Tidbits from Smartphone Wars - Carl Zeiss, HTC, Sammy and look out for Huawei vs iPhone next two quarters.

A few interesting tidbits from the smartphone wars that caught my eye. First off, this is awesome great news. HMD has officially confirmed that the Nokia-Carl Zeiss optical camera lens partnership is back and that HMD will create flagship Nokia Android smartphones that will use Zeiss optics. That is fantastic news. Not that an average consumer might even 'notice' the difference of Zeiss glass vs generic plastic on a mobile when shooting pictures - it is the principle of the excellence implied with partnering with an iconic camera lens specialist like Carl Zeiss. That means that Nokia Android based flagships will have great cameras and that HMD will make a focus area in the camera, something that Samsung used to do (Sony Xperia still does) and Apple explicitly does not do. It helps create differentiation for HMD/Nokia and hopefully it also revives the development in camera tech in our pocket. If HMD invests in Zeiss as a partner, they won't then pair that with a rubbish camera sensor or meek other specs. This is great news. The first Zeiss-glass flagship won't necessarily be the most awesome cameraphone ever - although it is likely to be one of the better ones currently - the NEXT gen Zeiss-glass Nokia, a year later - THAT could be a superphone. This is great news.

Then in the area of really bad news for iFans. Samsung is reporting they have had a great quarter. Both their chips unit and their smartphone unit has had strong sales and strong profits. Some analysts are already suggesting that for the quarter, Sammy may report bigger profits overall than.... Apple. That would be a big ouch in iLand. Wot? iCompany is not iNvincible? And lets be clear about this - the Samsung number would be driven by its chips side, but a solid smartphone contribution would help. Apple is facing its 'down cycle' in its annual sales - likely a bit worse this year because for some reason, they didn't bother to release the 'spring iPhone' model that they did last time. So the iPhone sales this quarter overall would be possibly down more than usual. And the other iBusiness? I recall that Macs, iPods, iPads, iWatches - sorry Apple Rubbishes, etc were mostly down already earlier... so we could see a rare 'disappointing' quarter from the iEmpire. If so, that would be bad timing if the Korean boys are having a great quarter..

Hey, talking about bad news for the iBoys. Huawei. I am pretty sure in a few years Huawei will pass Apple to become the second largest smartphone maker. That rank of being third is a tricky place and nothing is certain in this type of race but Huawei is doing pretty well there and has reported a long series of steady growth, globally, not only inside China. So they are not victims of the whims of market success in just one country. If you looked at Huawei growth Q1 2017 vs Q1 2016, they are up by about a quarter units in sales, in a year. Now.. lets move that quarter-sized growth to the next two quarters, this just-ended Q2 and the current quarter Q3. That would put Huawei in the rough scale of 40 million units per quarter (about 33M last year this time). And then guess what iPhone sales levels woudl be like? Last year Q2 April-June quarter, Apple sold 40.4 million iPhones !!!! And in Q1 2017 vs Q1 2016, Apple iPhone was down 1%. The could be smack center at 40M units now. And that is just about where Huawei seems to be headed now also. It will be neck-and-neck for Q2 and Q3. We might see the first single quarter where a rival snatches second place from Apple in smartphones, pushing Apple to third ranking. Of course we know on this blog, that this is temporary, due to the strong cyclical sales pattern of iPhones (down in summer, up for Christmas) so for the full year statistics, Huawei is not (yet) challenging iPhone but this year might be the first 'sign' that Huawei is really coming. For one quarter they might be past. And even if they end up not quite matching Apple, if the numbers are close - expect some opportunistic tech analysts to skew their math just enough, that they can claim Huawei ahead - so they get all the headlines that Apple is falling, Apple is falling... And that would be quite big noise in iTown, wouldn't it. A colossal iCollapse. In particular if that squares with an actual decline in iPhone sales vs last year, plus declining market share in iPhones (expect iPhone market share to be around 11% in Q2 vs 12% same quarter last year); coupled with Samsung's sudden profit bonanza. We could have a summer of iDespair in iCupertino. Some might even dare say, Tim Cook is no Steve Jobs haha..

