Estimating Samsung's smartphone mix

Samsung no longer reports mobile phone shipments. The company’s phone market performance reporting is limited to the following:

Shipment : High-20%↑YoY (low-20%↑QoQ)

ASP : Slight increase QoQ

As the company did not report volumes or ASP last quarter either, the QoQ (Quarter on Quarter) growth estimates are almost useless. The only fragment that might be useful is the “High-20% YoY” given that they did publish units for Q3 2010: 71.4 million. This leaves the question of what “High-20%” means. Here are some ranges and what the result would be:

  • 92.1 million assuming 29% YoY growth
  • 91.4 million assuming 28%
  • 90.1 million assuming 27%

The “best guess” might be 91.4 million.

As the company also provides revenue for its mobile division (14.42 trillion Won) we can therefore estimate the average selling price: $142. Is this a slight increase? By a similar approach, last quarter’s ASP was $139, and assuming exchange rates did not vary widely, this increase is small enough to be called “slight”.

We also have a figure for the operating margin for the entire Telecom group (16.9%) which gives an operating profit of $2.2 billion.

The last piece of the puzzle is the number of smartphones Samsung shipped. Samsung said smartphones grew “more than 300%” year over year. That would imply 31.4 million. One estimate is from Strategy Analytics that suggests 27.8 but it’s coupled to an overall volume estimate of 88 million (well below the 91.4 million estimated above). The Wall Street Journal published an estimate of 28 million.

I have no idea how to narrow down this estimate, but if we go with the one that claims the highest precision (27.8 million) we get an estimate of about 30.4% of Samsung’s volumes being smartphones (what I call the “smartphone mix”). That is an interesting basis for comparing Samsung’s smartphone business to other companies’ smartphones. I prepared a graph showing how pricing is affected by the increasing mix of smartphones in vendor portfolios.

What the graph shows is the movement of prices as companies have increased their smartphone mix since Q1 2009. For example Sony Ericsson moved from 31% smartphones to 80% smartphones in about a year. Their ASP increased from $184 to $231. Some companies have not changed their mix. Apple, HTC and RIM have maintained 100% smartphones in their portfolios so their pricing has been consistently high ($650, $354 and $357 over last 12 months, respectively). Conversely, Nokia has struggled with its smartphone portfolio and as a result its pricing has remained stubbornly clustered below $100.

But the most interesting companies to watch are Samsung, Sony Ericsson and Motorola. You can see how their “vectors” or price migration point toward the sweet spot where HTC and RIM reside. Ideally, they would be very much better off with pricing in the $300 range.

Samsung is moving quite rapidly toward the sweet spot but the slope is not as steep as the others. That’s may be because SE and Motorola have much smaller volumes but it’s still an open question why, with an estimated 30% mix of smartphones, the pricing remains $60 lower than when Motorola was at the same mix or $40 lower than Se.

Some of the answer might be due to the number of “low end” smartphones (Bada?) that Samsung is selling or maybe their non-smartphone pricing is trending down a lot more rapidly.

Keep in mind that if we change the assumption of the number of smartphones to a lower number (i.e. below 27 million) then the trajectory of the Samsung line in the graph would increase and may match more closely the slope of the other two vendors.

I don’t have any reason to believe that it’s lower than 27 million but I don’t have any reason to believe that it’s above 27 million either. It’s an estimate.

If we believe it then we have to say that with a near tripling of smartphone mix (from 11% to 30.4%), the company grew its overall units by 28% and its revenue by 39% and pricing by 17%. Profits also grew by 130%.

It would follow then that switching to a 100% smartphone mix would make a lot of sense.

  • Horace,

    Great work!

    I am amazed how you can take a few [intentionally] obscure numbers, relate them to other known numbers, add some logical assumptions — and tease information out of the whole.

    This is very useful information — and reliable enough to gain a perspective of what Sammy is attempting to do.

    Is there any information about brand loyalty when changing from a feature phone to a smart phone? Said another way, is it in Sammy’s interest to continue selling feature phones and benefit by providing an upgrade path to Sammy smart phones?

    • GeorgeS

      I wonder how many people–if any–actually seek out a Samsung (or HTC, Motorola, LG, etc) phone because of “brand loyalty.” The few conversations between shoppers and salespeople I’ve overheard have seldom mentioned a brand, at all, except BlackBerry and iPhone. The others are just “Android phones.” (Before someone mentions “Droid,” remember that “Droid” is a trademark owned by Verizon, not by any manufacturer.) More often, the discussion starts with what carrier the customer is currently using. That’s how the displays at Radio Shack, Wal-Mart, Target and Best Buy are arranged, not by the phone brand.

