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20% vs 33% for "Others": Why are Gartner and IDC so far apart on mobile phone market estimates

The latest mobile phone estimates from Gartner made a startling claim that “Others” vendors increased share from 16% a year ago to 33%. Doubling share in a year is possible if you’re at 1% share but to double from a base of 16% is sounding improbable. They allege that the “Others” now sell more phones than Nokia. And Others don’t even include ZTE and Huawei, the prototypical low end challengers.

They emphasize this point in their discussion and state that the incumbent vendors are being pressured by these low end entrants. They go on to explain that the same set of vendors will probably use Android to enter the smartphone space.

To illustrate, the growth of individual companies is shown here (all phones).

Also puzzling is that ZTE and Huawei did not share in this boom. They barely beat market growth and were growing at half of “Others”. Until recently ZTE and Huawei were themselves Others, so the new vendors are truly unbranded “white box” vendors.

To put it in perspective, their year-on-year growth is astronomical: 176%, selling 87 million more phones this third quarter than last year’s. This is equivalent to saying that a new company was born in the last year and has already become the second largest in the world. The growth in volumes is higher than the total units Samsung sold!

Mind the gap

Extraordinary claims require extraordinary evidence. Can we check what other analysts estimated and do some form of validation of the claims?

Yes we can.

IDC reports the same data and they only reported 340.5 million phones sold (vs. Gartner’s 417 million). Excluding ZTE and Huawei the total share for “Others” in IDC would be about 20%.

20% share vs. 33% share is a big gap.

IDC and Gartner both agree on smartphones, so the difference is even more glaring when you consider the “non-smart” comparisons:

Non-smart phones:

Total Market: millions of units sold____ 3Q2009______ 3Q2010
Gartner 268 337
IDC 244 260

For added emphasis, I added a comparison of last year’s quarter. Last year the Gartner total estimate was about 10% higher than IDC. This year they are 30% higher.

How could the difference in the total phones sold be so big: 77 million phones?

If Gartner is right, how could IDC miss 77 million phones. If IDC is right how did Gartner conjure up 77 million phones in one quarter? That number is nearly as big as all the smartphones sold (81 million). This is not within any margin of error for whatever sampling method they use.

Perhaps they need to clarify this because until they do, neither is credible.

Note: My own models are built from individual company public reports. The only data I depend on from IDC and/or Gartner is this total market size which allows me to back out what the “Others” are doing. If the total market estimates disagree so much, I’ll be forced to throw out the “Others” all together.

  • asymco

    Until they discuss their methodologies openly, the world wonders.

  • Sälli

    Isn't IDC sell-through and Gartner sell-in? So Gartner's numbers also contain all the phones stuffed in the channel, but not sold to actual customers. Maybe not enough to explain the big gap (why would the difference in inventory be so different at the start and end of the quarter?), but that is a difference in their methodology.

    The channel is also something I'm suspecting to inflate Android numbers. The media has been screaming how Android is outselling iPhones nowdays, but not saying anything about the channel. As we all know, there are pretty much no iPhones sitting in inventories. Only very recently have iPhones started to ship within 24h in the US, whereas in the rest of the world there is still a substantial wait. Compare this with Android, which has about 1,000 different SKUs, which all need to be stocked at thousands of distribution points.

    And despite the supposedly huge sales, Android web browsing share is growing nowhere as fast: http://ilari.scheinin.fidisk.fi/market-shares/

    • asymco

      It's the other way around. Gartner reports sales to end users whereas IDC reports shipments into the vendor's distribution channels. This makes the difference in totals all the more astounding. Also keep in mind that Gartner had two weeks to look at the data from IDC and adjust it if they thought they were way off base.

      • Sälli

        Wow. I have always been puzzled about the discrepancies between what manufacturer's report in their ERs and the "analyst estimates". Sure your future estimates don't need to match with the actual numbers, but a lot of these "estimates" are released for the past after true numbers have already been reported. I guess this is one more evidence of a "we pull numbers out of a hat, and expect that somebody is willing to pay for that" business model.

      • JonathanU

        Horace – perhaps a carefully worded open letter to either outfit asking for clarification on this issue might be of use?

        Perhaps ask PED to pick this up on Fortune – get enough publicity together and you might just get some sort of response/answer!