But hey, we do have other news too. HTC. Remember that company? The company that launched the world's first Windows based smartphones, and the company that was the first 'biggest Android maker' until Samsung bothered to get serious with Android? HTC which once was the world's third largest smartphone maker? (But I thought HTC was dead?) No, they aren't quite dead yet, even though they have been trying real hard. Well? This quarter for once in a very very long while, the Taiwanese smartphone maker is reporting INCREASED sales. Woot? That is amazing news, for a smartphone minnow. They still are outside the Top 10 (outside the Top 20 even) but hey, they are not dead, and they reported growing sales. Good for them!

I will have the Q2 data for you once all the numbers are out, that will be around mid to late August, but many analysts will give Top 5 numbers before that, so we'll start to see how the picture shapes up already in a few weeks when the first of the analysts start with their news. Could it be that Huawei gets temporarily the second place ranking? That would be something...

(PS the blog seemed to have some issue with comments past few days, am sorting it out. We should always be open for comments...)

Comments

[chithanh]

@Tester
If your theory is that the PC market slump is due to increased lifetime of PCs, the mathematics says that after one such period has elapsed, the PC market will stabilize. However, IDC tells us that the PC market is now at the lowest point in 10 years. 10 years ago, Windows Vista was just released, and I don't think many PCs from back then are still around.

About your other point, it is not about being overspecced, it is about being needlessly complex. A clue to understand this is that Chromebooks are growing while the rest of the PC market is shrinking.

Finally, the PC market depends on cheap parts and economies of scale. Designing a high-end CPU or GPU is very expensive. Shedding the users who don't need PCs will shrink the market to the point that prices for PC components will rise, thus drive away more customers, and accelerate the downfall of the PC in a vicious cycle from which is no escape.

For stuff that is hard to do on a smartphone, connect keyboard, mouse, and monitor.

About gaming, I think that following the introduction of 5G, gaming will start to transition to server-based (PlayStation Now, GeForce Now, etc.), so you don't even need powerful graphics hardware in your computer any more.

[Per "wertigon" Ekström]

@chithanh:

I read it as Tester saying it was because of two things:

1. Much longer life expectancies
2. A lot of people not needing a full-fledged laptop anymore

This combination is what is causing the terminal decline. Doesn't mean the PC-market is completely hosed, but it will now be a tool mostly for enterprise, SMBs and SOHO users.

[Jim Glu]

Is this the Nokia 8 that will do battle with the iPhone? http://bgr.com/2017/07/18/nokia-8-release-date-close-images-leak/

Doesn't have the "all screen" look that seems to be the rage these days. I'm not so sure I'm on board yet. Yes, the Galaxy S8 is gorgeous, but I think it would be gorgeous even with some more bevel at the top/bottom. Certainly think a front button is better than one on the back. And I'm not a fan of the new taller aspect ratio. It let's them say the screen is bigger than it is (as they go by diagonal, not surface area.

OMG - the camera notch on the Andy Rubin phone....horrible. Not a huge fan of the "leaked" iPhone "notch bar" either. Just have a bevel where the cameras go people.

People have long complained about Apple's relentless "make the phone thinner" no matter how much more we'd all want better battery life instead. I think folks are rushing into the bevel-less design and making unneeded compromises to get there.

So - good on ya Nokia.

[Tester]

@chithanh:

"10 years ago, Windows Vista was just released, and I don't think many PCs from back then are still around."

Have you ever had any experience with retro gamers? You won't believe what kinds of computers are still being used and those users consider it perfectly normal to use these things. BTW, the system I had back then would still be more than sufficient for run-of-the-mill tasks. When I replaced that in 2012 after I had a HD failure it was mostly for the loud fans than anything else.