      As an interesting sidelight, few phone sellers (other than the carriers’ own stores, e.g., ATT stores) I’ve visited have actually had an iPhone on display. They may have dozens of other phones, but no iPhone, though there may be a poster showing the iPhone. This may be because customers ASK for the iPhone or, more likely, because the stores (and sales staff) get more commission from selling Android phones. I have noticed that the salespeople steer customers to Android phones. I’ve heard several try to dissuade customers who specifically asked for the iPhone.

  • Luis Alejandro Masanti

    I think this are devices shipped not necessary sold to customers.

    On the other hand, considering how foggy are Samsungs words and practices, “High-20%” could be “24-25” or even less.

    But, as dicklacar put it, your work is great.

  • As the numbers from Strategy Analytics could very well be inflated, it’d be interesting to see the exercise follow through from your reasonable estimate based on Samsung’s stated growth of more than 300% (perhaps an accidentally accurate admission?). 23.5 million phones shipped would seem more in-line, and would have an interesting impact on your other calculations. It’s still a great number for Samsung, though the shipped versus sold question always nags. Either way, I don’t doubt Samsung’s selling more smartphones than ever.

  • Anonymous

    It would follow then that switching to a 100% smartphone mix would make a lot of sense.

    Certainly from the perspective of ASP, but if memory serves several of the firms in question seem to have lower profit margins on their smartphones than on their feature phones. We’ve just seen Nokia profits recover with improved feature phone sales, Sony Ericsson also seems to have lost income even as smartphone mix has improved. The lower end of the smartphone business may actually be more cut-throat than the upper end of the featurephone business.

    • But the upper end of the featurephone business is evaporating.

      Sony Ericsson and Motorola are about to disappear into the bowels of other companies, and their courses as independent companies have ended. Vultures are also circling around LG. The only viable remaining incumbents are Samsung and Nokia. It will be interesting to watch how they pursue differing strategies.
      From one point of view, Samsung is racing very rapidly to become a smartphone company while Nokia is hedging or perhaps suffering from a painful delay in transition.
      My assumption is that it will be much more tempting to go all-in with Smartphones and abandon featurephones to the unbranded “others”.

      • Anonymous

        That is certainly the trend that the industry is taking, but how much of that is real? So much of it depends on exactly what constitutes a smartphone and what constitutes a featurephone. Is the Nokia Asha really a smartphone? Is their ‘next billion’ project utilizing Linux really a feature phone? Should we really count Symbian or Bada as smart? Where increasing ASP is coming with reduced margin something is clearly going wrong, and I think it’s worth watching out for those cases.

        I do really like the graphs though, it would be really interesting to see that first graph presented as a 3D plot, with time on the additional axis.

      • Luis Alejandro Masanti

        “So much of it depends on exactly what constitutes a smartphone and what constitutes a featurephone”

        Maybe the answer is in Apple’s strategy: There are no feature phones, only “New smartphone,” “Last year smartphone,” “Two years before smartphone.” (a.k.a. 4S, 4, 3GS)

      • Anonymous

        That works for Apple, but Apple’s business is completely unlike every other smartphone OEM so it’s hard to imagine it working for anybody else except maybe RIM.

      • Anonymous

        The answer is to do what Tim Cook did at his last presentation: talk about “phones” and “the phone market.” Then you can say things like “Apple takes 66% if the profits in the phone market,” and “Apple has 5% market share in the phone market,” and “Apple sold n million phones this quarter,” they are meaningful, factual statements.

        If a 2011-2012 iPhone and a 2005 BlackBerry are both smartphones, it is a meaningless term.

      • GeorgeS

        “If a 2011-2012 iPhone and a 2005 BlackBerry are both smartphones, it is a meaningless term.”

        Good point. At one time, “smartphone” meant being able to get and send email and maybe have access to what Jobs called the “baby Internet,” plus have calendar & contacts. Despite BlackBerry fans’ claim that RIM “invented” the smartphone, Handspring’s (later Palm’s) Treo was earlier.

  • Walt French

    I’m interested in your take about Sammy’s disclosure practice.

    US investors have expectations of enough, and accurate enough information to make informed investment choices; that is tempered by the risk of giving competitors opportunities. But Samsung seems to be hiding its actual sales so as to promote a vision of success without investors being able to tell how much risk they face from Oracle, Apple or Microsoft succeeding in IP battles.

