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Assesment of the Xiaomi phenomenon before the global storm is starting on Sept 5

Follow-up: Xiaomi announcements: from Mi3 to Xiaomi TV [‘Experiencing the Cloud’, Sept 5, 2013] with detailed information links and videos about the two market leading SoCs used in Mi3:
NVIDIA Tegra 4 with 4+1 Cortex-A15 CPU, 72 GeForce GPU and the absolutely unique Chimera™ solution for HDR (High Dynamic Range imaging) photography and video recording
Qualcomm Snapdragon 800 with the high-end Krate 400 CPU cores and Adreno 330 GPU
(Actually the benchmark performances are roughly equal although Qualcomm needs for that a much higher frequency.)

The news came yesterday declaring not less than
A new Android chapter [Hugo Barra on Google+, Aug 29, 2013]

After nearly 5½ years at Google and almost 3 years as a member of the Android team — the most amazing group of people I’ve ever worked with in my life — I have decided to start a new career chapter.

In a few weeks, I’ll be joining the Xiaomi team in China to help them expand their incredible product portfolio and business globally — as Vice President, Xiaomi Global.  I’m really looking forward to this new challenge, and am particularly excited about the opportunity to continue to help drive the Android ecosystem.

It has been an amazing ride and true honor to be part of the Android team at Google, and I especially want to thank +Andy Rubin , +Hiroshi Lockheimer , +Sundar Pichai and +Vic Gundotra for their phenomenal support and mentorship over the years.

+Android team, I will truly miss you all!

To which co-founder and president of Xiaomi Corporation Bin Lin responded on his facebook account on August 29:

I am truly grateful to have Hugo joining Xiaomi to help lead our international business.

Being Google’s VP of Product Management for Android, Hugo has a deep understanding of Xiaomi’s unique business model of building a fully compatible Android OS (aka MIUI) by embracing the openness of the internet, building top performance device with great user experience, and selling direct to consumers at substantially lower price. We’ve achieved some level of success in China market. Hugo is the best person to drive this globally.

Being ex-Googler myself, I’ve always made sure that Xiaomi shares many of the believes as Google Android. For instance, we believe in protecting the Android ecosystem and therefore our handsets have always passed Android CTS [i.e. achieving Google Play compatibility]. We believe in top performance device and eCommerce sell-direct would benefit consumers. We are committed to drive the Android ecosystem moving forward.

Welcome to Beijing, Hugo!

Last time we have seen Hugo Barra at a press event in San Francisco with
Google’s Nexus 7 goes full HD [CNETTV YouTube channel, July 24, 2014]:

The all-new HD Nexus 7 tablet is thinner and lighter than previous versions and sports an HD screen with 1,920×1,200-pixel resolution.

News were first leaked in: Android’s Hugo Barra Departs Google for China’s Xiaomi [AllThingsD, Aug 28, 2013 at 5:15 PM PT]

What’s going on? After Sundar Pichai expanded his Chrome responsibilities to Android as well, and Andy Rubin left the Android scene, so Hugo Barra became the #1 man in Google’s Android efforts, he is leaving for a much less influential Chinese maker of Android forked smartphones? What is the sense for him to have such a move?

In what follows below I will be able to give all the well justified reasons for that. Moreover, thanks to my earlier posts analyzing the Xiaomi phenomenon in all details, I will be able to convince every reader of this post in the most concise way that Hugo Barra was absolutely right about his decision to move to Xiaomi, as an even bigger thing is on the Horizon than what Google may become in the future.

Let’s start with the all-new RMB799 ($130) low-end superphone segment of Xiaomi: Xiaomi Red Rice (Hongmi) review
[a Xiaomi video on Youku via phonezilla2013 YouTube channel, Aug 21, 2013]

More information: UPDATE Aug’13: Xiaomi $130 Hongmi superphone END MediaTek MT6589 quad-core Cortex-A7 SoC with HSPA+ and TD-SCDMA is available for Android smartphones and tablets of Q1 delivery [‘Experiencing the Cloud’, Dec 12, 2012; Aug 1, 2013]

Note: Xiaomi Red Rice (Hongmi) manufacturing cost (BOM) has been estimated by TrendForce to be $84.7.  See the press release, also included here in the very end of this post.

