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FRAMINGHAM, MASS. — The worldwide mobile phone market grew 1% year over year in the second quarter of 2012 (2Q12), as Samsung and Apple shipped almost half of the world's smartphones. According to the International Data Corporation (IDC) Worldwide Quarterly Mobile Phone Tracker, vendors shipped 406.0 million units in 2Q12 compared to 401.8 million units in the second quarter of 2011.
Samsung and Apple have more than doubled their combined market share over the past two years, which has created more distance between the companies and the competition. “Samsung and Apple have quickly become the global smartphone heavyweights though both employ somewhat different approaches to the market,” said Kevin Restivo, senior research analyst with IDC's Worldwide Quarterly Mobile Phone Tracker. “Samsung employs a 'shotgun' strategy wherein many models are created that cover a wide range of market segments. Apple, in contrast, offers a small number of high-profile models. While both companies have expanded their geographic presence in pursuit of market share, the two companies will inevitably come into greater conflict as both try to generate additional gains.”
Market share gains will be harder to generate, however, if the worldwide smartphone market grows at rates similar to the 42.1% year-over-year rate at which the market increased in 2Q12. This was the lowest growth rate since the fourth quarter of 2009. Vendors shipped 153.9 million smartphones in 2Q12 compared to 108.3 million units in 2Q11. The 42.1% year-over-year growth was one percentage point lower than IDC's forecast of 43.1% for the quarter.
The spectre of further economic woes puts growth prospects for the mobile phone market at risk. “With half of 2012 behind us, vendors are looking ahead to 2013 and how key markets – particularly Europe and emerging markets – will play out,” said Ramon Llamas, senior research analyst with IDC's Mobile Phone Technology and Trends team. “Despite recent maneuvers to shore up several countries within the Eurozone, the effectiveness of these efforts remains to be seen. Meanwhile, emerging markets will continue to be strong contributors due to their sheer size and growth trajectory, but how much they can offset potential declines in other countries is unclear.”
Nonetheless, IDC expects long-term mobile phone and smartphone shipment demand to grow steadily in 2012 and through the years ahead due to the central role mobile phones play in people's lives. “For many users, the mobile phone has become the essential communications link to others and to the world,” noted Llamas.
Samsung extended its lead over Apple during the second quarter, taking advantage of Apple's release schedule and launching its flagship Galaxy S III. In addition, Samsung experienced continued success of its smartphone/tablet hybrid device, the Galaxy Note. As a result, Samsung topped the 50 million unit mark and reached a new quarterly smartphone shipment record in a single quarter. What remains to be seen is how the company’s smartphones will fare against Apple's next-generation iPhone expected later this year.
Apple posted an expected sequential decline last quarter, similar to years past. The quarter-over-quarter shipment decline came six months after it unveiled its latest iPhone. The decline is not unusual as iPhone shipment volume is highest in the first two quarters after its release. The company’s once-a-year release cycle usually results in two quarters of lower volumes leading up to the next-generation model introduction. Nonetheless, Apple made significant inroads into new markets and segments, including smaller regional carriers and prepaid service providers.
Nokia smartphone business underwent another quarter of transition. Demand for Symbian and MeeGo units declined, reaching levels not seen since 2005 though the company almost doubled its Windows Phone shipments from the previous quarter. Nokia’s Lumia sales were not terribly affected by Microsoft's Windows Phone 8 announcement, which will prevent current Lumia owners from upgrading to the new mobile operating system. However, Lumia sales have remained steady and key enhancements available on the new platform will eventually become available to current Lumia owners. Nokia, however, has a long path to travel before it can reclaim previous volume levels and challenge Apple and Samsung for smartphone supremacy.
HTC rebounded from its struggles in the two previous quarters to reclaim the number 4 spot in the smartphone vendor rankings. Its relatively strong performance in the Asia/Pacific region allowed it to climb back up the rank order as did the correction of its channel inventory issues. The company's streamlined portfolio means future share gains will be predicated upon the success of its One products.