    Is it your opinion that these disclosure practices would fly in the US?

    • I don’t have any idea what is or is not acceptable. What I find interesting is that disclosure is increasing with some companies with Sony Ericsson and Motorola talking about smartphones with clarity. Also Nokia is exemplary in its details even giving out ASP for its smartphones and geographic sales data. RIM has regressed lately and Samsung has gone completely dark (they used to give at least volume data).
      I don’t know what motivates companies to hide information. Larger firms with resources may be able to get estimates and those results will be sold to competitors, so there are no competitive benefits. What benefits are there for keeping the average person in the dark?

      • Anonymous

        ‘What benefits are there for keeping the average person in the dark?’
        That’s a huge question with enough possible answers to fill a book.
        The most obvious answer, is to keep all your options open for current and future use in the public sphere. Doing so means you can say pretty much what you want, to get a message across ie. marketing strategy. With no real verifiable facts to get in the way, you can create your own reality and rely on analyst laziness and a motivated cheerleading fanbase to promote your message. This is something Apple indulges in with some product lines eg. iPods, Macs and iTV boxes.
        When the threat by competitors has been ameliorated and you are confident of holding on to your competitive advantage – you can make a big splash in the news with no embarrassing ‘facts’ historically speaking to dilute the message.
        I’m sure it’s not really this simple but Samsung does seem to be indulging in some selective reading of the Apple theory book.

      • Luis Alejandro Masanti

        ‘What benefits are there for keeping the average person in the dark?’

        Goebbels, the Minister of Propaganda of the Third Reich used to say:
        “Lie, lie, lie… always something remains!”

        Maybe that’s the reason why Samsung hides its data.

      • Anonymous

        [mistake] aiming for fring.

      • Anonymous

        [Third times the charm]

        Apple, I think, gives iPod and Mac numbers. And they’ve, IMO, set expectations for AppleTV. You can, I think, infer than AppleTV isn’t doing tremendous sales because Apple isn’t talking about it.

        However, considering that they give numbers associated with iPods, Macs, iPhones and iPads, I’m not sure what selective reading you are referring to. Where you have to guess is *how many* iPod touches to iPods classics or *how many” laptops to desktops.
        Apple does provide breakdowns for laptops and to some extent, iPod Touches.

      • Apple is shy about Apple TV and only mentions iPod touch numbers as “above half” of all iPods. However, these are not the biggest drivers of volume or value at Apple whereas mobile phones are increasingly the most important business at Samsung.

      • Anonymous

        Shy is a funny word for ashamed.

      • I did not mean to imply shame as the word shy does not mean shame. Shame implies feeling of having done wrong. I don’t believe they are ashamed as they continue to support and update the product even after nearly five years in the market. Having done wrong would imply they would have withdrawn it years ago. The company refers to it as a hobby. I cannot imagine how they can imply being ashamed of a hobby. By shy here I meant to imply coy.
        It’s also not true to suggest that Apple has not revealed any information about sales. Like Samsung they give fragments of data. For example, The second generation sold 250,000 units in the first two weeks it was available. On December 2010, Apple announced that they had sold 1 million units. In the second fiscal quarter of 2011, it had sold 2 million in total, with 820,000 sold in that quarter alone.

      • Your expression was fine, Horace. Shy describes a behavior, ashamed describes a feeling. I believe the “misunderstanding” is due to our friend deV14nt wishing to ascribe emotions to companies. Or perhaps his reading comprehension is not sophisticated.

      • Anonymous

        Give it a rest. “Shy” was not the appropriate word. It was a perfectly good jab at the biased tone around here. Enough said.

        If you’re so high class, why do you feel the need to come here and try to cause trouble when its uncalled for?

      • Anonymous

        In comparison, Samsung sold 2 million SmartTVs with Google in its first 2 months.

      • jawbroken

        “with google”? I don’t really know what you mean by this because their Smart TV seems almost entirely unrelated to google. I guess you can probably watch youtube video on it, that seems like the closest it gets. Samsung was going to get into Google TV but as far as I know they never released a product because of the horrible reception of Google TV in general.

        You can’t separate the people buying these to act as simple televisions vs “Smart Televisions” anyway so the comparison is suspect and likely irrelevant.

      • Anonymous

        Huh. Looks like you’re right. Their apps and smart hub looks a lot like Android and their ads show couples using a Samsung Android phone to control the TV, so I assumed it was based on Google TV. Apparently they’ve been considering switching to an Android-based platform, but currently use their own platform instead. Well, I guess they’re doing well with their own platform then.

