months later with mediocre hardware in 2015). This should help them, I guess...


iFool trying to whitewash the numbers.

Yeah, business as usual...


"there is NO actual use benefit where a dumbphone would be better than a smartphone on anything other than price, "

There indeed is one: battery duration.

A traditional mobile phone will last typically about a week or even more on a single charge. Most smartphones batteries are flat after 1 day, maximum 2 days.

We can discuss at length the advantages of a smartphone (larger screens with higher resolution, better video, fancier browsers, apps, yadda, yadda), but in the end autonomy on a single charge is a decisive criterion for a genuinely _mobile_ device, and precisely all those aforementioned advantages take a very heavy toll on the phone energy budget.

I had a relative experiencing just that a couple of days ago. He wanted to check something on his calendar, took his employer-supplied work iPhone... and cursed it because the battery was gone, again -- before 18:00. He grabbed his personal feature phone (a good old S40 vintage Nokia) and had no problem getting his answer. He is permanently pissed off at how fast those smartphones exhaust their juice -- feature phones are way more resilient.

Per "wertigon" Ekström


Actually my current Xperia Z1 can last for up to 5 days with it's current battery. It could last a week when I got it brand new. Of course the more I actually use it for other things than text and sms, the less battery I get - 2.5 days with heavy use, around 18 hours on a GPU heavy game.

Still nothing compared to my first phone - a good old Nokia 5110 that could hold a charge for 3 weeks - but then again I used that phone for 3 things: Calls, Texts and Snake. Good times! :)

Earendil Star

Wayne, I believe you are a little confused... or is it all just smoke and mirrors?

So, excluding Apple, the market is stable. Including Apple... it shrinks by 3%... Ooops!

Furthermore, you appear to be mixing up fall in *market share* (which can happen even with growing sales, if the market is growing exponentially, and your growth is slower than the market's), with an actual fall in sales. Oh, well...

Very confused. Very very confused. Or is it just tough to admit you were wrong?


Wayne Borean


I'll make you a bet - buy you a beer at the Miner's Tavern next time you visit Cobalt!

My bet is that DumbPhone sales will effectively end in 2018. By effectively I mean that production of new units will cease, and that any sales in 2019 will be from phones in the channel.

Why do I think this?

1) Manufacturing unit costs rise when volumes drop, and by the start of 2018 this is going to hit manufacturers.

2) Evolution. We were evolved to hunt prey which moved in linear patterns, and to evade predators who moved in linear patterns. Thus we think linearly, and the situation is not linear. Think VHS to DVD switch which started slow, and then accelerated massively. Over a three year period from when DVDs first started appearing in stores, they went from one shelf, to the entire store. The same thing happened with the music CD to music download switch.

So, two questions:

1) When will manufacturing costs of DumbPhones peak? Note that I'm assuming that the economies of scale for smartphones will also improve, but I can't see them improving much more. Also the remaining DumbPhone manufacturers will consolidate models to attempt to retain economies of scale. Add in the fact that the lower end of smartphone pricing keeps getting lower - soon they'll be giving the damned things away free with boxes of cereal!

2) Have you already built in adjustments for non-linear movements?



Your Xperia Z1 has a massive 3000 mAh battery, which is about double the capacity of a typical smartphone battery (such as the one in an iPhone), and it correspondingly soldiers on for double the duration, as your figures indicate.

Your old Nokia had, what, about a 700mAh battery? Traditional feature phones have about 1000 mAh and sustain one week of usage on a single charge.


Re: dumbphone vs. smartphone

I think that if a customer has the choice between a dumbphone and a smartphone at the same price, they will overwhelmingly choose the smartphone. Not universally though, as the dumbphone has advantages in battery life (as E.Casais pointed out) and simplicity (which matters to older people).

Cheapest you can get a dumbphone is around $6-$8 wholesale (e.g. Soloking T176 and others) which is around $10-$12 if you include shipping, retailer profit and taxes. That price hasn't moved much in recent years, because display and battery are now major part of the cost.

Simple smartphones cost at least three times that currently, which means that dumbphones currently own the $6-$25 price range. Tomi predicts that a smartphone with iPhone 1 specs will cost $10 within four years (I'm sure Tomi visits Shenzen several times a year just to check how that prediction is going along, hehe), leaving dumbphones in $6-$9 range which I am not sure is viable.


Ah, and in other news from the 'Microsoft is dead in mobile' department, a SurveyMonkey study on the US mobile population found that Google's GMail/Drive/Docs is beating Microsoft's Outlook/OneDrive/Office 365 by a staggering 14 times in mobile user numbers:

Remember this is the US market, where Apple still has 30-40% marketshare.


@Wayne Brady

The N1 was essentially a Foxconn product under Nokia brand -- Nokia was not even responsible for marketing.

So there the lesson is clear: offer a run-of-the-mill product without any USP and with indifferent marketing, and the Nokia brand will have zero traction.

All the more so since Nokia historically never had any mass-market recognition in the area of tablets -- the Internet maemo tablets N770/N800/N810/N900 were pioneer products, but designed for geeks and poorly marketed.

So why would anybody license a superannuated brand for product categories in which it never had any presence?

The only segment in which Nokia still has some recognition is affordable phones with the traditional qualities of ruggedness, long battery duration, ability to hold onto a network signal under any circumstance. After all, Nokia feature phones still represent a comparable or possibly even larger share of the total installed base of mobile phones than all the wildly successful iPhones.

On the other hand, Nokia recently designed and released a special camera (called "ozo") with 360 degrees view for VR developers. An expensive product targeting commercial developers. It is way too early to tell whether this is a success in its niche, but the diversification approach is interesting.


"Nokia is having trouble executing their strategy for reentering the smartphone market."

As far as I can tell, Nokia is not even attempting to re-enter that market: so far there are no offerings, no release plans, no product announcements, and no roadmap.

And why should it jump into the fray? The most profitable markets are saturating, the high-end segment is firmly in the end of Apple and Samsung, the mid-range is a battlefield for Chinese manufacturers, the entry-level requires large-scale, fine-tuned production and logistical facilities which were a strength of Nokia but which it abandoned years ago.

My bet is that Nokia will not even try.

Wayne Borean


That points to the problem I identified five years ago. Microsoft is too reliant on Office, and if Office looses traction Microsoft is in trouble. Of course five years ago I was figuring on OpenOffice and LibreOffice to do the damage. I hadn't yet found this blog, and didn't realize how strong mobile was.


I respect your proven track record, but the smarmy way you rub it in everyone's faces is so bloody annoying.

Can you please continue with your reports, but be less you while doing it?

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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 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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