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Ascent of the entrants: Taking food from the mouths of giants

Revenues for the eight phone vendors I track increased overall during the last three years. The compounded annual growth was about 13%.  However the growth was not evenly distributed. The following chart shows revenue growth across three time frames: Three year compounded, year/year quarterly and sequential quarterly.

I separated the incumbent companies from the “entrant” smartphone vendors for contrast.

Looking at individual performance, the following chart shows how each vendor performed over time:

The share of revenues is shown in the following chart (I highlighted the smartphone cohort):

The ascent of the entrants is shown in the league table below:

The headline that Apple became the biggest phone vendor in the world by revenue has already flashed across the feeds of the world. It’s another straw on the camel’s back. But I’d like to take a moment to note that this is not just an Apple story.

If you look at the league table, RIM, HTC and Apple were at the bottom three years ago and now they are either in the top or the middle. RIM in particular deserves credit for reaching the fourth spot and staying there. HTC also has shown a late surge to fifth passing LG, Motorola and Sony Ericsson in the process.

Combined, these vendors went from taking in about one dollar in 20 (6%) in Q2 2007 to nearly half the money (46%) in Q1 2011. As the market also grew, the total amount went up an order of magnitude. From $1.8 billion to $21 billion in three years. Not bad for niche players.

  • eyez00

    The Sales Share graph is particulary good imo. My vote for a T-Shirt!

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

      T-shirt was my first thought too when I saw the Sales Share diagram. I will purchase one!

  • asymco

    One footnote: note who Google is courting as customers among the companies charted.

    • Nrayanan

      What choice did they have? Plus the majors are the volume leaders and by roping them in, Google has achieved it's initial ambitions ie; establish a viable mobile platform with growing numbers. Credit is due for that.

      But AAPL has to go for volume sooner than later. Every Android sold is a missed iPhone sale for at least that buying cycle.

      • http://www.noisetech-software.com/Perspectives.html Steven Noyes

        I tend to agree. At some point, Apple needs to do a bit of a share grab.

        Take the iPhone 3G S and make an iPhone 3G S+. This would basically be:

        1) Put in the A4 processor. This brings in much better power management.

        2) Keep the same screen. This allows memory to go further. The lower resolution would allow the phone to be very fast as well.

        3) Take it to 512 MB.

        4) Keep it at 8GB or even 4GB of flash memory.

        5) Make it CDMA/HSPA+.

        6) Sell it for $50 subsidized.

        Basically, an iPhone 4 with a cheaper body and cheaper screen and less flash memory. $10 here, $15 there, $10 here. Pretty soon you are $50 cheaper to build the unit and that makes a HUGE difference. Based on how the $50 iPhone 3G S is doing on AT&T, this would mop up HUGE sales.

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

        I don't see why that is even relevant in the USA. Most of the cost of a handset is in the contract and those are the same regardless of the upfront handset price. Are people really bothered by $50 upfront when they're on contracts costing $1000s.

        Outside the USA though, yes, Apple could do with a cheaper handset to hit lower contract price points to compete against Nokias and Android phones like the ZTE Blades, HTC Wildfires and Orange SanFran.

      • claimchowder

        "Are people really bothered by $50 upfront when they're on contracts costing $1000s"?

        Seems like they are. Remember the 3GS outsells the best Android handsets, apparently because it's cheap upfront. I never understood that phenomenon either. Maybe people are unable to see the TCO because the sales guys are cleverly distracting them ;)

        Heck, some people would even buy an Android phone with a contract!

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

        Has anyone considered the possibility that the $49 iPhone 3GS outsells Androids (which are often sold at the same price) simply because it is an affordable iPhone?

        People want iPhones — just like they want premium cars (Audi not Chevy), premium television (Sony not Vizio), clothes (Gap not Walmart) etc. If they can buy the iconic product for the same price as a knock-off, why not buy the icon?

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

        It just seemed a bit silly to me for the US customer.

        In the UK it's a different proposition. The 3GS is around £10 a month cheaper for the same tariff and upfront cost. eg. £25 a month instead of £35.

      • chandra

        …..and the very popular prepaid option.

      • http://www.noisetech-software.com/Y.A.S.C..html Steven Noyes

        Are people really bothered by $50 upfront when they're on contracts costing $1000s.

        The short answer is: YES.

        This is why the B1G1F offers helped Android so much on gaining market share. In the states, the 3G S is still wildly popular and sells very well. A basic refresh to lower the price and improve the battery performance (the Apple A4 would do both) as well as add in CDMA would sell like hotcakes if the price was in the $350->$400 unsubsidized price points and free to $50 subsidized.

        At the same time, the hardware is not that bad. The A4 would provide a slight speed boost, it has the same ARM architecture, the GPU would be adequate for the resolution of the non-retina screen. Fragmentation would not be increased and it would be a perfect upgrade for people like my mom.

      • Ted Kluaf

        I think even more telling is that the ad-supported Kindle is outselling the wifi version. People will tolerate ads to save $25 bucks on a $140 device. People are universally cheap! The discerning buyer is the anomaly.

      • Hamranhansenhansen

        iPhone 3GS is already $49 subsidized in the US. A friend of mine got it on sale for $19. I don't see Apple extending the 3GS any further. I would be less surprised to see iPhone 4 8GB at free-with-contract.

