Global Smartphone Market Outlook - ITFIND · • Nokia and Motorola captured almost 60% market share by volume in Q4 2006. • Before 2007, all feature phones looked similar, but

1 1

Strategy Analytics Insights on the Global Digital Experience

Global Smartphone Market Outlook

October, 2013

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Agenda

1. Introduction;

2. Global Mobile Devices Outlook

3. Saturation of High-end Smartphone Market

4. Growing Demand for Smartphone In Emerging Markets

5. Vendors’ Strategies to generate profits;

6. Summary & Recommendations.

3 3

GLOBAL MOBILE DEVICES OUTLOOK

Annual Global Feature Phone & Smartphone Shipments (2011 ~ 2015)

Services: Wireless Device Strategies (WDS) / Wireless Smartphone Strategies (WSS)

GLOBAL FEATURE PHONE / SMARTPHONE SHIPMENTS (MILLIONS OF UNITS)

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2011 2012 2013 2014 2015

490.5

700.1

1004.8 1187.0

1498.4

1055.5

879.9

669.2

583.0

344.3

Feature Phone

Smartphone

5 5

Global Feature Phone & Smartphone Shipments Growth YoY (%)

Global Feature Phone/Smartphone Shipments Growth YoY (%)

-40%

-20%

0%

20%

40%

60%

80%

100%

2010Q12010Q22010Q32010Q42011Q12011Q22011Q32011Q42012Q12012Q22012Q32012Q42013Q12013Q2

Smartphone Growth YoY Feature Phone Growth YoY


Historical benchmarks indicate that feature phone has gone through minus growth from 2011 while smartphone remains 40% to 50% in terms of annual growth rate;

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Global Handset Shipments by Quarter

• The feature phone market is slowing, as expected, while smartphone growth in

global market is contributing to the flattening global handset shipments.

• We expect an LTE-driven 4G recovery from 2013/2014 onwards.

Source: Wireless Device Strategies (WDS) service

7

The Handset Market in Review - It is a Mixed Regional Picture Today

Global Handset Shipment Growth by Region: Q2 2013

Percent Growth Year over Year

Service: Wireless Device Strategies (WDS)

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The Smartphone Market in Review – It is growing in all regions today

Global Smartphone Shipment Growth by Region: Q2 2013

Percent Growth Year over Year

Service: Wireless Smartphone Strategies (WSS)

9

Global Smartphone Vendor Share by Region in Q2’13

• The Chinese vendors, like Coolpad, are becoming big at home, but still small abroad;


Q2 2013

Global Smartphone Vendor Market Share % N America W Europe APAC CALA CE Europe AME Total