[Tester]

@chithanh:

"Finally, the PC market depends on cheap parts and economies of scale. Designing a high-end CPU or GPU is very expensive. Shedding the users who don't need PCs will shrink the market to the point that prices for PC components will rise, thus drive away more customers, and accelerate the downfall of the PC in a vicious cycle from which is no escape."

And I declare that statement utter bollocks. It's pretty clear that you have no clue what people drive that market and what they buy vs. what the people the market is shedding will buy.

Furthermore, as long as a smartphone can be constructed for $150 with reasonable specs so will a PC. The main difference between both is the CPU family they use.

As for high end hardware, that's something else entirely and doesn't even compete with smartphones. People who buy a dedicated graphics card are in a completely different business, for example.

[chithanh]

@Tester
> Have you ever had any experience with retro gamers?

Sure, retro gamers are preserving old hardware, but how many are there? The PC market at its all-time peak sold almost 350M units a year. Retro gaming systems are something which is dwarfed by that (can be inferred from gaming market size, console share, and published console cumulative sales), and I would bet that even emulators outnumber actual retro gaming hardware still in use.

> It's pretty clear that you have no clue

NO U

Seriously, economies of scale is what made computing in the form of PCs affordable, and what made the PC big. Once economies of scale go away, PCs will go away. Innovators will turn away from PCs. Development cycles will increase. The whole thing will fall apart inevitably. What remains will be smartphone hardware built into a PC-like form factor.

> As for high end hardware, that's something else entirely and doesn't even compete with smartphones. People who buy a dedicated graphics card are in a completely different business, for example.

Yesterday, maybe. Today, we see already a trend towards doing the heavy lifting on servers instead. Remember PlayStation Now and GeForce Now which I mentioned above? These are just byproducts of workstation graphics vendors embracing the trend and developing solutions for thin clients, cutting the PC out of the picture in the process.

[James Glu]

Perhaps one should be looking at install base instead of new sales to determine if people are fleeing the PC. Is the PC shrinking? No doubt that smartphone cover a far larger customer base. But I don't know anybody giving up a PC for a smartphone who already had a PC. Not even all that many doing so with a tablet.

Smartphones and tablets are additive, I'd think.

[chithanh]

@James Glu
Yes, installed base of PCs is shrinking according to Gartner. People are getting rid of their old PCs and not buying replacement.

http://www.gartner.com/newsroom/id/3280626

[Winter]

@James Glu
"Perhaps one should be looking at install base instead of new sales to determine if people are fleeing the PC."

People are very unwilling to buy new software for an old PC if it is not for work. No new consumer PC means no new consumer software. With the market for consumer PCs, the market for consumer software will be going down. For new games, a new PC is generally needed.

[Per "wertigon" Ekström]

@Winter:

For games, it takes years to develop software titles that take advantage of the latest features, plus much of it isn't taken advantage of due to consoles.

So no, you don't need the latest and greatest anymore.

[James Glu]

Looks like you guys are right and that I'd missed the trend that not only are sales declining but actual install base is declining as well. As one who uses a computer for work and home, I guess my "gut reaction" isn't as relevant as much of the consumer use of home computers was never about work.

For surfing the web, checking email our mobile devices have been replacing PC's. Not to mention the social media and the new uses that are largely mobile first experiences.

[Abdul Muis]

Current CEO of HMD Global Arto Nummela is leaving his position with immediate effect, the company surprisingly announced in a press release. He is parting ways with the board of directors and will be replaced with Florian Seiche, president and co-leader since HMD’s beginning.

[Tester]

@chithanh:

You are making one huge mistake here:

First, it has already been said why installed base is going down. What you completely neglect is that the market segment that is eroding is utterly inconsequential for the market as a whole, it may constitute a large segment in absolute numbers but it's a segment that adds little volume to the PC economy: These are customers who never buy any software, who never upgrade their computer, who only replace after broken etc. These are people who went to the electronics store, bought the cheapest laptop around and went home. End of their PC story.

Second, there's still massive need for PCs. There's just little need for low cost internet access machines that classify as PCs. But those low cost internet access machines share very, very little with real PC components.