Then let’s see (note the Sept 5 warning on the illustration which is from Xiaomi itself):

Previous
segments
Aug 16, 2011: Aug 16, 2012: April 9, 2013:
USD$326.6 Xiaomi smartphone Xiaomi 2 Xiaomi 2S
USD$249.9 Xiaomi 1S Xiaomi 2A

image_thumb5[1]

Detailed further information and market analysis:
Xiaomi, OPPO and Meizu–top Chinese brands of smartphone innovation [‘Experiencing the Cloud’, Aug 1, 2013]
The Upcoming Mobile Internet Superpower [‘Experiencing the Cloud’, Aug 13, 2013]

Note: Only when you read The Upcoming Mobile Internet Superpower post (not only the e-book included there) completely (i.e. with the follow-up and global analysis parts) your understanding of the all-new Xiaomi Horizon could be sufficiently complete. It is only possible to give as a teaser certain crucial facts here:
– “The broader vision of Xiaomi, Lei [the founder and CEO of Xiaomi] pointed out, is to ship more than 100 million smartphones annually for one model by 2016” that was published in China Daily back 15 months ago. With Hugo Barra now in charge of Xiaomi Global it will be easy to achieve that, even far overcome.
– There is a new (maybe final before an IPO) round of financing said to be disclosed also on Sept 5 by Xiaomi. The amount was rumored as being not less than $2B and “from Chinese internet and mobile services firm Tencent (0700.HK), with Russian investment firm Digital Sky Technologies (DST) acting as an intermediary”. DST already invested $90 million into Xiaomi in Dec 2011, and another $216 million in Dec 2012.
– Then, DST is controlled by Russia’s richest man Alisher Usmanov with ~20B of private wealth and an additional ~13B wealth of its two business partners also controlled by Usmanov via 100% voting rights in his USM Holdings empire. USM Holdings has three groups of assets in its portfolio: Internet (with DST and a complete Mail.Ru Goup), Telecoms (with Megafon, Russia’s second largest mobile operator in terms of revenue and subscribers and the market leader in the mobile data segment, as well as Yota, the leader of the mobile broadband sector in Russia), Media and Steel & Mining.
Tencent is controlled by Naspers (33.9%) which also heavily invested into the Mail.Ru Group earlier (29%), and might have some minority share of DST itself, indirectly via Tencent definitely (getting not less than 10.26% of DST with a $300M investment into it in April, 2010). Although Naspers’s CEO, Koos Bekker has a personal fortune of ‘only’ $580M (mid’12, so now closer to $1B probably) but has been the unquestioned leader and decision maker of the company, which has a market capitalisation of about $57B (mid’12, now much higher). Also Tencent’s own market capitalisation is not less than $88.6B (Aug 15, 2013).
–  Also, Venture Capital Dispatch reported in January this year that “DST Global counts Chinese e-commerce giant Alibaba and online retailer JingdongMall [pre April 2013 360buy] as part of its Asian portfolio. DST, alongside other private equity firms like Silver Lake agreed to buy shares in Alibaba at a tender offer of $1.6 billion in 2011. That same year, DST Global also participated in a $1.5 billion third round of funding in Jingdong [pre April 2013 360buy] , with media reports stating that DST bought a 5% share in the online retailer for $500 million. … DST Global spent around $1.5 billion on both of those deals, said [DST partner John] Lindfors [responsible for the Chinese market].”
(AND THE FACTS DO NOT END HERE BUT ARE GOING TO EVEN HIGHER ECHELONS OF GLOBAL CAPITALISM. GOLDMANN SACHS AND LARRY SUMMERS ARE THE MOST NOTABLE EXAMPLES. BUT DO NOT FORGET J.P. MORGAN EITHER WHICH IS HAVING A 5% OWNERSHIP OF TENCENT AS WELL. So read The Upcoming Mobile Internet Superpower post completely.)