Samsung 34.7% 42.6% 23.9% 39.7% 44.3% 63.2% 32.6%

Apple 31.8% 19.0% 8.5% 7.4% 10.4% 7.9% 13.4%

LG 9.8% 6.7% 1.5% 16.6% 6.1% 1.8% 5.2%

ZTE 3.8% 1.2% 7.3% 3.5% 0.9% 0.9% 4.9%

Huaw ei 2.7% 1.5% 7.5% 1.3% 1.7% 0.9% 4.8%

Lenovo 0.0% 0.0% 8.6% 0.0% 2.6% 0.9% 4.6%

Coolpad 0.0% 0.0% 8.6% 0.0% 0.0% 0.0% 4.4%

Sony 0.3% 8.6% 3.2% 4.8% 13.9% 1.8% 4.1%

Nokia 1.4% 5.8% 1.9% 6.1% 7.0% 4.4% 3.2%

BlackBerry 2.9% 4.9% 1.1% 5.2% 0.9% 11.4% 2.8%

HTC 3.2% 4.3% 2.5% 0.0% 5.2% 0.9% 2.7%

Motorola 3.2% 0.6% 0.5% 7.0% 0.4% 0.4% 1.5%

TCL-Alcatel 0.3% 3.1% 0.8% 4.4% 1.7% 0.9% 1.5%

Pantech 1.0% 0.0% 1.4% 0.0% 0.0% 0.0% 0.9%

Sharp 0.0% 0.0% 1.0% 0.0% 0.4% 0.0% 0.6%

Fujitsu 0.0% 0.0% 1.0% 0.0% 0.0% 0.0% 0.5%

Panasonic 0.0% 0.2% 0.2% 0.0% 0.4% 0.0% 0.1%

NEC - Casio - Hitachi 0.3% 0.0% 0.2% 0.0% 0.0% 0.0% 0.1%

Others 4.6% 1.4% 20.3% 3.9% 4.0% 4.8% 12.2%

Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

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Smartphone Sales by Country in 2017 - Preliminary number

330

165

100

51 4934 29 28 26 25 16 12 11 10 9 20

50

100

150

200

250

300

350

China

USA

Indi

a

Bra

zil

Japa

nUK

Ger

man

y

Sou

th K

orea

Mex

ico

Franc

e

Spa

in

Arg

entin

a

Colom

bia

Egy

pt

Polan

d

Tunisia

Millio

ns

of

Un

its

The USA will remain the world’s most influential supply-side smartphone market

Mexico, Brazil & South Korea quietly becoming a more influential countries

China exceeding everyone’s expectations, due to subsidies; India to follow?

Global Smartphone Sales Forecast by Price-tier

11

• The market share for Premium and High-tier segments are slowing down while the bottom three tiers are growing, leading to the limited profit generation.

• The top two tiers dominated by Apple and Samsung are getting more intensified by 2nd tier groups as the innovation in H/W and S/W is reaching the ceiling.

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SATURATION OF HIGH-END SMARTPHONE MARKET

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USA Smartphone Sales by Wholesale Price-Tier : % of Total


The premium smartphone percentage will be on the decrease thru 2016/2017 while the relevant market size by volume will hit the summit in 2014/2015 timeframe.

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Korea & Japan Smartphone Sales by Wholesale Price-Tier : % of Total


The premium smartphone percentage will remain almost flat thru 2016/2017 while the relevant market size by volume will hit the summit in 2015/2016 timeframe.

15 15

WE Smartphone Sales by Wholesale Price-Tier : % of Total


The premium smartphone percentage will drop by 15% between 2013 and 2016 while lower-tier devices will increase their presence over years.

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Saturation of High-end Smartphone Market

• Cyclical nature, intensified competition with chasing 2nd groups, limited room for

growth in high end markets, higher SP penetration, flattening innovation, trend

towards low-end smartphone, operators’ reluctance for more subsidy…. The stake

is how players differentiate their products with cool services.

Initial concept, Popular in

emerged markets for high

price by replacing FP &

Nokia/RIM SP

Alternatives to Apple,

Grow market share

by H/W, distribution

& marketing

Dominate high-end

markets until the SP

penetration reach

60~70%

2nd groups chasing

the leaders with

diverse products &

differentiators

iPhone fatigue &

Galaxy fatigue,

remaining users are

split.

Strong demand for low-end

SP in emerging markets while

penetration in emerged

market exceed 70~80%

Intensified competition for the

narrower high-end market

leading to price war and

segmentation, if not with

influential differentiators

Market Saturation

2007 2010 2010~2013/14

2012 ~ 2013 ~

2013? 2014?

17 17

High end Smartphone Saturation leading to Market Segmentation (being pioneered by Samsung)

• Super Phablet, Phablet, Flagship, Water/Dust-proof, Imaging, low-cost, Flexible

Display, etc…. Flexible display and wearables expected for better margin. But how?

• Bad for profit generation for all involved players, but when driving out all the

competitors in each segment, the remaining one or two would dominate the profits.

Super Phablet (> 6”)

Phablet (5” to 6”)

Flagship

Water/Dust proof

Imaging

Low-cost

Flexible Display

Wearable devices

Galaxy Mega

VS

Galaxy Note III

Galaxy S4

Galaxy S4

Active

Galaxy S4

Zoom

Galaxy S4

Mini

Galaxy Note III?

