A Bloodbath for 2010: the Smartphone market preview

This is an interesting article about the smartphone market in 2010 by Tomi T Ahonen. Enjoy


The big battle this year in mobile will be in smartphones. Not because of reasons many pundits and analysts now suggest, that somehow this is that everybody caught the iPhone fever or that Google somehow energized the field with its Nexus phone. No, those are overhyped views with an overly US-centric view. Remember that differing from most high tech and media industries like computers, TVs, air travel, advertising, military spending, music, movies, rocket science etc, where the US tends to reflect about half of global spending of the given industry. That is not so in mobile telecoms. US cellphone users (about 285 million subscriptions) represent only 7% of the global subscriber base of 4.6 Billion. While Americans are now getting heavily into smartphones, Forrester just today reported that the total installed base of smartphones in the USA is only 17%. The EU projects that for the EU region, smartphones will be half of all phones this year.
While the American pundits, journalists and analysts obsess about the iPhone, Palm, Google etc devices, that is not the main battle. Its a side-show in the big global fight for smartphones. And while some North American players are indeed quite strong – RIM is the world’s second largest smartphone maker behind Nokia – this battle is now heating up considerably for 2010. Some very powerful players are bringing in their A-game. And both market leaders, Nokia and RIM have refocsed very hard for this upcoming battle to be able to respond to the challenges. Most other smartphone makers have not caught on. The battle will be brutal this year. It will not be pretty.

The reports of Nokia’s demise were premature. Even Nokia’s own analysis got it wrong for the third quarter of 2009 when they reported a serious decline in their market share. After all numbers came out, turned out that Nokia had had only very minor 1% fluctuation in its smartphone market share, and as is usual, Nokia’s smartphone market share remained well above its global handset market share, itself the best in the world.
Last year analysts were not impressed with the N97 and then there was confusion about Symbian vs Maemo and what of Nokia’s Ovi store for apps and various smartphone content and services. So where do we stand? Nokia’s market share in smartphones is as big as number 2 and number 3 combined, and more importantly, Nokia’s smartphone market share is better than its overall handset market share. And they are doing this with a mobile phone manufacturing juggernaut which has been profitable every single quarter of the decade, while each of their big 5 rivals has struggled and posted numerous unprofitable quarters along the way (the last quarter Nokia posted a loss, but not with its handset unit, the loss was due to its infrastructure unit NokiaSiemens Networks). Typically at least 2 of the rivals are unprofitable and in some quarters all four have been so.

Do not put any credibility to any “Admob” stats or pay too much attention to Nokia ‘failing’ in the US domestic market for smartphones. If the choice is to be the desired smartphone brand in the 93% of the world’s phone market that is not the USA, or the 7% that is the USA, Nokia has certainly made the right call to its strategy.
But it won’t be easy going. A couple of years ago, the Symbian operating system was owned across several giant handset makers (Nokia part owned with SonyEricsson, Samsung, Motorola etc) and had over 60% market share. Now being only Nokia’s owned operating system, its installed base is about 50% of the world’s smartphones and currently sell a little over 40% of the world’s smartphones. Note that most of that decline was various non-Nokia phones shifting away from Symbian. Nokia’s own Symbian sales level is very stable. But it is not growing, it is in slight decline. So don’t mistake Motorola and SonyEricsson and Samsung (and others) shifting away from Symbian as somehow a ‘Nokia decline’ in Symbian. Nokia Symbian is still very healthy at or about 40% on an annual sales level.

What is Nokia doing? While it introduced Maemo to power high end smartphones, Nokia is aggressively pushing the Symbian system down to mid-price phones where ‘feature phones’ used to be. It is expanding its proportion of touch screen devices (to position more against the iPhone) and more importantly, expanding its proportion of QWERTY phones against the Blackberry. Some very promising news came out of the UK this past December, that Nokia is back as the top preferred phone brand among UK youth in the Mobile Youth survey of phone brand preferences.
Most of all, any analysts should keep in mind, that thephone market is not an open ‘free market’. There are severe distortions by the enterprise/business segment, and the carrier/operator subsidy model in many countries. I explained these in my blog about smartphone market share secrets last year.