      • jawbroken

        Seems sure that they outsold Google TV, and very likely they outsold Roku boxes and I can’t find any good numbers on Boxee boxes.

        Not much to be ashamed of in comparison to competitors in that market, just in comparison to Apple’s other product lines, I guess.

      • Anonymous
      • Anonymous

        I know. I mentioned that in a post that somehow went to moderation.

        Only Apple could make people like you believe that was their intent when they invested money into that project.

      • Anonymous

        I know. I mentioned that in a post that somehow went to moderation.

        Only Apple could make people like you believe that was their intent when they invested money into that project.

      • kevin

        Apple used to provide units for each Mac line (iMac, Mac, iBook, Powerbook) when no other company did. And then they changed to provide the level of insight that the others did.

        For iPods, very few of their competitors ever even released units sold. Quick, how many Zunes were sold? Plus, Apple still gives an approximate level of iPod touch compared to other iPods.

        Apple gave units for AppleTV at the very beginning, but it turned out to be low, and total revenue was negligible compared to its other products. It’s known by all that it’s never been material.

        So again, not sure what you see as the “Apple theory book”.

      • Anonymous

        On second reading, I wasn’t clear in my meaning.
        I meant to point out that Apple does dissemble, to a degree, about the actual sales spread in those categories. Ie iPods as a whole, rather than each model; Macs where only total sales are reported EDIT..seems I was wrong there – and the Appletv where they report nothing at all. Just as Samsung is not reporting seperate smart/dumb phone shipped numbers – let alone, sales.
        I then jokily suggested, though obviously poorly, that since it seems to work for Apple, that maybe Samsung was borrowing(again) something from the Apple ‘theory’ book – be it PR, Marketing or whatever.
        I’ll get my hat.

      • Anonymous
      • GeorgeS

        That was a one-time number, 10 months ago. Apple doesn’t say in which category it includes revenue from Apple TV sales. It may be in “Peripherals and Other Hardware.”

      • Anonymous

        Perhaps the question is better put the other way around, what is the benefit to a firm from revealing accurate numbers and thus giving out valuable market intelligence? The obvious answer is that it benefits investors, but Samsung is a chaebol – it has far less concern over considerations such as share price or market cap than a western firm.

      • Revealing your performance is a powerful signal. Not only of your own reliability but if you consider your products as platforms it signals to the whole ecosystem that your platforms are sound.
        Case in point, Amazon not revealing any data about Kindle sales does not signal to me anything about whether I should consider their platform for publishing an eBook. How many readers am I supposed to imagine exist?
        Same question to Samsung about Bada. Why should I develop for their platform if I don’t know how many users they have.
        This is most peculiar with respect to Google. Why don’t they have a web site showing real time stats on how many Android users, where they are and so on?
        If I had a way to show that information about my site, I’d be very happy (I put out as much info as tools allow me to.)
        Do these companies really think they have an *advantage* in not letting anybody know what their performance is? I’ve never met anyone who admires a company that keeps its performance under wraps.

      • Anonymous

        Bada is an interesting case. On the one hand the more Bada numbers Samsung claim then the more apps will be developed for the platform. On the other hand, given its lower market positioning, the worse they will seem to be doing in the smartphone market. If I ran Samsung I don’t think I’d announce Bada numbers either.

        Kindle is a great example. Publishers don’t need to know how many kindle devices there are, they only need to see how high kindle content revenues are. eBooks are essentially platform neutral as it’s very easy for a publisher to convert ePub into Mobi. Announcing kindle sales numbers is only useful to Amazon’s investors and competitors.

        Google seems to like the PR potential of releasing activation numbers intermittently. They’re releasing activation numbers roughly every quarter, which is after all how often we get numbers from Apple. Google certainly could give us more data, but then Apple could also give us specific model sales numbers broken down by market – they could give us the number of active devices (which they’d know due to the push notification service which all ios devices connect to).

        There is always more data to give, and obviously that data has value – to partners, to competitors and to investors. For Samsung neither partners nor investors are relevant, so their main consideration is competitors. For most everybody else it’s a balancing act.

      • AB

        The real question is who is this information for? Customers don’t care how many smartphones Samsung has shipped. It may make the analysts life easier as they have information direct from the source but then the flip point is they can’t now add their value added in estimating the numbers! For Android developers it makes not a jot of difference as there are enough data points out there in regards to Android market share. Perhaps for Investors it may make some interest but then if I was an investor and the data was not made clear by Samsung would give me an incentive to find out and see if I could glean an advantage – having all data publicly available reduces the scope of information asymmetries which can be exploited by canny investors.
        So to summarise I don’t think its as clear cut that you can read into it that the lack of disclosure is due to less than stellar performance.