G2

Xperia Z Ultra

iPhone 5S

Xperia Z

Lumia 1020

HTC One mini &

iPhone 5C

LG, Apple

Sony, Google, Apple Galaxy Gear

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How Feature phone market got segmented in 2007 - Music/Messaging/Camera/Design

• Nokia and Motorola captured almost 60% market share by volume in Q4 2006.

• Before 2007, all feature phones looked similar, but Nokia and chasing groups

focused on segmented products (chocolate phone) while Motorola got lagged behind.

• Segmented products didn’t last long, leading to the overwhelming market reaction to

iPhone, the symbol of innovation, from 2009/2010 onwards.

Source: WDS (Wireless Device Strategies) service

• The same formula could be applied to the current high-end smartphone market.

• The key to survival would be differentiating factors. (LTE-A, Qualcomm, Lego,

Kakao, etc)

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GROWING DEMAND FOR SMARTPHONE IN EMERGING MARKET

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Smartphone Penetration by Region (APAC/CALA/AME) between 2010 and 2017_Preliminary


As opposed to the developed markets such as NA and WE with over 75% penetration in 2013, the below regions have the potential to grow the smartphone market down the road.

Global Smartphone Penetration (%) of All Handsets 2010 2011 2012 2013 2014 2015 2016 2017

Asia Pacif ic

- Handset 579.9 672.5 753.0 850.1 911.2 985.9 1053.0 1112.9

- Smartphone 96.7 189.9 319.7 519.6 623.5 824.1 920.0 997.5

Asia Pacific Smartphone Penetration 17% 28% 42% 61% 68% 84% 87% 90%

Central & Latin America

- Handset 157.2 200.6 188.7 183.2 191.0 190.2 194.7 201.4

- Smartphone 20.2 36.4 59.8 91.0 116.1 153.6 176.9 191.5

Central & Latin America Smartphone Penetration 13% 18% 32% 50% 61% 81% 91% 95%

Africa Middle East

- Handset 151.2 185.4 178.1 171.0 187.6 178.0 182.2 187.4

- Smartphone 15.5 30.0 36.7 52.0 71.9 84.9 99.6 113.1

Africa Middle East Smartphone Penetration 10% 16% 21% 30% 38% 48% 55% 60%

Total Smartphone Penetration for Three Regions 15% 24% 37% 55% 63% 78% 84% 87%

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Smartphone Penetration by Key Emerging Countries between 2010 and 2017_Preliminary

Global Smartphone Penetration (%) of All Handsets 2010 2011 2012 2013 2014 2015 2016 2017

India

- Handset 149.7 172.5 183.1 210.5 236.3 252.7 265.1 275.2

- Smartphone 5.8 10.9 20.5 45.0 65.0 85.0 102.0 119.9

India Smartphone Penetration 4% 6% 11% 21% 28% 34% 38% 44%

Indonesia

- Handset 46.5 52.5 56.5 60.1 63.0 65.5 68.8 71.1

- Smartphone 6.3 9.0 10.0 16.6 22.8 28.7 34.5 39.0

Indonesia Smartphone Penetration 14% 17% 18% 28% 36% 44% 50% 55%

Brazil

- Handset 55.9 75.5 72.3 70.0 71.2 72.2 73.1 73.9

- Smartphone 6.5 13.9 23.0 35.9 41.0 46.9 51.0 54.0

Brazil Smartphone Penetration 12% 18% 32% 51% 58% 65% 70% 73%

Mexico

- Handset 22.2 34.6 34.5 33.5 34.2 34.6 34.9 35.0

- Smartphone 3.9 7.0 10.9 17.1 20.0 22.0 24.0 25.5

Mexico Smartphone Penetration 17% 20% 32% 51% 58% 64% 69% 73%

South Africa

- Handset 11.0 18.3 19.8 18.1 19.0 19.6 20.1 20.5

- Smartphone 1.9 4.1 5.8 8.4 10.5 12.0 13.0 14.0

South Africa Smartphone Penetration 17% 22% 29% 46% 55% 61% 65% 68%

Total Smartphone Penetration (%) for Five Countries 9% 13% 19% 31% 38% 44% 49% 53%