The key point to take away, is that Apple says openly that its best markets are in those countries with strong operator/carrier subsidies. They do not do as well in markets where customers pay full price for the phone (the real price of an iPhone 3G on AT&T is not 100 dollars, even Americans pay the real price of about 600 dollars for their iPhones, but the remaning nearly 500 dollars is hidden payments in the 2 year payment plan). Meanwhile, in every single market that is open, ie carriers do not subsidise most phones and the phone makers get to sell their own phones directly – and which are not controlled by a domestic maker or makers (like in South Korea for example) – Nokia is the run-away market leader in all phones, and in smartphones. For any analyst who suggests Nokia is ‘losing’ the game against the iPhone, that should give some pause. In all markets where there are no subsidies to distort the picture, Nokia wins hands-down… And Apple itself admits it struggles in precisely those markets. Who makes the “most desirable” phones when we take price into the equation? Not necessarily the single best phone for internet surfing, but rather a series of phones to suit mass market tastes? Thats Nokia, hands down. As big as number 2 and number 3 combined.

Even with all that, expect Nokia not to grow market share this year in smartphones, and very likely to lose some in 2010. The competition is coming from every angle and the big leaders will likely feel the heat. Nokia has been aggressively moving downstream in price and gets some solace that its price points are difficult for smaller brands to match, but its going to be a very rough year. And whether any newcomer focuses against the iPhone or the Blackberry, they will automatically also then target some part of Nokia.
The amazing untold success story, far bigger story than Apple, is RIM. Blackberries were nerdy US centric business phones only a few years ago. Europeans and Asians would not take to the flat, wide, weird Canadian phones. Try as they might, even as American conglomerates took to Blackberries by storm, and started to call it the Crackberry – 75% of American business/enterprise smartphones are Blackberries (says Ostermann survey in 2009)

The rest of the world did not fall in love with Blackberries. But RIM plugged along and slowly got traction in many markets in the enterprise/corporate space. They did particularly well in Latin America. But then came the SMS texting craze even to American shores, and whether by design or by accident, the youth of the world discovered the Blackberry. Not your boss’s phone, but your kid’s phone. And success followed. About at the same time, again perhaps by design, perhaps by accident, RIM expanded its product line of Blackberries to more models and several of these were more suited to consumers. RIM added cameras to these, and what businesses previously were reluctant to accept – cameraphones – started to infiltrate the business phone space. But now the Blackberries were very well suited for consumer use.

First the overall numbers. Today one in five smartphones sold – actually already 21% by the third quarter of 2009 – was a Blackberry. Remember that only 17% of smartphones are Apple iPhones. Why all that hype about the Apple and total silence about the Blackberry? Partly because this success is on strange foreign shores. In Venezuela the bestselling phone brand – not smartphone brand – is the Blackberry. In Indonesia the youth most popular phone is now the Blackberry. In the UK survey of university students, UK is traditional SonyEricsson and Nokia ‘back yard’ – Blackberry is now the third most popular phone brand, not the iPhone.