ZTE climbed into the smartphone Top 5 for the first time thanks primarily to shipments of its lower-cost entry-level smartphones in China, where it's based. However, the vendor has also grown its international smartphone sales, particularly in the U.S. where its smartphones can be found under other brands. Latin America is another source of significant smartphone growth for the vendor. Despite impressive gains last quarter, brand equity may prove to be an issue for ZTE in future. Strong brand recognition is a necessity if high-growth smartphone sales abroad are a priority for the company.
@Rich, Good to hear from you. Can you say more why you think Industrial Design will not be here? We have all the 3D Cad tools for part modeling and when I was at MS, everyone in our building got to play with the various prospective remote controls and give feedback before a design was settled upon.
While I do agree that the looks of a product plays a key part in purchasing decisions, how that product works and interacts with the user is also very very important especially in high-tech products.
iPad is a very attractive product on the outside; it's slim, has a large screen, it is equipped with dual cameras and has a great battery life. However, these are not the only reasons why people buy an iPad. What goes on under the 18.5 x 24 glass is also important for the buyers.
Software user interface is as simple and intuitive as it gets: I have seen a 1.5 year old using an iPad! For people who are used to Windows interface, the initial experience can be a bit awkward but it does not take long to get used to the new iPad. The software applications are captivating. It is amazing to see there is an iPad application for almost any possible practical problem including an oscilloscope and a simple metal detector! There is a HUGE selection of games, weird and wacky applications that are very popular among teenagers. (The application developers do not necessarily need to like or use the application they design in order to make money, right?)
Therefore, in the application domain, iPad has it all covered. The success of the application domain is down to the business model Apple has in place that makes sure the application developers get paid for their hard efforts. I think this strategy is one of the key reasons why iPad has been so successful.
Besides hiring an Industrial Designer, I also think hiring good embedded software developers, architects and product managers is still important.
What exactly is an industrial engineer?
“the three things that will determine which product a buyer will select will be product appearance, support, and reliability”
Interesting post, Doughlas. I think apart from these factors, one other thing that also matters a lot is the ease of use of the smartphone or gadget. Quite often you run into devices that are pretty sturdy and have elegant looks but it becomes a nightmare to use them and navigate through their options. I feel usability is very essential and the user interface has to be made as user-friendly as possible. This is something that can become an edge for the manufacturer.
“Besides hiring an Industrial Designer, I also think hiring good embedded software developers, architects and product managers is still important.”
@Cryptoman: That's a very valid point. More often than not you see devices that are pretty strong on the hardware design side where the appearance is sleek and the design is rigid, but the software is either slow or doesn't offer a lot of features. This may fail the entire device. I think having a good software design is equally important as having a sound hardware design. And that's where the role of good software engineers and architects comes in.
@All, I completely agree with the usability and software being key in product designs of the future. Although iPad has tons of applications, Android is cranking them out too. If, over time, both have the same applications, what will be the key decision points people will use to select one over the other? It is easy to spend more on the applications than on the hardware. I have a complete reference library for one subject area alone that has cost me about $500 so far. All the books are available on all of the tablet platforms and the UI is pretty much identicle.
How about the demands they will make for their services ? You should be eady for that as well.
And I thought it was just me…I “unfriended” the cell phone market a long time ago. There just isn't a lot of differentiation in the market anymore (with a few exceptions, such as the iPhone) and I don't even use 80 percet fo the features my current phone offers. I just don't NEED the stuff. I will admit the cell phone camera is a great idea and I use it more than I expected. But by the time you get your current phone customized, a new version comes out. Enough ranting…an industrial designer is a good idea, but I think I need clarification on how that could be a game changer. Is it purely a look/feel type thing (assuming everything 'under the hood') is pretty much the same?