Top 11 emerging countries by smartphone volume in 2014 (China, India, Brazil,

Mexico, Indonesia, Philippines, Vietnam, Thailand, Argentina, Saudi Arabia,

Nigeria) will be the primary focus market for all vendors including Samsung,

which is dominating the markets across all price-tiers at the moment.

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China Smartphone Sales by Wholesale Price-Tier : % of Total


Many local vendors (tier 1: Huawei/ZTE/Lenovo/Coolpad, tier 2: Xiaomi/Oppo/Meizu) are gripping their

local shares with some invisible support from local carriers while foreign vendors are expected to

struggle to keep the share. The low-tier TD-SCDMA segment has been a main driver for the big growth

in entry-tier market this year.

GNI per

Capita

$5,740

(2012)

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India Smartphone Sales by Wholesale Price-Tier : % of Total


Samsung is arguably capturing the top spot while local vendors such as Micromax, Karbonn and Spice

are beefing up its influence based on the price affordability and appealing specs such as Dual-SIM.

GNI per

Capita

$1,530

(2012)

24 24

Brazil Smartphone Sales by Wholesale Price-Tier : % of Total


While premium tier is estimated to represent the highest share in 2013 and 2014, mid, entry and ultra-

low combined will account for more than 50% in 2014, with the share in 2017 expected at 63%.

GNI per

Capita

$11,630

(2012)

25 25

Russia Smartphone Sales by Wholesale Price-Tier : % of Total


As with other emerging countries, the premium tier is likely to lose its share through 2017 while lower-

cost smartphone are expected to replace the market, once occupied by premium.

GNI per

Capita

$12,700

(2012)

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Comparison of GNI per Capita/Population _ Top Emerging Countries

It would be essential for vendors to figure out the GNI(Gross National Income) per Capital and

population of each emerging country. They should have a different strategy for Saudi Arabia, Thailand

and Vietnam.

GNI per

Capita

$12,700

(2012)

Russia

144M

GNI per

Capita

$11,630

(2012)

Brazil

201M

GNI per

Capita

$1,530

(2012)

India

1.23B

GNI per

Capita

$5,740

(2012)

China

1.36B

GNI per

Capita

$9,740

(2012)

Mexico

118M

GNI per

Capita

$3,420

(2012)

Indonesia

237M Philippines

98M

GNI per

Capita

$2,470

(2012) GNI per

Capita

$1,400

(2012)

Vietnam

89M

GNI per

Capita

$5,210

(2012)

Thailand

66M

GNI per

Capita

$18,030

(2011)

Saudi Arabia

29M

GNI per

Capita

$1,430

(2012)

Nigeria

173M

Source: World bank database (2011/2012)

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Factors why lower-cost smartphones are inevitably gaining traction in emerging markets

• Feature Phone replacement: Affordable price & Appealing, but limited specs • Almost free OS: Android, Firefox, Ubuntu versus iOS, Microsoft • Market Size: Foreign vendors and local vendors neck and neck to capture the

market share. They could lower the device cost to target the potentially growing market.

• Chipset availability: Low-cost turnkey chipset for 2G/3G/possibly 4G available from several players such as Qualcomm, MediaTek and Spreadtrum

• Geographical setback 1: Due to the sparse wireline broadband network, smartphone with wireless connectivity is regarded alternatives.

• Geographical setback 2: Large country would cost a lot of money to install the cellular network, making local operators non-flexible in terms of subsidy.

• Low household income/weak spending power/infrastructure/logistics

Global Smartphone Forecast by ASP (US$)

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• Surging volumes expected in lots of emerging countries are closely related to the lower smartphone selling price due to the price-sensitivity in those markets.