  • Valeb

    One problem with these clowns (IDC and Gartner; I remind you Gartner is a public company) is that they don't know. This wish they knew, but they don't. Their PC market estimates are risible. Confounding their cluelessness, IDC and Gartner area constantly revising their historical estimates. Let me repeat. They're constantly revising numbers they've already engraved in stone, for which they are paid handsomely. Recall, Nokia last year began to include "grey market" handsets, and their estimates ballooned. Since "grey market" is definitionally difficult to capture (unless Gartner is merely attempting to count MediaTek units sold), these estimates are going to be all over the place. Think about this: for September 2010 quarter worldwide units, Nokia 364 million, Strategy Analytics 327 million, IDC 341 million, Gartner 417 million, iSuppli who knows. For my part, I take the average (mean,median) of various estimates to arrive at a #. Did I mention these clowns get paid handsomely for these "estimates".

  • Narayanan

    Strange indeed.
    I too have wondered about the massive underutilization of Android from web browsing stats compared to the “activations”.

    Hopefully there will be some clear answers soon.

    • Hale

      Those mobile web browsing stats lump iOS as a whole including iPad and iPod Touch.

  • RobDK

    Seems like there is a huge market opportunity In providing accurate data about the Mobile market. Something for asymco?!

  • Philip Elmer-DeWitt

    Gartner is trying to track down an analyst. No reply yet from IDC. Meanwhile:
    http://tech.fortune.cnn.com/2010/11/11/missing-77

  • FalKirk

    You're the best, PED.

  • Coera

    A guess: since the 'Others' are probably mainly black/grey market devices sold thru *unofficial* channels, maybe IDC's methodology doesn't capture these.

    But I also doubt Gartner's ability to accurately capture the sell-thru figures from the thousands of Nigerian (and other) shady resellers using unofficial channels for their counterfeits. Hence, their estimate might be based on MediaTek (and other such players) chipset volumes?

    By definition, estimating the size of a black market is notoriously difficult.

  • http://twitter.com/BrianSHall @BrianSHall

    Wow!
    Did Microsoft really ship 77 million Windows Phones at the end of Q3!

    But, seriously, thanks for pointing out these gaps between the 'leading analysts'.

  • Philip Elmer-DeWitt

    This came in over the transom from an Apple 2.0 reader who prefers to remain anonymous:

    "Philip, I know something about this sausage-making process, as I used to do it for IDC. In 3Q98, I did a cross-section, an excavation, if you like, of our methodology, putting a crowbar to it and snapping it into fragments. It was the PC count, but the methodology is the same for phones.

    "In most quarters, the team starts with OEM guidance and, depending on the country, does some by-country cross-checking. However, for the US team, we just did some systematic adjustments to the vendor guidance and called it a day. For example, we knew that lots of Macs were transshipped from Miami to Latin America. So, we took some percentage of Macs (Apple, of course, never helped; in fact, even objected, saying it wasn't so) and reallocated them from the US to a smattering of Latin countries, effectively modeling the market but with no low-level data.

    "So, in 3Q98, I analyzed the "choke points," those parts of the supply chain where the channel narrowed enough to get a definitive count. At the time, it was OS, processor, graphics, and hard drive. As I recall, I found 20 million processors with no homes. The market at the time was about 100 million, so this was a 20% discrepancy.

    "The process that ensued was a marvel of obfuscation. The leader of the Tracker team figured out a way to rationalize away all the extra units (e.g., multiprocessor servers, inventory, speculation, etc.). It was politically impossible to force the extra units on the regions because it would introduce gross distortions to the historical trends.

    "So, the mantra became, preserve the growth rates; to hell with the actual numbers. Even the growth rates are fiction. The fudge is in the "others" category, which is used as a plug to make the numbers work out. In fairness, we did do survey work, calling around, and attending white box conferences and venues to try to get a feel for that market, but in the end, the process was political. I used to tell customers which parts of the data they could trust, essentially the major vendors by form factor and region. The rest was garbage.

    "The industry itself was aware of these issues, but agreed to maintain the fiction because it was convenient. Most vendors kept their own numbers, but referred to IDC for public purposes. Thing is, real executives got real compensation based on our numbers. There were other games played, but that's for another time.

    "The question always came down to, are these fiduciary numbers that investment managers charged with keeping money for widows and orphans rely on, or are they just inside baseball for the industry to squabble over and not all that important? That question has never been answered."

    • asymco

      Thanks for this PED. At last some clarity is emerging.