On RIM, this is the only brand I can promise you, it will grow market share in 2010. Why? Because first of all, it has a ‘lock’ on the enterprise/corporate market. The business phone market will not shift simply because there is one hot new smartphone this quarter, like a Palm Pre or Motorola Droid or iPhone 3GS or Google Nexus One or Nokia E72. The business phone market is incredibly stable because business customer IT departments resist any change and any new systems to be added and to be supported. In the big US market, Blackberry can very safely rely on something nearly 75% of all business smartphone sold this year. It may fluctuate a little up or down, but it is incredibly stable.
At the same time, the Blackberry keeps making more inroads to business phone use in all other markets, due to its incredibly well optimized business oriented form factors, solutions and apps and services. The Blackberry is simply the best enteprise phone solution on the planet. Now they have President Obama as the ultimate unofficial spokesman, the Blackberry President. They have achieved such certifications as NATO level quality of security on their device so for any business users, this is really a secure and safe platform. Their non-US global business-oriented smartphone user base will grow disproportionately well, rivalled only by Nokia with its E-Series. This market share segment will be particularly secure from any inroads by any new operating systems like the Apple iPhone or Google Android or Samsung Bada. Not because the phone is bad, but simply because IT departments will fight tooth and nail against any new OS. A survey by TBI Research in 2009 found that 80% of US businesses refuse to have more than one operating system for smartphones – and in most cases that is now the Blackberry. This is an incredibly stable source of revenue and unit sales and subscriptions for RIM.
But its huge growth is that successful transition from business phone to residential phone. And while all the press, analysts, pundits and ‘experts’ obsess about touch screen smartphones, the truth is that far more QWERTY phones are sold worldwide than touch screen phones. The internet use is not addictive, but SMS text messaging is addictive as proven in university studies like the one at Queensland University of Australia. So while both inputs are of course desirable and have their proponents, the fact is, that QWERTY trumps touch screen. Why is Nokia now rolling QWERTY keypads to its cheapest non-smartphones? Nokia know this, they invented the QWERTY keyboard in the world’s first smartphone, the Communicator 9000, and they were the world’s first entity to suggest SMS might be addictive, a decade ago. Nokia know this.

But RIM have optimized their phones for mobile messaging. It is a perfect starting point. Then they have the Blackberry instant messenger, which appeals to the youth in particular as it offers free messages between Blackberry users. That in turn brings in a contagion effect, you want to have the Blackberry specifically, because your friends use it. And then there is the cool factor, suddenly the Blackberry is the phone all older teenagers and young adults want to have. RIM is right now in a sweet spot, all things going for them. It is no surprise, that in the shadow of the world’s most spectacular high tech launch ever, the iPhone – RIM has consistently outsold the iPhone and grown its own market share.

I can tell you that often analysts and pundits even in the various early adopter markets like say Indonesia, where Blackberries emerged as the youth ‘must-have’ phone, inspite of their considerable cost differential above typical youth phones; the early experts were dumbfounded and could not explain it. I have heard various RIM experts say the same, that they are not sure exactly how and why, but are trying to learn this as much as possible and then capitalize on this knowhow.
I think it speaks volumes that Nokia is copying RIM not only with E-Series form factors, but now with cheaper non-smartphones adopting QWERTY keypads. Both RIM and Nokia know that the biggest single segment of the smartphone battlefield will not be touch screens, it will be QWERTY phones. And I would hope that at times the operators/carriers would be reminded of this too – that AT&T and O2 and other networks complain about congestion with the iPhone, but QWERTY Blackberries and Nokias do messaging, very profitable services for the operators… So its in the core profitability interests of the operators/carriers to promote QWERTY phones, not touch screen phones.
Anyway, all signs suggest that Blackberries are achieving ‘must have’ status among the youth. Youth fashions and desires can be fickle so this is by no means a guarantee of long term success, but for this year 2010 this bodes very well for Blackberry. As they are very secure to hold onto business/enterprise customers and see growth in youth markets, they are sure to pick up some market share points even in this very competitive year of 2010.

Apple is also growing strong currently. They have been expanding their global footprint but it is a worrysome detail, that out of all iPhones ever sold, 43% have been activated by AT&T (Said AT&T late last year). The iPhone is the darling of Americans but doesn’t seem to engender the same level of passion across the oceans. Yet 17% of all smartphones sold in the third quarter last year were iPhones. That is very good news for Apple and they keep growing year on year. Remember that as Apple only introduce one new model per year in June, they have that peculiar sales pattern where their sales grow in the second half of the year, but then always decline stronly in the first quarter of the new year. So don’t be alarmed, but be prepared, that when the January-March quarter sales numbers come out in about April of 2010, there will be inevitably a decline in Apple market share. That is not a sign of trouble, it is only because the 3GS will be 9 months old by then – near-obsolete in smartphone terms – and the next iPhone is not due until June of 2010.
But its not going to be an easy year for Apple. The early strongly operator/carrier subsidised markets are all now ‘done’ and have the iPhone. As Apple tries to bring its ultra-expensive superphone to ever less affluent markets, it finds it hard to sell meaningful numbers. China is a perfect example, Apple was really struggling to get its iPhone to move in any relevant numbers in China. And its strategy of going with an exclusive carrier/network in major markets is backfiring (as I predicted) and they are now expanding networks in many markets. There is continuing speculation that the exclusive deal with AT&T will end as well.