Now an additional focus on Xiaomi’s design and user experience leadership must be emphasized here, out of all that above (the illustration below is again from Xiaomi):

image_thumb2

Xiaomi MI2 Product 3D View [Xiaomi China YouTube channel, Aug 25, 2013]

Xiaomi Fans Festival: MIUI V5 Design Concept [MrMiui YouTube channel, April 9, 2013]

Xiaomi One Minute Show 01 Smooth MIUI [Xiaomi China YuTube channel, May 22, 2013]

A brief introduction of the brand new smooth MIUI v5.
0:04 This is our smooth MIUI v5
0:07 You can feel the smooth animation effect from every detail of MIUI v5
0:11 when switching the list in apps like Contacts or App Market
0:18 Feel the smooth switch of the background in the interface of Music
0:22 even the tiny volume icon is smoothly optimized as well
0:25 Your playlist, album photo and lyrics are perfectly combined
0:31 Switch between the camera and gallery swiftly and smoothly
0:37 When you open a photo album, you can see photos smoothly blossom on your screen
0:43 You can also have a quick and smooth slide when there are a lot of photos in your album
0:48 All the icons vibrate smoothly after reordering
0:51 We also redesigned the animation of deleting apps
0:55 You can feel the smooth animation everywhere in MIUI v5
1:00 What do you think of MIUI v5?
1:03 For more Xiaomi One Minute Show, please visit Xiaomi Community
Note: The Xiaomi community is on https://www.facebook.com/xiaomichina. The other shows are available when one click on the “YouTube” in the header (not all of them are one minute long). The “proper” One Minute Shows I found on XiaomiHK: currently 11, unfortunately all in Chinese.

There is also a MIUI community around the world which will make Barra’s job much easier. With ‘MIUI fan clubs’ – already available in 23 countries 15 months ago – the localization problem has been well solved. These fan clubs are producing MIUI ROMs for modding a range of already existing phones. And the results are quite good:
MIUI 5 on Samsung Galaxy s4 !!! (Review) [TheExilimus YouTube channel, July 28, 2013]

Note: this is why 20+ million MIUI users were indicated on the previous illustration by Xiaomi vs. 15+ million Xiaomi phone users.

Moreover, MIUI is continously evolving, and updated every Friday based on feedback from its users. The latest example (full description of the update):
MIUI ROM 3.8.30 Update Highlights [MrMiui YouTube channel, Aug 29, 2013]

1. Added the option of “Limit mobile data usage” in Browser 2. Added support for transfer of complete contact info and notes with images in Transfer … Find MIUI here (http://en.miui.com/) Facebook:https://www.facebook.com/miuiromchina Twitter: https://twitter.com/#!/miuirom Google plus: http://gplus.to/miuiofficial

Also the marketing hype generated by Xiaomi should be emphasized separately here as well. It is best demonstrated by this:
Xiaomi 2012 Conference Start Show [Xiaomi China YouTube channel, Aug 27, 2013]

What kind of company Xiaomi is, after all?
Explanation: Xiaomi CEO: Don’t call us China’s Apple [Reuters TV YouTube channel, Aug 15, 2013]

China’s Xiaomi has sparked a frenzy with a low-cost smartphone that may help the tech firm widen its lead over Apple in the local market — but CEO Lei Jun says it has very different ambitions.

Based on this interview Reuters published its news article For China’s Xiaomi, it’s what’s on the inside that counts [Aug 16, 2013] from which the following excerpts are the most relevant ones here:

Xiaomi looks a bit like Apple but is really more like Amazon with some elements of Google,” Lei said in an interview in Beijing, dressed in a blue shirt, blue jeans and brown shoes.

The mobile phone is only the carrier,” Lei said. “Microsoft used to sell Windows in a box with a CD in it. Does that make Microsoft a paper box company?”

The 43 year-old chief executive said it was high time for the Apple comparisons to end and the rivalry with local tech giants Alibaba Group Holding, Baidu Inc and Tencent Holdings Ltd to start.

Xiaomi currently makes around 20 million yuan ($3.27 million) a month in revenue from its mobile Internet platform, which includes a game centre, an online marketplace and a social messaging app that competes with Tencent’s popular WeChat.

In the first half, that figure was equivalent to less than 1 percent of monthly revenue, company data shows.

