Absolute value: the handset market stacked

In previous posts I detailed shares for units, sales and profits. I also offered different ways to look at the data like rankings and profit “area” maps.

This article is about the absolute numbers. What is the total market in terms of units sold, sales and operating profits.

The time frame remains from the second quarter in 2007 to the third quarter of 2010. The same eight vendors are analyzed (with “Other” available for units analysis only).

The first observation is that the market grew to new heights in Q3. 340 million phones in the quarter means that we might be looking at a very good holiday season. The market was range-bound due to the recession and its over-hang, but there seems to be a good indicator of macro-level recovery

On an individual competitor basis, the share snapshot pictures we saw earlier gave a good summary of the condition of competitors. Here we see the evolution of absolute units and sales over time. It’s instructive to scan the two charts as a pair to see how units and sales are affecting the positions of the participants.

I clustered the “pure smartphone” vendors at the top of the charts so you can visually separate them from the broader portfolios of the others.

Finally, here is the evolution of total profitability (operating) for the participants. I annotated Nokia and Apple for calibration.

(note the color coding legend in the pervious charts).

What is most impressive is how LG, Motorola and Sony Ericsson seem to be in the same boat. At the same time, Apple, RIM and HTC are outstanding in performance. And Nokia and Samsung are stuck in a dilemma. On the other hand, every vendor is different in many ways, and it’s inaccurate to paint them with the same brush.

Overall, we see a pattern of increased absolute value in the market. All but one vendor is profitable, and sales are increasing. A large part of the growth is due to the transition of the market to smartphones.

  • timnash

    In 'Volumes since iPhone launched' there is no legend for the uppermost band. Other?

  • asymco

    Yes, Other.

  • RobDK

    Great graphics Horace! Shows very clearly where the Industry and profits are heading!

    Any chance of combining this data with Tour Android market share analysis and recasting the article on the basis of OS?!

  • roger1

    nokia and apple…similar color…I don't understand graph so well..

  • Billy

    "And Nokia and Samsung are stuck in a dilemma."

    What dilemma is that for Nokia? Since the launch of the iPhone, or shortly thereafter, Nokia recognised their limitations and effectively exited from the high end smartphone market while they set about re-inventing themselves, a process which is still not complete. Despite that they continue to sell millions of smartphones and still make a profit… new devices based on revised Symbian and Maemo/MeeGo operating systems underpinning the Qt platform should see Nokia right for the future and help raise ASP.

    So what is the dilemma for Nokia?

    As for Samsung, they'll back any OS going if it means gaining market share and have no clear vision for the future.

    • Fred´

      I think the dilemma for Nokia is that nobody will listen. They are reduced to an entity assembling hardware and software made by others. Who cares if they sell hundreds of million of very cheap phones. Apple, on the other hand, has their own SW and their own HW. No one except Apple has this, which makes Apples position unique.

      • Billy

        "entity assembling hardware and software made by others"

        Totally untrue. In the case of Symbian and MeeGo it's Nokia that are one of the biggest (if not the biggest) backer/supporters dictating the direction the software will take, and Nokia design/manufacture much of their own hardware (unlike Apple, who manufacture nothing themselves but outsource everything).

        Or did you mean Samsung in place of Nokia?

  • Ram

    Apple sells less phones but makes more money – obvious if one follows their model, I would think. Bottom line is that even if Apple loses some market share by handset volume, they will be more profitable. They have demonstrated this already with the Mac line and their approximately 6% share…

  • I think the question remains unanswered: what dilemma do Samsung and Nokia share? The backgrounds and biases of the varied audience prevent some from recognizing the answer, even from excellent work as above.

    • OpenMind

      How will they survive the race to bottom? Look at PC industries, think how can you avoid to become Compaq, Gateway, Dell, IBM PC BU, etc like in mobile space?

  • kevin

    Of the major global handset makers, only Nokia and Samsung possibly make profits on dumbphones (featurephones). [LG is now taking losses. Motorola and Sony Ericsson, who took losses earlier, are rapidly transitioning to all smartphones. Apple, HTC, and RIM are already all-smartphone.]