Most of all, Apple faces severe competition in the consumer space. The 3GS was a good phone last summer but now is really showing its age already. 3 megapixels is very modest for a 600 dollar smartphone where other brands do 8 megapixels and in advanced markets like Japan and South Korea 12 megapixels is now the standard for premium phones. A flash? When can we see that? And no removable battery, no memory slot, no QWERTY keyboard, etc. Apple is seeing a lot of business going to near rivals who also offer 3 inch touch screens but in many ways ‘better’ features. And please Apple fans don’t write about that. Yes, the Apple is by far the most user-friendly phone. But that goes only so far. And at some point 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.

Anyway, Apple needs yet another hit this June. If they manage once again to do a magical phone that everybody loves, they’ll be fine to the end of the year. But in 2007 when there were very few phones of a similar form factor, Apple had this 3 inch touch screen market segment to itself. Today every major maker offers 3 inch touch screens, and the competition is proving rough for Apple.
What is certain, is that for the start of the year 2010, Apple’s market share will sink of course, due to an aging model line. Will it recover for the second half of 2010, will depend on how amazing the next iPhone will be (it will definitely be better of course). But now most new rivals are all targeting this Apple area – not the enterprise space where RIM is, and not the low price angle where Nokia is. The new competition will almost all hit Apple square center. Like the Google Nexus One right now.
I would say for the year, if Apple can hold onto its market share – remember the smartphone market itself will explode this year -so there is going to be a lot of organic growth for those who can hold onto market share, so that is still good news. I don’t see much chance for strong growth, but it does depend on that one new iPhone model next June. It could be a ‘must have’ phone perhaps. I’d say the single best tool for Apple would be a QWERTY keyboard but I’ve been saying that since 2007 and of course Apple don’t listen to me haha…

The fourth largest smartphone maker is not SonyEricsson or Motorola, it is Taiwanese HTC. They manufacture for example the Google Nexus One. But even before there was an Android operating system from Google, HTC was the fourth largest smartphone maker with about 5% of the market. HTC has often struggled with the lackluster performance of Windows Mobile – HTC was the launch smartphone for WinMo early int the decade (after MS suddenly pulled the rug out from under their first-annnounced WinMo launch handset maker, UK based Sendo, if you remember) – and HTC has been WinMo’s standard-bearer ever since. HTC CEO said in 2009 that 80% of all WinMo phones ever made, were manufactured by HTC. So now that HTC is shifting most of their smartphones away from the Microsoft operating system to Google’s Android, is coming as a very hard hit to Microsoft.