Lei estimated mobile Internet revenue may rise to as much as 150 million yuan [$24.41 million] a month by the end of next year as Xiaomi develops what he called its software ecosystem.

He declined to give specific details, but said Xiaomi had the hardware it needed to expand into online services.

Xiaomi selling mobile phones is like Amazon selling Kindles,” he added.

This points quite clearly to the expansion of Xiaomi’s application (and operations) portfolio towards the e-commerce. Only this way would be possible to increase the current annualized revenue of about $40 million from the mobile Internet platform to about $300 million in just one a half year. This also means that in the long-run Xiaomi is going to be a mobile e-commerce company with affordable mobile devices offered as well, and not a premium device company, like Apple. Similarly, there are fundamental differences of the same kind from the business model of Samsung as well. Even more, this means an all-encompassing disruption of the whole industry.

Finally read this 3d party analysis:
TrendForce:Xiaomi’s New Red Rice Phone Takes China by Storm, Carries $US 85 BOM [press release, Aug 29, 2013]

(Note that Xiaomi’s own superphone segments are different as was shown above:
USD$326.6 for high-end superphones, USD$249.9 for mid-range superphones, and
?USD$130? for low-end superphones, with the latest question mark for the reason of not yet announced global prices – as the USD$130 equivalent RMB799 is China only price. Wait for Sept 5.)

image

According to global market research firm TrendForce, smartphone manufacturing costs are decreasing – in 2014, low-end devices that cost less than US$150 are expected to represent 14% of total smartphone shipments worldwide, up from 11% forecasted for this year. Mid-end smartphones, which cost between US$150 and US$450, are projected to account for more than 50% of shipments in 2014. Clearly, smartphone makers looking to expand their market share cannot overlook the low to mid-end sector. Fully aware of this, Chinese smartphone manufacturer Xiaomi has released a Hongmi, or Red Rice, a device with decent specifications and a low price tag of RMB799 [$130].

image

Taking a look at Red Rice’s hardware, its MediaTek MT6589 chipset accounts for 20% of total manufacturing cost. The 4.7-inch, 312 ppi IPS display by AUO represents 22% of cost and is a significant upgrade from the 220 ppi display commonly used in similarly priced devices. Based on component cost, total manufacturing cost for the Red Rice device is estimated at US$85 (4Q”13). With a retail price of RMB799, roughly equivalent to US$130, Xiaomi is profiting at a rate difficult for other smartphone makers to keep up with.

Xiaomi is not relying on traditional sales channels for its new device but turning to Internet retailers instead – the company hopes to garner revenue from software, advertising, etc., creating a new smartphone profit model. TrendForce believes Xiaomi is able to offer Red Rice at such a low price because the maker has a solid grasp on three important points of cost control.
– First, Xiaomi usually unveils new products very early, at least a quarter before the actual release date, which gives component cost time to decrease.
– Second, Xiaomi controls inventory better than its competitors. Using an Internet pre-order sales model, Xiaomi is able to get a more exact estimation for initial production, thereby avoiding risk if sales are not as strong as expected.
– Third, by marketing via social networks, Xiaomi cuts down on advertising costs, enabling the manufacturer to continue causing a stir on the market with each new device release.

Red Rice’s groundbreaking price will inevitably have an influence on other smartphone manufacturers’ pricing strategies, especially for low to mid-end products. Currently, Xiaomi’s main market is China. The company is eagerly expanding on foreign markets as well, but results have been limited. Whether Xiaomi’s low prices will have an effect on smartphone makers in other markets will depend on the Chinese manufacturer’s foreign sales.

TrendForce believes Xiaomi’s long-term strategy includes continued expansion on the domestic market as well as breaking into foreign markets with high price-performance ratio devices. As social networking platform services and software are the company’s main sources of profit, Xiaomi will need to develop new strategies to attract consumers in foreign markets. As the company’s recently closed funding round has skyrocketed its valuation, Xiaomi is financially set to expand in foreign markets, potentially by acquiring local businesses. Or, the funds could be used to improve manufacturing and ensure timely product delivery, a notable weakness of the growing company.

