By now the Gartner global mobile phone sales/shipment estimates for the 3rd quarter of 2012 have been widely disseminated, and they are summed up nicely at places such as TechCrunch.
For those looking for the basic bullet points, here goes:
– Overall mobile phone sales declined ~3% in Q3
– Smartphone sales increased by 47% during the same time.
– Samsung has overtaken Nokia as largest handset maker.
– Samsung & Apple account for ~50% of smartphone sales, >100% of smartphone profits
– Samsung alone owns nearly 1/3 of smartphone market (and almost 40% of sales)
– Samsung, Apple, ZTE and Huawei had growth, everyone else saw declines
– RIM and Symbian have evaporated
– Windows Phone has grown, but is smaller than Samsung’s Bada OS or Symbian
– Apple lost market share in spite of ~40% sales growth
– Android now accounts for ~72% of smartphone sales
There are a couple of things that are very interesting there: that Android is now ~72% of sales (expected to be smaller in Q4 due to iPhone 5), and that Samsung now owns almost 1/3 of the smartphone market. Are these GOOD or BAD? Aside from the companies who have direct interest, it isn’t so clear. So let’s take a look at each from both perspectives:
Android at 72% is a GOOD Thing
If you look across the last two years you see Android jump from about 25% to 50% to 75%. Given that the majority of growth comes NOT from the US and EU and high-end phones, but rather from cheap phones in Asia, this means that what is happening is that smartphone sales are spreading out amongst the masses rather than just the rich. This democratization is excellent, and a good thing. This is ONLY possible with Android because it is freely available for handset makers to use and customize.
Also, as more and more people adopt smartphones along only a couple of OS lines, developers will be more likely to spend resources on those OS versions.
Android at 72% is a BAD Thing
72% is a HUGE market share, and represents a monopoly. It is larger share than Google has of search, and about the same as Apple has of digital music (and had with the iPod when the MP3 player market mattered). With this sort of share it is possible – and entirely likely – for the market share to be used as a ‘hammer’ to demand things from those using the OS.
I have too often heard people talk about Google like some benevolent dictator, out for the good of the people. They are a for-profit company, and as Android market share has grown Google’s Android-based revenues have declined. Shareholders don’t like that – so it is only a matter of time before they demand more … and since Google makes most of its money selling YOU, it is clear who will be paying the bills.
Samsung as #1 Smartphone by a Lot is a GOOD Thing
One of the hallmarks of Android is fragmentation – no two devices are alike, so apps struggle for compatibility, accessories are unprofitable, and so on. So buying a phone is a crap-shoot at best, as you may never see docks or cases or apps that work correctly.
Enter Samsung with the Galaxy S2 followed by the S3, the Note followed by the Note II. These devices sold like crazy, and offered a stable target for accessories and apps. The S2 was problematic because it had several external variants and more than a dozen internal versions, but the S3 has a single exterior design that allows companies to make accessories and know there is a solid and stable market.
I focus on this because the long-term success depends on more than just handset makers and carriers making money: app developers and accessories need to generate revenue as well. And Samsung pushing stability (with HTC following this year with fewer designs), is a good thing for a broader ecosystem.
Samsung as #1 Smartphone by a Lot is a BAD Thing
Samsung has built an empire based on having in-house capabilities to do everything, a long history of cheap garbage phones, and an undeniable knack as a ‘fast follower’ who blatantly copied Blackberry, Nokia and Apple and used the innovation of others to power their own success.
Think back to the early Android devices: HTC was immediately innovative, and the original Droid was about as un-Apple like as possible. Samsung entered with … an iPhone clone. And they have continued that way, between designs, icons, docks, connectors, and on and on and on. Only in the last year have they started to break out with truly unique designs. The issue here is innovation – Samsung has clearly benefitted from the design innovation of others while controlling margins by having such a huge chip-making infrastructure.
Also, I find it puzzling that the same people who clamor for the ‘downfall of Apple’ after they gained such huge market share cheer for Samsung even as they have double the share of Apple. Samsung is already at the top of chip-design (memory and processors), displays (they make panels for everything from watches to mega-TVs), and ‘foundry’ chip production (everything for everyone). They have used that power to raise prices on Apple by 20% (now starting next year), which if not anti-competitive legally is certainly a fairly bold and stunning way to stifle competition by unilaterally stealing their profits. (In other words, this change isn’t a general change but one directed ONLY at Apple).
Conclusions
As I mentioned, while Samsung’s profits have climbed Google’s have dropped, leading some to declare that the next battle is actually Google vs. Samsung. That might sound odd, but at this point Samsung doesn’t need Google anymore – and as I have discussed before Samsung is now loading their devices with an ecosystem that is like ‘Apple meets Google’. They bought mSpot for music and will absorb others in 2013 if my predictions are correct. Samsung is using Google and Android as a stepping stone to becoming their own smartphone superpower beholden to no one.
Meanwhile, Apple is now getting an estimated $6-8 per phone from HTC, and will likely push for similar results from at least Motorola … but Samsung will hold out until the plan above is inevitable then it won’t matter. But for players such as HTC in particular, Android has become too costly (because it IS stolen technology, and HTC is the only one honest enough to pay for the licenses) – so they will move to Windows Phone. I also see others heading in that direction – with Samsung gaining a controlling interest in Android, most people say that if your phone isn’t Samsung or a Nexus you are an idiot … and people like Motorola seem only too happy to disappoint customers and prove that true.
So what about my earlier question about whether this report is good news? Well, let’s run down the players:
– Google loses money as Android gains share … not good.
– Apple continues to be seen as the ‘big dog’ in spite of having 50% smaller share than Samsung … and PC and Android folks have aligned in their anti-Apple rage. Again – not good.
– RIM is toast regardless.
– Carriers? They HATE leaders, which is why they have actively tried to not sell Apple iPhones for the last couple of years. Now that Samsung has leverage they will not like how that goes – it will be interesting to watch.
– Nokia is entirely hitched to Windows Phone. Their success depends on people’s willingness to try something new … and Microsoft not pulling another ‘incompatible upgrade’ any time soon.
– HTC/LG/ZTE/etc … tough times ahead, fighting over the market share scraps. ZTE and Huawei have solid China positioning that should help, but HTC and LG and Motorola are in serious trouble in the near term.
– Samsung owns smartphones, TV, and chip-making. They have been benefitting from enormous popular support even as they continue a path of demonstrable IP-theft … but it isn’t clear how long this will last. Something tells me that the unilateral Apple price hike will come back to bite them. In my estimation, they have made themselves a target.
Most people predict that in Q4 Apple will jump like they did last year. I agree – but I don’t see that coming at the expense of Samsung as much as everyone else. It has been repeated because it is true – the smartphone world is Samsung, Apple and ‘others’.
What do you think?