    • Joe_Winfield_IL

      Wow, this is depressing. It's easy to be Naive and trust that the objective of these firms is only as stated – namely to accurately track the data. The concerns of IDC management mirror those of any public firm; sometimes actual results don't fit a trend or expectation within a predefined period. What to do about the discrepancy is an ethical conundrum. This article, written just today, covers exactly the same topic:

      http://www.fool.com/investing/general/2010/11/11/

      It sounds like IDC and Gartner are terrified to show an unexpected shift, so instead they normalize the data by making revisions to historical numbers when they report new, current results.

      Thanks PED and Horace for tag-teaming this one!

  • Rob Scott

    Thanks. Great work to both you and Horace!

  • Rob Scott

    Great work Horace. These fictitious numbers from IDC and Gartner are bad for everyone. I also have big trouble believing those Android numbers. They look inflated if only to confirm their predictions. Its about time they get challenged on this.

  • Philip Elmer-DeWitt

    This from Gartner PR:

    "I've spoken with the analysts, and the difference in numbers is very likely down to the white box market. There's commentary in yesterday's release.

    "Effectively, many companies can now assemble large numbers of handsets cheaply using readily-available components — in much the same way that white box PC manufacturers were able to do so in the past. These companies are increasingly exporting to countries with high demand for basic handsets. Combine that with differences already noted in how mobile device sales are measured, and you get to the root of things.

    "Another bit of research that might be relevant:

    Gartner Says Indian Mobile Handset Sales To Reach 138.6 million in 2010
    http://www.gartner.com/it/page.jsp?id=1412313

  • JonathanU

    Awesome work PED, as ever.

  • kevin

    Nokia also does a market estimate, usually, one of the earliest published, as its part of their filing. They estimated 364m total phones sold in 3Q10. Nokia made a major adjustment in their estimating methodology beginning in 1Q09 for these below-the-radar white box handsets, upping the estimate in that quarter from 255 to 291, and including them in its estimate from that point on. So the 364m includes what Nokia thinks of the white box market. 364 is more than IDC's 340, but still falls way short of Gartner's 417.

    • asymco

      Very good point. Unfortunately, even Nokia's estimates are not frequently cited. It's IDC and Gartner that have the power of citation and, I might add, the responsibility to be accurate.

      Clearly the difference is the white label or grey market. This is a tough market to track because not only are the devices often produced as unlicensed copies, they also avoid taxes, tariffs and have no IMEI, making them illegal.

  • RobDK

    Mobilgate here we come!!

    PEDs anonymous contact implies that the industry is inflating figures to boost Executive pay. Is it Google/Android OEMs in China boosting the figures to match iOS activations?…

    I suggest PED and Asymco join forces on this one and dig further…

  • Rob Scott

    IDC and Gartner have skin in the game. They make predictions that must come true. They make money on these numbers and they estimates. What do you do when you predictions/estimates are absolute horse, and you are the only one who keeps and update the numbers? You cook them, that's what you do. These numbers are absolute nonsense. 77 million is an absolute ridiculous error.

    Its about the damn time these companies are held accountable!

    Throw out the “Others” and any numbers that cannot be proved Horace, enough of this nonsense from Gartner and IDC. I suspect strongly that Android numbers are inflated by a sizable margin. We need published that straight from OEMs as they are force not to lie tot heir shareholders.

    • kevin

      Although we really don't know the ground truth on Android, this discrepancy here is in the non-smartphone part of the market. I could see Nokia having the most interest in this, as it is the leader of the non-smartphone market. Their overall (all phones) market share took an almost 25% cut from 3Q09 (36.8%) to 3Q10 (28.2%).

      As for Android, Canalys estimated 20m, and Gartner estimated 20.5m units. (I don't have IDC or Strategy Analytics estimates.) Horace drew a chart a few days ago. HTC reported 6.8m units (mix of Android and WinMo), Samsung reported 11% of unit sales, so about 7.9m (mix of mostly Android, and Bada, WinMo, Symbian), SE reported "more than half of sales" of 10.4m, so if it was referring to units, that's at least 5.3m (mix of Android, Symbian), Motorola reported 3.8m (mix of mostly Android, and WinMo).

      If we assume that 75% of these units are Android-based, we get 17.8m, leaving 5.9m for Bada, WinMo, and Symbian. Gartner estimated approx 29.5 Symbian phones (Nokia reported 26.5m smartphones so guesstimate 3m non-Nokia Symbian phones), 2.2m WinMo, and 1.2m Other (to include Palm, Bada, and others). So 75% seems reasonable to me. Since there is also LG and a bunch of others making Android phones, I'm comfortable with the 20m/20.5m estimates for Android. Of course, it would be better if the mfrs just reported the numbers.