Mark Zuckerberg’s personality is hyped (again) with a quite worthwhile initiative (otherwise) but with substantial global financial interests behind it as well

The internet.org initiative for the next 5 billion people is even a bigger announcement than the Steve Ballmer’s retirement from Microsoft announcement given The Upcoming Mobile Internet Superpower [Aug 13, 2013, with extensive follow-up & ‘The global forces behind …’ analysis, later in the post, as of August 22 at 9:08pm] and the substantial global financial interests (uncovered there and) otherwise also tied to the creation of the whole global Facebook phenomenon (also indicating that Mark Zuckerberg has been just a strawman of something significantly bigger going on behind the scenes from the very beginning). Just two images which were included into the The Upcoming Mobile Internet Superpower as a reminder of that (before documenting the internet.org initiative in this post):

While the true intent of this announcement is covered by things described above, here is what was officially told to the world:

Every one of us. #ConnectTheWorld [Internet.org YouTube channel, Aug 20, 2013]

Technology leaders launch partnership to make internet access available to all [joint press release available from http://internet.org/ and number of other sources, Aug 20, 2013]

Facebook, Ericsson, MediaTek, Nokia, Opera, Qualcomm, Samsung to be founding partners

MENLO PARK, Calif., Aug. 20, 2013 – Mark Zuckerberg, founder and CEO of Facebook, today announced the launch of internet.org, a global partnership with the goal of making internet access available to the next 5 billion people.

“Everything Facebook has done has been about giving all people around the world the power to connect,” Zuckerberg said. “There are huge barriers in developing countries to connecting and joining the knowledge economy. Internet.org brings together a global partnership that will work to overcome these challenges, including making internet access available to those who cannot currently afford it.”

Today, only 2.7 billion people – just over one-third of the world’s population – have access to the internet. Internet adoption is growing by less than 9 percent each year, which is slow considering how early we are in its development.

The goal of Internet.org is to make internet access available to the two-thirds of the world who are not yet connected and to bring the same opportunities to everyone that the connected third of the world has today.

The founding members of Internet.org –Facebook, Ericsson, MediaTek, Nokia, Opera, Qualcomm and Samsung – will develop joint projects, share knowledge, and mobilize industry and governments to bring the world online. These founding companies have a long history of working closely with mobile operators and expect them to play leading roles within the initiative, which over time will also include NGOs, academics and experts as well. Internet.org is influenced by the successful Open Compute Project, an industry-wide initiative that has lowered the costs of cloud computing by making hardware designs more efficient and innovative.

In order to achieve its goal of connecting the two-thirds of the world who are not yet online, Internet.org will focus on three key challenges in developing countries:

Making access affordable: Partners will collaborate to develop and adopt technologies that make mobile connectivity more affordable and decrease the cost of delivering data to people worldwide. Potential projects include collaborations to develop lower-cost, higher-quality smartphones and partnerships to more broadly deploy internet access in underserved communities. Mobile operators will play a central role in this effort by driving initiatives that benefit the entire ecosystem.

Using data more efficiently: Partners will invest in tools that dramatically reduce the amount of data required to use most apps and internet experiences. Potential projects include developing data compression tools, enhancing network capabilities to more efficiently handle data, building systems to cache data efficiently and creating frameworks for apps to reduce data usage.

Helping businesses drive access: Partners will support development of sustainable new business models and services that make it easier for people to access the internet. This includes testing new models that align incentives for mobile operators, device manufacturers, developers and other businesses to provide more affordable access than has previously been possible. Other efforts will focus on localizing services – working with operating system providers and other partners to enable more languages on mobile devices. 

By reducing the cost and amount of data required for most apps and enabling new business models, Internet.org is focused on enabling the next 5 billion people to come online.

Facebook, Ericsson, MediaTek, Nokia, Opera, Qualcomm, Samsung and other partners will build on existing partnerships while exploring new ways to collaborate to solve these problems.

“For more than 100 years, Ericsson has been enabling communications for all and today more than 6 billion people in the world have access to mobile communications,” said Hans Vestberg, President and CEO of Ericsson. “We are committed to shaping the Networked Society – where everyone and everything will be connected in real time; creating the freedom, empowerment and opportunity to transform society. We believe affordable connectivity and internet access improves people’s lives and helps build a more sustainable planet and therefore we are excited to participate in the Internet.org initiative.”