        But a low-end smartphone is not just a cheaper phone, it often drops the data plan. It's the monthly bill that is the limiting factor.

        I disagree that an Android sale is a lost iPhone sale. It's a lost Microsoft or feature phone sale. A $500 PC sale is not a lost Mac sale, either. Now that we have iPad, a $500 PC sale could be a lost iPad sale. I expect there will be a low-end phone from Apple at some point that is to iPhone as iPad is to Mac: high end of the low end.

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

        A carrier may offer a free iphone with contract at some point, I imagine, but I don't think we'll see Apple endorse the idea. It’s very important to Apple that their products are perceived as valuable. "Free" undermines that perception significantly.

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

        The iPhone is already available for "free" in most of the world outside the USA.

      • Narayanan

        It is a lost opportunity because that cutomer is effectively out of the total customer pool for that cycle. This is for the entire market and not just for Apple or Android or Microsoft….

      • Drew

        The buying cycle is 1-2 years. I doubt buyers of low-end Android phones are locked-in to the platform.

        Why the focus on unit volume rather than revenue volume? What has Nokia accomplished as the unit volume leader? That said, I think Apple will introduce a lower price/higher volume phone within a year.

      • poke

        I think it matters for the platform. Right now iOS is still the biggest platform and is still by far the best platform if you're a developer but that could change in the future. Selling more units would extend iOS dominance.

      • nns

        iOS isn't the biggest platform by any stretch of the imagination. Apple's done very well, but let's not get carried away here.

      • bbh

        not by a stretch of imagination, but by actual facts.
        look at installed base fo mobile os as an application platform
        the apple app store dwarfs the other not just in # apps (which is does)
        but far more importantly in revenue. and then remember that iOS is not
        just iphones, but every ipod touch and ipad as well.

      • http://noisetech-software.com/Y.A.S.C..html Steven Noyes

        Symbian beats it but it is a dead platform with Nokia saying buy-buy to it. Android just past 100,000,000 activations while the iPhone alone past that point a few months back. Add in the iPod touch/iPad and iOS is around 180,000,000 units.

  • Rob Scott

    HTC is an incumbent, they were making 80% of Microsoft Windows Mobile phone a few years back. They have been in the business for years.

    Your footnote is probably the most important observation, Android is not doing much for these OEMs. Most people are not seeing this, the only time it will be apparent is when we stop talking about smartphones and start talking about phones. It is only then that people will start appreciating the iPhone and understand Android correctly.

    • asymco

      HTC is a hybrid. Yes, it has been building phones for a while but it was an ODM and not a brand until about 2005 or so. Their roots were in PDAs and not in traditional telecom. Consider how many of the incumbents also built network equipment or had legacies of close ties to the operators.

  • claimchowder

    Apple's growth especially in the third graph looks very convincing. Apple is only in the high end subsidized market so far. Now remember what Tim Cook said during the earnings call, when asked about prepaid or low-end iPhones: "we're not going to cede any market".

    That must have sent shivers down Samsung's spine. And HTC's. And Nokia's (oh, almost forgot: they don't have a spine ;)

    • Divebus

      " (oh, almost forgot: they don't have a spine ;) "

      HA! You owe me a keyboard!

  • George Slusher

    A generally great article, but I'll pick a bone with the first chart. It's misleading to compare percent changes when the denominators are very different. It's a lot easier to show high growth rates when starting from small numbers. (I know that Horace is well aware of this, of course.)

    • asymco

      Which is why the first chart is not the only chart.

  • MFR

    I think Eric Raymond has much more intuitive graphs. Previously he showed that Apple maintains a very consistent market share of about 25% for about the last 14 months. And this is coming from a guy biased towards Android. Don't take my word for it read it for yourself:
    http://esr.ibiblio.org/?p=3240

    • http://noisetech-software.com/Y.A.S.C..html Steven Noyes

      He still falls into the trap of most Android fans of comparing a phone to a platform making most of his analysis warped.

    • Drew

      Analyses and graphs of iPhone (one phone) vs Android (mobile OS with hundreds of phones) are commonplace. Horace is one of a few who bother to look at revenue and profit share of the mobile phone industry. He provides a much more comprehensive and accurate analysis of the industry.

      If you want to examine Android vs iOS, then you obviously need to factor the iPad and iPod touch. Does Eric have a graph for that? Trust me, it won't show Apple with 25% unit marketshare.

    • asymco

      I don't know if you are referring to the one chart Eric is showing on that page, but that's only US data (comScore). Global platform share data is coming next week.

    • timnash

      comScore uses 3 month trailing data for the US. Eric's charts use the data for the 3 months up to the beginning of March. This means only February sales for iPhone on Verizon are included. NPD found a decrease from 53% to 50% in Android smartphone marketshare for the March quarter, which includes 2 months of iPhone on Verizon.

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

    Good stuff… Especially like the first plot. I will re-use that one (properly sourced of course)

  • Rory

    Since I know you appreciate constructive criticism: it would be a lot easier to follow multiple charts if you used consistent color labels on all of them. e.g. if Apple is red in the top chart, it should be red in the next two charts as well. Keeping it consistent makes it much easier to see how one chart compares to another, particularly when companies are performing well by one metric but poorly by another.