@Barbara, yep, it is a look/feel and higher and higher levels of integration with other products like agnostic chargers, docking stations, wireless modes, entertainment center integration, and service and maintenance cost. What products are available in the after market, and how convenient are the upgrades and service locations.
Not only hire an industrial designer but I would say also give value to your service department and reschedule your after sale marketing.
“To that end, service reputation and upgrade costs will become key to the competitive marketplace .”
Barbara,
You “unfriended” the cell phone market? Have you ever wondered if you really need a phone at all these days?
-Susan
An ID designer usually determines the aesthetic look of the products. But going by Apple success, they need to have more control and respect in the company for a great product. Quite often designer ideas are put aside due to cost issue, difficulty in implementing with hardware or software etc.
Susan: all the time, actually. If other people did not have to reach me in an emergency, I would not carry one at all. Smartphone…not sure yet
I've always been fascinated the iPod's exterior. Honestly, at first I was flummoxed by the dearth of buttons. And the Nano is sometimes too sensitive, bu it hasn't broken yet!
Barbara,
Something similar has been happening to me. The phone is off all the time if I am at home/working. Rarely I carry it with me. If I do, it's off. It bothers me if someone call when I am in the middle of something, reason why I started keeping it off. It became a habit that actually I enjoy. Lately I have been wondering if I need a phone at all when, in fact, everything I need to do it's possible with a tablet. I went as far as thinking if smartphones and tablets will eventually merge.
-Susan
Susan: I think your instincts are correct–I have been reading a lot about the tablet/smartphone convergence. In fact, the Galaxy III has been referred to as a small tablet vs. big smartphone.
Barbara,
Yes, I believe that's the way we are going, a tablet-smartphone integration. Not sure if this is what manufacturers envision businesswise, though.
-Susan
Susan: well, it would cut the market in half for some vendors, wouldn't it? But I think it might come sooner rather than later in light of the Apple/Samsung wars. The first company to bridge the phone/tablet gap might wind up with the lion's share of the market…or crash and burn if the product isn't good enough. I think it is a risky proposition but a fascinating idea
Barbara,
Indeed, a fascinating idea. If I am thinking of this non-existent device, most likely some designers are already doing the same. Yes, the Apple/Samsung wars is going to open doors for what I expect would be innovation, and a new device. There is a need for such device.
-Susan
I guess Apple is coming up with the iPad mini to target this market segment – those who want tablet and phone at the same time.
I am getting out of my depth here, but one of the reasons we haven't seen a tablet/phone hybrid has something to do with cellular vs. internet technologies. I believe they can coexist, but it would be expensive and unwieldy to do so. Does anyone with mroe intelligence than I understand this? Or is there a differetn reason (other than selling two devices instead of just one?)
@Barbara, if you have Skype installed on the tablet, you can call non cell phone numbers and talk or chat. For the US, it is 3$/month. I can already Skype to anyone with a Skype address for free. I have an iPad with 4G and wireless. I can also tether it to my Samsung Galaxy II to become my own hotspot where I can get cell service. I tried it a couple of times and it works just fine. I have a microcell at my house because I live up in the mountains. Even with all of that, I lose it all during a power failure. Fortunately my candles have battery backup GPS locators so I can find them in the dark……just kidding. I am not that geeked out yet.
“Industrial designers will be much more in demand as this trend continues” I also think usability and interface engineering fields are evolving and would perhaps join the trend.
@Wale, What are your thoughts with regards to ID as a function of usability? I know when we passed around the remote controls for WebTV, many comments came back about the button sizes and placement location by specific function.
@Barbara, there is an App called whatsapp. WhatsApp Messenger is a cross-platform mobile messaging app which allows you to exchange messages without having to pay for SMS.
That may be dependent on important factors, which i think users carry higher priority. In that case, there's need to understudy – direct/indirect interviews and/or observations of consumers' behaviours and usable of the device vis-a-viz its functionality.
t-alex,
Indeed, and it seems like such device can rule the market sooner than we think, according to research I have read.
-Susan