So HTC was already plugging happily along in the fourth place, and now they have been increasing the awareness of their own brand, and then they have the sudden added support of the Google brand. This is sure to bring growth to HTC. How far can they grow? They are perceived as a small ‘built-to-order’ maker, and don’t have the brand appeal of the Samsungs and SonyEricssons in the eyes of the big mobile operators./carriers or the independent handset resellers in open markets. But they are now on a good growth path. I think they’re a pretty sure bet to increase market share in 2010.
So the fifth biggest smartphone maker is Fujitsu out of Japan. What? You never heard of Fujitsu’s smartphones? Thats because they mostly focused on the home Japanese market the past few years. In Japan the major smartphone platforms are Symbian and Linux, but most smartphones are ‘crippled’ by the operators/carriers with standard features and often the user cannot install apps like they could on a similar device in most other markets. Still, as a smartphone maker, Fujitsu is experienced and big. Plus they are one of the biggest makers of laptop computers so they have that synergy in distribution chain, brand and tech support.
What can we expect out of Fujitsu. Last year they said that they are going to refocus on the world market. Expect Fujitsu branded smartphones to appear in selected markets during the year. They are a luxury brand sitting right next door to China, it would sound like a good strategy to push into China. Japan often looks at Taiwan as their back yard, so its another obvious early target market. Beyond that, it will probably be random markets this year as they sample world tastes and see which markets would be receptive to the Fujitsu brand of phones once again.
Fujitsu have the advantage of learning about end-user preferences in the single most advanced mobile phone market, Japan. So they can bring ideas and innovations and technologies that have an advantage. I would expect that Fujitsu will be targeting initially the top end of the smartphone market, nearer to netbooks and web tablets, and going of course head-to-head with the Apple iPhone line. But if they can hold steadily onto about a 4% global market share in smartphones simply by selling in Japan, and now start to expand, expect them to grow organically at least a few percentage points globally.

Samsung had been giving smartphones lip service for many years. They had smartphones on just about every platform, on Symbian, on Windows Mobile, on Android etc. Now they have decided that it is a battle they want to enter and to win in it. And they have made that strategic commitment of releasing their own smartphone operating system, Bada. Samsung had previously held something like 3% market share in smartphones, but – in feature phones with touch screens – they already outsell the iPhone. All Samsung need to do, is to switch their touch screen phones from their proprietary operating system to Bada during 2010, and they will exceed the iPhone annual sales in smartphones…
If executed perfectly, Samsung would seem to appear out of nowhere and in one year leapfrog Microsoft Windows Mobile, Google Android and Apple iPhone. Don’t be surprised to see this happening. The South Koreans are nothing if not competitive, and they work day and night and weekends to achieve their objectives. And Samsung says in every market they intend to be one of the top 3, or its not worth competing. They have the scale to do it, and I am very confident within at least 18 months they will overhaul those three, lagging only behind RIM and Nokia. Whether it happens in 2010 remains to be seen how far Samsung is along its diabolical world domination plans. But they will certainly grow every quarter this year once the Bada phones are launched. Grow every quarter, mark my words.
I expect that during 2010 Samsung will push its Bada operating system aggressively to its mid range feature phones, and by converting these to ‘smartphones’ – they will achieve the most amazing market share growth ever seen in the smartphone space. Yes, in some ways its a bit of ‘cheating’ with accounting, but it fits the smartphone definition and Samsung will be grabbing headlines. As these will predominantly be touch screen phones, it will be seen as being head-on battle against the iPhone, even though in price it will more appropriately be a battle against market leader Nokia.

A bit player in the smartphones space, SonyEricsson was one of the first major smartphones and has had very high end prestige and popular business and residential phones in that area, but only a tiny part of their total lineup. Since Sony released the Walkman and Cybershot brands to the SonyEricsson partnership, the SE phones have been in the mid-range of excellent dedicated musicphones and cameraphones. But the advent of the iPhone decimated SE’s musicphone market and the brand has been struggling severely to find a place recently. SE has been losing global handset market share and its smartphones have suffered in that same process. Even that news out of UK university students preferring SonyEricsson as the second most popular phone brand is actually bad news for SE, as previously SE was tops. They are moving down in preference among even the youth. All news is bad news at SE.
Recently with the Symbian OS shifting to Nokia ownership, SE has little reason to particularly push Symbian in its smartphones and is shifting to Android. But the total shipments are low in numbers and the total brand is in confusion. I don’t see SE particularly growing. They have to stabilize their overall handset market share first, and then worry about smartphones. This could be a good year for SE to ignore the wars in the smartphone bloodbath and find attractive niche markets elsewhere and stabilize their profitability. I’ve been saying dfor years now, that what SE needs is the Playstation phone, which could be a hit product. Remember that most of the paid apps on the iPhone are games. But yes, if the PSP phone appears, SE could have a sudden surge. Else – and more likely not – I don’t see them as growing. They will be in the ‘other’ category of smartphones and mostly ignored.