No software or content developer, no accountant and certainly no PC gamer is going to dump their PC for that pitiful smartphone screens. Innovation of PCs was never driven by undemanding base users, but by people demanding quality products for their money - and those won't switch.

Mark my words: If prices for PCs go up, it also will have a devastating effect on the smartphone market because it reduces the pool of content producers. PCs can exist without smartphones, but smartphones will become dead weight without PCs.

Googling for some more informative numbers I found this:

http://www.businessinsider.de/pc-sales-decline-year-chart-2017-1?r=US&IR=T

Interestingly the start of the decline nearly perfectly coincides with CPU performances peaking. After that the incentive to frequently upgrade just went away. Want a new DX12 graphics card? Why buy a new computer when just replacing that graphics card will do? 10 years ago this was unthinkable.

Or take this:

https://www.theinquirer.net/inquirer/news/3002448/pc-sales-down-in-2016-and-will-continue-declining-in-2017-say-analysts

Some quote:

"Infrequent users of PCs, he added, are more likely to resort to a smartphone for applications that ten years ago they might have used a PC for, she suggested. As a result, the market will continue to decline in 2017 ******despite growth in sales among enthusiasts, gamers and in the business sector.******"

(note the highlighted section!)

Another link:

https://arstechnica.com/gaming/2017/01/as-pc-sales-shrink-the-gaming-pc-market-grows-faster-than-expected/

And a quote:

"All told, the market for pre-built and "DIY" gaming-focused PCs (which also includes "upgrades and accessories such as input devices and audio/communication systems") exceeded $30 billion (£24 billion) for the first time last year ($30.346 billion, to be precise), according to JPR's latest report. That's well up from the estimated $24.6 billion (£19.6 billion) market for gaming PCs that JPR saw back in 2015. Back then, JPR projected that the PC gaming market wouldn't pass the $30 billion mark until 2018, meaning the industry has accelerated roughly two years ahead of those old projections."

I think we finally get the true story, and it's precisely what I've been saying all along. No doom, no gloom, just a market that's having a little shakeout but will be off all for the better as a result.

[Abdul Muis]

@Tomi

http://www.digitimes.com/news/a20170719VL200.html
"Two-thirds of iPhones sold in past 10 years still in use, says Newzoo
Steve Shen, DIGITIMES, Taipei [Wednesday 19 July 2017]

Almost two-thirds of the iPhone devices that Apple has sold in the past 10 years are still in use today, according to Newzoo.

As of March 2017, accumulated global iPhone shipments totaled 1.163 billion units, Apple reported recently.

Newzoo's latest data showed that 728 million iPhones, or 62.6% of all iPhones sold in the past 10 years, were still in use in April 2017.

While sales of iPhones currently account for 15% of global smartphone shipments, Newzoo said that 25% of all smartphones used across the globe in April were iPhones.

China is by far the iPhone's largest market, accounting for almost one-third, or 228 million, of all iPhones in use in April. The US is its second-largest base, accounting for 120 million or 16.4%.

The iPhone 6, launched in 2014, accounted for 21% of the 728 million iPhones being used in April, followed by iPhone 6s with 18%, iPhone 7 with 11%, iPhone 6 Plus with 9% and iPhone 6s Plus with 8%."

I wonder if this report were true...

[Winter]

@Tester
"No doom, no gloom, just a market that's having a little shakeout but will be off all for the better as a result."

There certainly will be a place for PCs in the future. Or rather, thin clients in the workplace, that are little more than terminals for central servers, and laptops for things that need power and keyboard&pointing.

But the real mass of users will be on mobile. But in number of users and time spend. That means the pressure will be for PCs to run mobile software, and not the other way around. That is, PCs will become more like tablets with keyboards.

[Tester]

@Winter:

"There certainly will be a place for PCs in the future. Or rather, thin clients in the workplace, that are little more than terminals for central servers, and laptops for things that need power and keyboard&pointing."

Yawn. The same nonsense of "All work will migrate to the internet."