      • The mystery is precisely why companies with stellar performance choose not to make it public while companies with poor performance are happy to do it.

      • Anonymous

        A cynical interpretation of this line of thinking, or not cynical depending on where you stand, is that companies want to control their future guidance.

        Knowing the performance of individual product lines and services can give investment analysts a leg up with their predictions and let the analysts determine how conservative guidance is.

      • GeorgeS

        “How many readers am I supposed to imagine exist? ”

        Good question, though Amazon also claims that it sells more Kindle books than paper books. That may include “Kindle singles” and perhaps free books–there’s no way to know.

        Amazon may find itself in a bit of trouble over reporting Kindle sales numbers. Amazon uses their claim that the Kindle is their best-selling electronics item (or even best, overall) not just in their “best-seller” lists but in their advertising. As that is a factual claim, rather than an opinion, they may have to back it up with actual numbers if the US Federal Trade Commission asks.

      • Ab

        Horace if I am correct Apple does not split out its Ipod sales from the Ipod Touch and other variants. Ipod sales are declining and understandardly so but I wonder just how fast Apple is cannibalizing its own Ipod Touch sales.

        The only indication I have of the total amount of Ipod touch sales is 60 million in its lawsuit re Samsung

        “as of March 2011,” the company had sold more than 108 million iPhones, 19 million iPads, and 60 million iPod touch units.

        In the 2 quarters since it has sold 7.54m Ipods in Q3 and 6.62m.

      • Apple does not specify iPod touch but they do state that they make up more than half of iPods (Tim Cook during conference calls). They sometimes give updates of total iOS units sold and we can thus derive iPod touch based on the other products being known. I’ve been able to get good enough estimates of iOS volumes on a quarterly basis.

      • Anonymous

        It prevents litigants from calculating the value of your infringement.

      • But I’m sure they would be required to submit that information to the court in case of a judgement against them.

      • Anonymous

        Thanks, I was just trying to be a bit of a smart aleck or wiseacre.

  • Anonymous

    [mistake. Moved to fring]

    • Apple publishes a breakdown between Mac portables and Mac desktops.

      • Anonymous

        I meant for this to go to “fring”, located just above this, thanks for the clarification.

  • kevin

    Interesting analysis.

    I think I’ve seen Samsung use the term “very high” in their documents, so I’d put “high” at between 27 and 28% or between 90 and 91 million units.

    By the way, do you have a reference/link to where Samsung said that smartphones grew by more than 300% yoy?

    • I had to Google the phrase once it came up and found several news articles that mention it, but I did not track down the original reference. Curiously, Canalys released a report that claims Samsung smartphone shipments increased by 252%. They also say that Samsung shipped 500k phones under other brand names meaning that the total growth was perhaps above 300%.
      Regarding “high” vs. “very high”. The company sometimes used “mid” x% and “low” x%. So I simply assume that mid is 4,5,6, high is 7,8,9 and low is 0,1,2,3.

    • Sam

      The quote comes from here, in the section titled “Record Profit Driven By Smartphone Sales Growth”:

      Samsung Electronics Announces Third Quarter 2011 Results

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  • Luke Lin

    up 300% yoy —> 7.81M (Q3’10) x 4=31.24 M, if the sales means shipment.

    • You’re right but two analysts so far (Canalys and Strategy Analytics) have suggested that the total is 27 to 28 million. I continue to be mystified.

  • Billy

    Hey Horace, HTC isn’t 100% smartphone anymore. They sell that brew phone the HTC Freestyle too.

    • Yes, good point. They have done this sort of thing before. I would be happy to separate that out but I’m forced to ignore it for now since I don’t have any idea of volumes. (Is it safe to assume them to be immaterial?)

  • Anonymous

    The Samsung numbers are all crap. They are not worth our time. Samsung has a massive channel, and a massive history of channel stuffing and of lying about their numbers. A large number of those phones were sold in the following quarter, a large number are still on shelves.

    • Anonymous

      This is doubtful. You can only stuff the channel for a quarter, maybe two. Eventually, the numbers will catch up, fire sales must ensue to clear the channel/inventory, and production must be slashed.

      They will eventually pay for it if this is what they are doing. I doubt that’s what they are doing.

      We all agree that the Samsung numbers are all crap as they are not actual numbers. They are just estimates from analysts based on scraps of informations from Samsung.