Poor Motorola. They are so on the ropes. I wrote my open letter to them, that they should do SMS texting optimized phones to save the company (something RIM ended up doing and growing magnificently). But Moto have staked the whole company on one Android phone, the Motorola Droid, and now ‘Do no evil’ Google has stabbed them openly in the back with the Nexus One. Motorola is doing its best, but their global handset market share has been in total freefall for years – they have gone from 22% to 5% in three years! – and they now are feeling the breath of RIM in their neck, a pure smartphone maker who may overtake Motorola in total phones shipped some quarter this year.
It was a risky move to make a heavy move into smartphones. The Droid is not going to make meaningful inroads into the enterprise space for the same reasons that RIM owns that space and others can’t get in. So the Droid has to fight it out in the high end of the smartphones, against the iPhone and high end smartphones from Nokia to Google to HTC to Fujitsu to Samsung to Palm to just about anyone.. But it was a popular move to US based investors, so Moto made its bed and now must sleep in it.
I don’t see Moto having much chance outside the US market in this heated contest, to peddle its smartphone to consumers who had grown very tired of the Moto brand the last few years. Not in this year with so many exciting new smartphones appearing in the same price bracket. And the US market is not big enough to give Moto the gains it needs. I see Moto overall losing handset market share and being irrelevant in the numbers of the smartphone battle. Incidentially, ZTE out of China as a non-smartphone basic phones maker is about to pass Moto as the fifth biggest phone maker, so the fall from grace continues in any case, Moto is headed to the waste basket of the industry.
Motorola may appear on the charts for US smartphones with some market share, but nowhere near market leader RIM or second place iPhone. Too little too late. When will Moto close shop? At Forum Oxford we have already a Motorola death-watch… They are certainly already on the ropes

Palm sells only about 800,000 smartphones so apart from being a curiosity in the US market, they are irrelevant in the big picture. They don’t account for one percent of the market and have essentially no chance of growing market share in this bloodbath of a year in smartphones. I would not be surprised if Palm passes onto history during this year.
A more interesting player in smartphones is LG. LG is the third biggest handset maker out of South Korea and like Samsung, they have pretty much ignored the smartphone space. But – remember the original ‘amazing’ looks of the iPhone? That totally radical one button touch screen flat 3.5 inch screen wonderphone when first shown by Steve Jobs in January 2007?
The looks of the iPhone, exact dimensions, etc, were considered in January 2007 to be a copy of an industrial design winning LG phone – from 2006. Apple designers cleverly copied an award-winning LG design to create the ‘wow’ factor in 2007, because LG had not brought this phone to the Western markets (we eventually saw the consumer version of it as the LG Chocolate, released in Europe before the iPhone launched in the USA in 2007). So LG knows fully well how to do this type of phones and form factors. They just haven’t bothered to do that as a “smartphone” so far. But the LG Chocolate was Europe’s bestselling phone at one point in 2007 and in its lifetime has sold more units than all iPhones.
If LG feels like they’d want to have a major market share in smartphones, they could do the same as Samsung, introduce a smartphone OS to the next edition of the Chocolate and having a far cheaper phone of the popular touch screen and 3 inch screen form factor, they could easily outsell the iPhone ‘as a smartphone’ within about a year – to 18 months. But that ‘step’ is not even taken yet, as Samsung did announce its Bada operating system and will clearly now fight for the smartphone space, LG has not made any such bold announcements. At the CES this week LG has introduced two smartphones and they made noises that they’d like to get more market success in smartphones. If they so desire, they can become a massive global rival in no time. Remember in scale as a handset maker they already are far bigger than any North American phone makers including Palm, Apple, RIM and Motorola.