• Both NA and WE will also be affected by the emergence of meaningful smartphone volumes in lower price-tiers.

Source: Wireless Smartphone Strategies (WSS)

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An Ultra-Low Smartphone Wave is Emerging in H2 2013

• Entry-level smartphones from Android are surging in China, emerging Asia, Africa, Eastern Europe and Latin America… Apple and “Microkia” missing this spike in growth…

• Ultra-low-cost smartphones are about to emerge (e.g. Magicon Ultra Smart, Lenovo);


GLOBAL SMARTPHONE SALES BY WHOLESALE PRICE-TIER (MILLIONS OF UNITS)

0 6

83

199256

304349

387

0 0

0

1

8

17

29

44

0

100

200

300

400

500

2010 2011 2012 2013 2014 2015 2016 2017

UltraLow (<US$35)

Entry (US$36 - 99)

VENDORS’ STRATEGIES TO GENERATE PROFITS

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How to generate the new sources of profits when high-end market slows down

Committing more to leading carriers for LTE/LTE-A/Innovation/Segmentation

Turning to China/India with TD-LTE/FDD-LTE/Innovation/Segmentation

Looking at emerging countries with diverse product portfolios (Soccer phone)

Growing the volume share by gripping the local distribution channels

Good cross-selling momentum by bundling phones, laptop, tablets, and TVs

ONE Brand image across its diverse portfolio, phone, tablet, laptop, TV, etc

High-end segment

Low-end segment

Multi-screen Convergence

Working on the incomparably superb services (contents, imaging, education)

Standardized Solution for multiple screens & platforms

Maintaining the lean and streamlined production operation

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One differentiator Global LTE Handset Vendor Share Trends: Q2 2013

• Samsung and Apple remain dominant, due to deeper distribution presence;

• The global LTE smartphone market is growing at 430%+ YoY, from 11M to 58M;

Source: Wireless Device Strategies (WDS) service

Global LTE Handset Vendor Marketshare by Country (% of Total) 2013 Q1 2013 Q2

Samsung 25% 47.0%

Apple 41% 23.5%

Sony 5% 6.2%

LG 7% 4.0%

BlackBerry 4% 4.0%

Nokia 4% 2.8%

HTC 1% 2.4%

Pantech 3% 2.2%

Motorola 3% 1.6%

Sharp 2% 1.4%

Fujitsu 2% 1.4%

Huaw ei 1% 1.2%

ZTE 1% 1.0%

Panasonic 0% 0.3%

NEC 0% 0.3%

Kyocera 0% 0.2%

Others 1% 0.6%

Total 100.0% 100.0%

Other differentiators in H/W, S/W & Services

• LTE-Advanced

• TD-LTE (relatively low 3G penetration at China Mobile with over 750m users)

• NFC/Wi-fi 802.11ac

• Flexible/Bendable Display

• Wearable Mobile Devices (Glass, Watch, etc)

• Wireless Charging

• Sensors (Fingerprint, Biometrics, etc)

• Multiscreen strategies across smartphone/tablet/laptop/PC/TV/Car/Office

33 Source: Wireless Device Strategies (WDS) service

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SUMMARY

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1 High-end segment shows a sign of slowing down amid the rise of low-end segment, consumer fatigue and stalled innovation.

SUMMARY & RECOMMENDATIONS:

Conclusions & Recommendations

2 Decent profits from high-end market will smoothly transit to low/mid-segment where we see lots of room for growth. It would matter to partner with local channels and to customize the products.

3 New technologies will inevitably emerge and spur more growth. Vendors must be differentiated.

4 It would be essential to have the segmented products for high-end and low-end tiers for now.

36 36

Q&A

Woody Oh

[email protected]

+44 1908 423 665

mailto:[email protected]

Documents

Global Smartphone Market Outlook - ITFIND · • Nokia and Motorola captured almost 60% market share by volume in Q4 2006. • Before 2007, all feature phones looked similar, but