    Nokia breaks out ASP and revenue for smartphones and non-smartphones, but not margins or profits. So we really don't know if it is still profitable on non-smartphones, which is now only 76% of all its phones sold. In the last year, it has rapidly come down from 85%. My guess is that it still is, though the margin is small.

    Samsung only provides numbers for all phones, so again we don't know if it is profitable on non-smartphones, but since non-smartphones is 89% of all its phones sold, we'd have to guess that it is still profitable.

    If both Samsung and Nokia can remain profitable in non-smartphone sales, that will give them more time to transition and compete in the smartphone market.

  • kevin

    With regard to just the 8 global handset vendors, in Q2 2007, maybe $1 to $1.3B of profit came from smartphone sales (HTC, RIM, Apple, part of Nokia), with $2.7 to $3B of profit from dumbphone sales. By Q3 2010, possibly $5.5 to $6B of profit came from smartphone sales, with $1 to S1.4B from dumbphone sales (part of Nokia and Samsung).

    The drop in dumbphone ASPs basically rendered their makers unprofitable except for the lowest-cost makers (Nokia, Samsung, and possibly some of the "Other" category who are not shown on the third chart).

    And although these charts aren't intended to show it, both RIM and Nokia have also significantly lowered their smartphone ASPs over the last year so as to maintain/grow smartphone market share. The increased sales volume have allowed them to maintain profits. The lowered ASPs have had little effect on Apple; there's not enough info to determine if it has had any effect on the Android makers.

  • D.Z.

    I've tryed to exclude absolute values from these charts for Sales and Profit for all 8 manufactures. Then I calculated followed values: COST = SALES-PROFIT and PROFIT% = PROFIT/COST.
    The main idea is, that no big reason for me to compare absolute value of profit, but very important to understand how much money these companies spent to obtain their profit to calculate efficiency of these money using. The second main factore for me to compare the size of buisness for main manifactures.
    What I see is that Apple buisness is very and very effective one – each spent dollar gives 0.6-0.7 dollar of profit (60-70%). The second place is RIM (40-50%). SonyEricsson does have ~5% and LG minus 10%. All other do have ~10% effective buisness. If we compare the size of buisness, we can see that Nokia is number 1, Samsung – number 3, Apple – number 3. It's interesting that cost of buisness for HTC, Motorola, SonyEricsson and RIM is around 2 billion dollars each one. It looks like 3 of them are using WinMob and Android as base for their products, so, possible, 10% of profit is the limit for company, which is used open source code based OS?

  • Billy

    E90 is hardly high end, it's an enterprise device.

    After the N97 there have been no new high-end devices until the N8 (which is really mid-range at best), and this I think is a fairly good indication that Nokia knew they couldn't carry on with what was already in the pipeline circa 2008/2009 (although they did slip out the N97 mini) and that they had to reconsider their whole approach to the N-series/high-end (ish) smartphone device market, and not just hardware but also software.

    • kevin

      I agree. I think Nokia saw they didn't have the product to compete at the high end, and made a conscious decision to move downmarket and compete with lower-priced smartphones (with lower costs but also lower margins), until MeeGo is ready. That same move also helped them to take on RIM (which was thinking that they were expanding their market downward with the Curve). Until MeeGo is ready, Nokia has ceded the high-end to iPhone and some of the Android-based devices.

  • Mark Newton

    Also worth noting is that Apple benefits financially from halo sales of other hardware, plus cross-sales of music, apps and movies as and adjunct to iPhone sales.

    I don’t think any of the other 7 vendors see related sales to any meaningful extent.

  • Pingback: How the iPhone’s profits stack up | Mobile Press()

  • Kalle

    I would count Nokia N900 to be more high-end than N8 and N900 was released early 2010 or so. So Nokia hasn't abandoned high-end, but rather has decided that their high-end is to be done with Maemo/Meego instead of Symbian. Unfortunately for Nokia it has taken quite long to get a successor of N900 out.

  • Davel

    It is interesting to see how well RIM is doing, even if they are getting hammered in the press.

    These charts show very clearly how disruptive Apple has been.

    The big question of course is how long Apple can stay disruptive and if the can maintain the cool factor or will the drop back into the pack.