There are actually seven handset makers out of Japan and several have expressed interest last year in moving abroad, or ‘returning’ to the overseas phone markets that the Japanese brands (other than Sony/SonyEricsson) abandoned a decade ago. Some of the brands will not be doing it as smartphones but some may. We have powerhouse electronics brands there like Panasonic, NEC and Sharp. And the biggest of the Japanese handset makers is Kyocera. Any of them may find it suddenly appealing to capture part of the limelite in smartphones and do a nice little splash some time in 2010. But I don’t see them taking big market shares in smartphones but keep an eye out for the GSM World Congress in Barcelona in February for any surprise announcements.

Doesn’t it seem like every PC maker is suddenly doing smartphones? Dell is also in the game now. They will be releasing their first smartphone in America on the AT&T network. Dell will struggle severely for early years in their entry, in building carrier relationships with the 160 or so significant mobile operator/carriers and the 600 overall; as well as hundreds of national resellers in so many markets. They will find that the smarpthones market is totally different from the PC market and that normal free market rules do not apply. And that to get scale, they have to move downstream and diversify fast – like Blackberry has done. I don’t see them being a global powerhouse yet and won’t register in the one percent market share range this year, but they are yet another brand doing high end internet-oriented smartphones (against the iPhone).

Google’s entry into the smartphone space is seen by some as going back on their word (that they do not intend to be a phone maker), and by others as stepping severely on the toes of their Android handset maker partners. The Google Nexus One suggests there will be a Two and more, so it seems like Google has made a strong commitment to become a handset maker brand, whether their phone is physically made by HTC or not.
Initially the Nexus One is energizing the US focused tech media and analysts into a frenzy but I would think this will subside. It is a phone positioning at the iPhone end of the consumer market, as a pure touch-screen device and labeled a ‘superphone’ in the US market, it is already attracting direct comparisons to the iPhone. Price wise its conveniently 10% cheaper. But Google has the advantage of not limiting the Nexus to one carrier only. And quite alarmingly for the iPhone US market aspirations, the Nexus will be both in a GSM and CDMA version (T-Mobile first, but Verizon version to follow). Google also has the Vodafone networks as reseller partners so it will make quite a splash globally as well.
Because it goes against so many other similar Android devices and tries to fight against the iPhone head-on, I don’t see them replicating Apple’s first year success of 10 million units, so the Nexus will be very low in the single digits even if all goes well. But behind the scenes, many Android device makers cannot be happy and there is probably a lot of lobbying to stop Google from this path. They may find a device maker revolt and be forced to pull out. On the other hand, most of the Android partners have poor options right now – Windows Mobile 6.5 is not much of an option and going back to Symbian means supporting rival Nokia – Google may well be seen as the lesser of all evils (as opposed to ‘do no evil’)

Microsoft once had 30% of the smartphone market share. Yes thats true. Today they are vanishing fast. They have seen many Windows Mobile handset makers shift to Android and Samsung launch their own OS, so expect WinMo to keep losing market share. The worst news, one could say devastating news was that HTC decided to focus on Android for this year, as they won’t do WinMo 6.5 devices and await WinMo 7. Microsoft has promised WinMo 7 will be released at the end of this year but so often in the past Microsoft’s launch dates have slipped and the WinMo handset community and developer community have no reassurances that Microsoft has woken up to mobile and is taking it any more seriously now as it has in the many years of the past. (My open letter to them has been read widely at Microsoft HQ but they still don’t get it).
Microsoft has to expend a lot of resources to support WinMo 6.5 and develop 7, all while their market share seems to be cut in half quarter after quarter after quarter. One wonders why they bother, and there is a deathwatch for WinMo also at Forum Oxford already. There is no light in this tunnel and one wonders at what point MS simply decides to throw in the towel and not bother to fight for this dwindling opporunity, especially as the fight heats up so much this year with so many fresh new players and far more modern operating systems.

