The violence with which new platforms have displaced incumbent mobile vendor fortunes continues to surprise.
- Nokia’s Symbian platform has gone from 47% share to 16% in three years
- Microsoft’s phone platforms have gone from 12% to 1%
- Other platforms have gone from 21% to zero
- Although far less dramatic, RIM’s decline from 17% to 12% is causing acute pain and anxiety
This while entrants have grown share in spectacular fashion:
- Android from zero to 48% (A two year period)
- iOS from 2% to 19%
- Bada from zero to 4% (two quarters only)
The picture of platform share over time looks like this:
Nearly all the data on smartphone shipments is now available for the second quarter 2011. Some fragments are still not public, including ZTE and Huawei (and any others) shipments. We also have estimates for the various platforms including an estimate for Windows Phone and Bada (though not for WebOS).
This allows the following chart:
Using the traditional color scheme which separates “integrated” from “modular” vendors, the chart shows overall volume growth and how the volumes are split among vendors.
The market grew at about 73% y/y and 50% compounded over three years and 9% sequentially. The y/y growth rates for individual vendors were:
Steve Ballmer stated and Andy Lees confirmed that Microsoft views iPad and other tablets as “just PCs”. From a market measurement point of view Canalys agrees. IDC and Gartner don’t, calling the new devices “media tablets.”
Before deciding whether tablets belong with PCs in market metrics, it would be interesting to look at what the data shows. When seen as a combined market, the focus should be on platforms. The following chart shows the four main PC+tablet platform volumes since late 2008 .
The second chart shows the same data as share of total market:
In the last post, I highlighted the difference between smartphones and non-smart device sales last quarter. The trajectory of share growth for smart devices would appear to have accelerated due to Android.
The following charts show the evolution of smartphone vendors and platforms over the last few years.
Like in the past, I used color clustering to show the separation between “integrated” (in green) and “modular” (in brown) platforms and their users.
Unlike the non-smart market where “other” make up 30% of the market, smartphones are still a big brand business. “Other” make up only 11% of units. and that number has been trending down. It would seem that the age of unbranded Android phones is still not upon us.
Comparing three years “before and after” here is Q1 2008 vs. Q1 2011 by vendors share:
Until the iPhone’s arrival in 2007, upgrading the software on a mobile phone was a rare experience for users. So rare that effectively it was not done. Few people were bothered though since they did not see the product they used as a software product.
This was even true for Windows Mobile and Symbian which were licensed platforms. Microsoft tried several times to offer upgrade paths, but more often than not the device vendors did not push out updates or the process required to perform an upgrade made it the reserve of either those who were paid to do it or those who enjoyed the challenge.
In the era of the modern smartphone, upgrades are more common. Certainly with the iPhone the process is easy enough that opting out of an upgrade is more challenging than opting in. But it’s still not as common with other platforms. Even with all the resources and experience behind them, Microsoft is still stumbling with Windows Phone upgrading.
UPDATE 1-Microsoft explains phone software update delay | Reuters
But is it really a matter of blundering or is there evidence of nominal partners working at cross-purposes?
Michael DeGusta created beautiful and informative charts on how The Newspaper Business Implodes.
With charts, he also told the story of how the recorded music industry followed a similar path:
Who is Winning the U.S. Smartphone Battle? | Nielsen Wire.
This is a great chart from Nielsen showing the split in manufacturer share by OS in US installed base. What I consider significant is how the modular software platforms Windows Mobile and Android worked out for the licensees.
Whereas in the case of Windows Mobile HTC took a significant, nearly dominant share, the Android ecosystem was more balanced between HTC and Motorola. However, HP and Motorola left the Microsoft camps, Motorola going exclusively for Android and HP buying Palm. That leaves Microsoft with HTC, Samsung and Other (mainly LG I presume).
The question of how Windows Phone will shape up vs. Windows Mobile and Android remains. Motorola has signaled they are not interested in WP7 for the time being and so it’s likely that they will stick with Android. Samsung is always hedging its bets so it will probably balance its portfolio. One could conceive of Nokia stepping into the US with significant WP volumes, but there are many hurdles on the way.
One can see the challenge individual modular vendors have to edge the overall volumes of the integrated vendors. As Nielsen points out:
But an analysis by manufacturer shows RIM and Apple to be the winners compared to other device makers since they are the only ones creating and selling smartphones with their respective operating systems
Not only are the volumes higher, but so are the margins and hence profit share.
Vic Gundotra of Google tipped off the world two days in advance that on Feb 11 Android would play no part in Nokia’s strategy. To be sure, Elop said that Nokia didn’t choose Android because of “differentiation challenges and commoditization risk” (begging the question of how these challenges and risks are mitigated by licensing another openly available OS).
But I won’t weigh the merits of one module vs. another. Rather, the more pertinent discussion should be on why license instead of build. Clearly, Nokia threw in the towel. Not because they could not build, but because their building processes could not create greatness.
But can greatness ever come from modularity? I’ve argued that it can’t. I’ll maintain that argument as long as what is being built is not good enough. In other words, as long as innovation remains relevant, improvements will be absorbed and rewarded. Once innovation exceeds what can be absorbed, the basis of competition will shift to convenience and price which are best served with a modular business architecture.
Android is a fast follower. The first Android prototypes looked like Blackberries because that was the input paradigm of 2006. When capacitive touch was shown to be a better input method, Android reacted swiftly. When app stores created a new medium Android reacted swiftly. When the iPad demonstrated that computing can be done in new settings, Android reacted. At such time when there will be nothing to follow Android will be the king of the last commoditized innovation, but as long as there is something worth inventing Android will be there to reproduce it.
This is not a judgement, but an observation: Nokia and Microsoft may not make an Apple but neither will Android ever create the future.
The smartphone market grew to about 100 million units last quarter. That’s nearly double what it was a year earlier and triple what it was three years earlier, the year the iPhone made its debut.
Few markets grow this quickly, especially as this tripling happened during one of the worst recessions for a century. 100 million units a quarter is not a small number. The rate at which smartphones are growing makes clear the trajectory of where all phones are going.
As I’ve shown in profitability charts, vendors have been benefiting to differing degrees. The overall smartphone market with individual vendors is shown below:
And so we come to the question of Chrome and H.264. First off, it should be clear that video codecs are infrastructural technology. They are commodity algorithms which are generally invisible to users. They are ubiquitous and are “shared” in the sense that they are available for licensing often without much in terms of cost.
So they don’t really offer strategic advantage to the adopter. Some may end up adding slightly more to a cost structure than others, but not in a way that determines strategy.
Flash on the other hand is not infrastructural. It is not shared, it is not invisible to users, it is a brand, it has a significant business model and market value. It is sustaining to Adobe.
So the argument I’ve heard against Google’s decision is that they are using an infrastructural technology decision (a new video codec) to placate or sustain Adobe Flash, at the expense of Apple, a potential or perceived rival.
If this was the plan, it would be a strategic mistake.