I seriously wonder how much thought you have spent on the implications of internet infrastructure this would require. Let's not forget that even developed countries have difficulty installing a nationwide 50 MBit/s internet service. Right now it's often so that once one round of upgrades is gone, the next one needs to start to be able to handle the increasing needs of the customers. Wanna bet that those who make a fortune off that bandwidth will not pay for it?

It's also abundantly clear that the so-called mobile "experts" really have no clue whatsoever what PCs are needed for and what their visions of 'thin clients' would imply.

No, gamers won't migrate to the internet.
No, developers won't, either.
No, power users won't as well.
No, those dealing with sensitive data also won't.
No, nobody can afford to outsource critical processes that may be disrupted by a service outage.

"But the real mass of users will be on mobile."

Like I said, no f*cking clue. These are only the consumers. They are not relevant to PC business now and they won't be in 5, 10, 15 or 20 years. PCs are mostly used for different tasks than mobiles. And how often do I have to repeat that this is precisely the types of users the PC market is currently shedding.
And haven't you read the links I posted? The non-consumer segments are still GROWING!
Oh, yes, before I forget: No PCs, no mobile, because what would all those mobile users consume if nobody can produce???

[Abdul Muis]

https://nokiapoweruser.com/nokia-8-appears-official-site-july-20-launch-date/

Nokia 8

[Winter]

@Tester
"All work will migrate to the internet."

That is exactly what I did not say. More like, everything BUT work will migrate to the internet. That is, everything that is mostly communication (the C in ICT) will migrate to the internet. The rest will move to tablet/laptop/terminal environments.

The balance is driven by the relative costs (, availability, and latency) of computing power and bandwidth.

As most non-work time is spend "communicating" in whatever form, and much of work time too, that means that most application will become internet based.

@Tester
"These are only the consumers. They are not relevant to PC business now and they won't be in 5, 10, 15 or 20 years."

That is a massive change, as these "only consumers" drove the rise of the PC industry, internet, and the growth some of the biggest companies in ICT: Google, Apple, Facebook. The whole of social media is "only consumers". The PC industry would not have been much without "only consumers".

[chithanh]

@Tester
Until now, I was talking exclusively about hardware when it comes to economies of scale.
When it comes to software, things are moving away from PC application software to browser based solutions rapidly anyway, both in enterprise and consumer space.

> Interestingly the start of the decline nearly perfectly coincides with CPU performances peaking.

People who are attached to PC in some irrational way invent reasons or try to derive from anecdotes about why the PC market is in decline.

It is not about lack of CPU performance upgrades.
It is not about Microsoft delivering poor Windows versions.
It is because smartphones disrupted PCs.

There is an excellent chart by Asymco which puts this into perspective. PC sales peaked and entered decline just as smartphones got big.
http://www.asymco.com/2015/04/14/personal-computer/

That some individual parts of the PC market like Chromebooks or gaming PCs are still growing doesn't matter here. They will eventually be dragged down by the whole market.

> No software or content developer, no accountant and certainly no PC gamer is going to dump their PC for that pitiful smartphone screens.
> PCs can exist without smartphones, but smartphones will become dead weight without PCs.

It is clear that you are the one who makes the mistake. Big screens are not the exclusive domain of the PC.

[Tomi T Ahonen]

Hi Gang

Hey, sorry about the inconvenience here. I was on vacation. I just occasionally checked on tech news, noticed nothing going on, and then never did much social media and didn't come here either. I didn't notice that you guys were blocked for a few days. My credit card hadn't gone through at Typepad (momentary problem long since resolved) and they then needed me to authorize a new payment attempt. I didn't know were were paused here. Its now fixed and we should be fine...

Anyway, there hasn't been much going on anyway, except the quarterly results started to trickle in at the end of the month. I did the iPhone comment and two of the analysts did their Top 5 lists. We'll take it from that onwards..

Meanwhile please do resume your discussions and if you had some forced vacation, I hope it was refreshing :-)

Tomi Ahonen :-)