Haha, Apps stores are a total non-story. They do not matter one iota in the big battle for smartphones this year, but you will hear all kinds of silly stats and forecasts and billions of downloads. That will not determin the market success. I told you what decides market success globally in smartphones. I also told you the media’s silly obsession with app stores is pointless. But I furthermore said that app stores are a good trend, and eventually, in many years from now, we may have real value out of app stores. Whenever you hear ‘app store’ mentioned in 2010 safely skip the story, it is meaningless to smartphone market success. Don’t fall for the app store hype.

What will it look like after 2010 is done? I see Nokia in the 35 to 40 percent market share range. RIM will grow to the 22 – 25 percent market share. Apple may hold onto about 15-18 percent share depending on how ‘awesome’ the next June 2010 version of their iPhone is. Samsung is likely to grow at least past the others with Bada to fourth place and will certainly eventually overtake the iPhone, but that I see happening more in an 18 month scale than this year. Still they will be a solid number 4. I’d put them around 10% give or take a few points.

HTC will be the biggest of the smaller players due in large part to Google’s Nexus and its brand. It will help sell any HTCs. I would say HTC grows but to something like 6% or 7%. At worst they hold fifth place at about 5%. Toshiba is going to push abroad, expect them to battle HTC. LG is a dark horse, depending on if they go full steam suddenly into smartphones or are happy to do touch screen feature phones.
The other brands will be in the roughly 1 percent or less range including Motorola. SonyEricsson, Palm, some other Japanese makers, Google’s own brand (double-counted in HTC above), and Dell. Should SonyEricsson do a PSP phone (most likely then as a smarpthone) that would give SE a big boost. And I’m pretty sure we’ll see more PC makers rushing to a smartphone near you, like Lenovo, Acer, HP, Toshiba etc.
It will be a bloodbath in 2010 and we will be keeping score in the media often. The only thing I urge you to keep in mind – the US market is totally not symptomatic of the rest of the world. Only one in 12 phones sold in the world is in America, so don’t think the biggest battlefield will be on those shores. No, the big battles at the high end of the price range will be in Western Europe and the low end of the smartphone battle will be in Asia. Those are the markets where this war will be won or lost. But it will be an interesting year in mobile.

Addendum – someone commented asking me to explicitly mention my background, that I have been employed by Nokia in the past and that Nokia is still a customer of mine. That is true, and I say so countless times in my books and on this blog and when I speak in public; but perhaps it again needs to be repeated? I left Nokia HQ in 2001 and my last post with them was the Global Head of Business Consulting. Perhaps I should also state that earlier in my career I was employed by a company that was an Authorized Apple Reseller as one of their Apple/Mac trainers, so I probably also have a strong positive Apple bias. Since 2001 I have been an independent consultant. I do not disclose any customers of my consulting who do not first openly acknowledge their relationship with me. Nokia has been kind enough to do so, so yes, Nokia is one of my reference customers. Out of this list of handset makers, so too my reference customers include RIM, Motorola, SonyEricsson and LG. There are others on this list who have not yet disclosed in public that they have used me. Note that in this blog I am positive of some of ‘my customers’ (RIM and LG) and negative of others (SonyEricsson and Motorola) and am both positive and negative of Nokia. I am known for speaking the truth as I see it, even when this means that I am critical companies that have given me consulting work. The amazing thing is, they do respect that, and keep giving me more work. But yes, if you need to hear it, yes I am a Finn, I was employed by Nokia up to 2001 and they are still giving me consulting work, as do four other companies in this list.
PS – two items may be of further interest to visitors. A video of my presentation of the mobile industry – nicely showing my slides as well, side-by-side, entitled the next four billion (mobile phone subscriptions to the planet that has only 6.7 billion people and over 4 billion mobile phones) has been viewed over 3,000 times already and many seem to quite like it. Its at this link Tomi Ahonen keynote presentation from Picnic conference Amsterdam.

And for those who would like to read about some astonishing numbers of the mobile phone industry – more cameraphones than digital cameras, more alarm clocks used on phone than stand-alone alarm clocks etc, read my essay on The Nokia Decade.


One response to “A Bloodbath for 2010: the Smartphone market preview”

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