      • Rob Scott

        You make a very good case, but I am still skeptical. Read this at AppleInsider – http://liten.be//DK2UP

      • kevin

        I think AppleInsider is misinterpreting the numbers to rile up the Apple fanbase. The difference between the four estimating houses on smartphones is 4m – ranging from 77.1 (Strategy Analytics) to 81.1 (IDC). Nokia's estimate is way lower at 70.4, but Nokia has been low on smartphones every quarter now for at least a year (it makes their quarterly results look better.)

      • Don Elish

        WinMo % is only 3% in its most used market, in the US. Android likely to account 80 to 90%. Maybe more. Samsung moved about 5 million Galaxy S in a quarter, not counting low end Androida. 2 million Bada or Wave. Means % of WinMo even smaller. Symbian non existant for Samsung.

    • Jill M.

      Enter text right here!
      Andy Rubin did state more than 200,000 activations a day with peaks over 250,000. Based on Gartner's 20.5 million that amounts to 222,000 activations a day on average which is close enough.

  • r.d

    Does anyone have the cell carrier numbers, that should
    be the real number instead of guesstimation.

    What about Tax collected on phones.
    SIMS activated per quarter.
    What about IMEI.

  • Garf07

    Regarding Gartner's big increase (vs Q309) on "others": My guess is that Gartner has revised their methodology to capture the white-box/grey market but didn't bother to restate the 2009 numbers.

    Regarding the Gartner difference to IDC/Nokia/Strategy Analytics: Obviously a difference on how to handle the white-box/grey market. It's anybody's guess really. How much of MediaTeks shipments actually ends up in the market….and where do the rest go?

  • http://twitter.com/ericylai @ericylai

    77 million is a lot of missing phones. On the other hand, it's 'only' a 20% gap between Gartner and IDC. If you look at forecasts this year for the tablet market, Gartner predicts nearly double the shipments of guys like iSuppli and ABI Research.
    http://blogs.forbes.com/sap/2010/11/04/which-anal

    That gap grows over time – by 2014, Gartner's forecast is almost 4x larger than that of IDC and In-Stat.

    I'm not nihilistic enough to advocate throwing the baby out with the bath water, though. Everyone has their own methodologies, some more rigorous than others. Taking the average of multiple reports/forecasts seems reasonable.

    • addicted

      There is a huge difference between forecasts, and what Gartner claims is actual historical sales. Differences in the former an be excused since minor assumptions can multiply and there are no real checks. However, you have real numbers in the case of the latter, which can help you sanity-check your assumptions.

      That being said, maybe you are onto something, and Gartner has overpredicted sales in the past, and is now trying to spin the numbers to match their forecasts more closely? (not sure if this is the case…just speculating wildly).

  • Josh

    That is because Gartner are paid by Googles. Google have a lot of cash.
    So Gartner will give android a larger number.

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  • Rob Scott

    Why is Gartner not breaking down smartphone units/share by vendor http://liten.be//Z36XT, surely they have the numbers. Why not publish them then? The 75 – 80% split for Androind at Verizon is also very fishy, how did they get to that? We know that the Droids were not that successful so where is this 80% coming from?

    All the major Android OEMs (save HTC) lost share in the general phones’ market making it very hard for me to believe that they suddenly figured out how to compete in a different category of phones.

    Gartner and IDC must breakdown smartphone data by vendor this will helps us figure out if they are padding up Android numbers by using “fake” numbers form the “Other” vendors.

  • kevin

    Gartner does have the smartphone numbers by vendor; you just have to pay big bucks to get it. Each quarter, they release selected data, but not all of it.

    • Rob Scott

      I am sure they do. They are losing credibility fast. It might help them to be more open and forthcoming with the data. Major Android OMEs lost share in the total phone business, but they made massive gains in the smartphone category. For this to be true they must have lost chunks of share in the dumb and feature phone categories. If they are so incompetent in the two volume categories what makes them so effective and efficient in the smartphone category? And why is there no other stats e.g. web stats or developers selling millions of units in app sales, etc that support this massive gain by Android? These numbers are very suspect.

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  • guestix

    Isn't Android somehow a platform for Java applications? So would those web browsing stats record the traffic as Java, not Android? Just wondering.

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