“As a world leader in mobile solutions for emerging markets having powered more than 300 million smart devices within 2 years, MediaTek whole heartedly supports the Internet.org initiative,” said MK Tsai, Chairman of MediaTek. “Global internet and social media access represent the biggest shift since the industrial revolution, and we want to make it all-inclusive.”

“Nokia is deeply passionate about connecting people – to one another and the world around them,” said Nokia President and CEO Stephen Elop. “Over the years, Nokia has connected well over a billion people. Our industry is now at an exciting inflection point where internet connectivity is becoming more affordable and efficient for consumers while still offering them great experiences. Universal internet access will be the next great industrial revolution.”

“Today, more than 300 million people use Opera every month to access the internet. Tomorrow, we have a chance to serve the next 5 billion people connecting on mobile devices in developing countries. It’s in Opera’s DNA to save people time, money and data, and through Internet.org we think we can help advance these goals,” said Lars Boilesen, CEO Opera Software.

“Mobile has helped to transform many people’s lives in the emerging regions where often a computing device will be the first and only mobile experience they’ll ever have” said Paul Jacobs, chairman of the board and CEO of Qualcomm Incorporated. “Having shipped more than 11 billion chips, Qualcomm is a market leader that is committed to the goal of bridging the digital divide. We’re pleased to be a part of Internet.org and to be working with key ecosystem players to drive this initiative forward.”

“This new initiative has big potential to help accelerate access to the internet for everyone,” said JK Shin, CEO and President of the IT & Mobile Communications Division at Samsung Electronics. “We’re focused on delivering high quality mobile devices to ensure that the next five billion people have great mobile internet experiences.”

The Internet.org website launches today and provides an overview of the mission and goals, as well as a full list of the partners. In the coming weeks, it will feature interviews with technology leaders and experts, along with the latest news on Internet.org activities.

The embedded video on the internet.org site explains further: Mark Zuckerberg aims to put the entire world online [CNN YouTube channel, Aug 21, 2013]

Facebook co-founder and CEO Mark Zuckerberg wants to connect five billion more people to the Internet.

adding more fuel to the campaign, as two follow-up videos on CNN channel as well:
Zuckerberg, tech companies look for “next 5 billion… [CNN YouTube channel, Aug 21, 2013]

Facebook CEO is teaming up with tech companies to bring the web to every single person on earth. Erin Burnett reports.

Mark Zuckerberg’s Internet plan: realistic or impossible? [CNN YouTube channel, Aug 22, 2013]

Tom Foreman examines how realistic it is for Facebook CEO Mark Zuckerberg to expand Internet access by 5 billion people.

And the leading global media was awash with extensive coverage of this as evidenced here just with the following videos:
Mark Zuckerberg’s World-Wide Plan for the Internet [Bloomberg YouTube channel, Aug 21, 2013]

Aug. 21 (Bloomberg) — “Lunch Money” Host Adam Johnson reports on Facebook CEO Mark Zuckerberg’s new plan to bring internet service to 5 billion people in the world currently without it.

Mark Zuckerberg Announces Plan To Get Billions More People Online [HuffPost Live YouTube channel, Aug 21, 2013]

Facebook Inc. announced a partnership called Internet.org on Wednesday. The company says its goal is to “make Internet access available to the two-thirds of the world who are not yet connected.”

Facebook-led project pushes for wider internet access – corporate [Euronews YouTube channel, Aug 22, 2013]

Facebook’s boss wants to make internet access affordable for the two-thirds of the world’s…

Chinese manufacturing grows and Facebook wants to spread the internet worldwide [FRANCE 24 English YouTube channel, Aug 22, 2013]

The Facebook Internet initiative (internet.org) story is from [5:15] to [6:20]

From the participant companies we had the following corporate communications in addition to the joint press release:

Ericsson and Internet.org – providing the internet for everyone, everywhere [Aug 21, 2013]

The Networked Society will bring significant economic, social and environmental benefits to hundreds of millions of people, one of which is providing internet access to the remaining two-thirds of the planet. Today (Aug 21, 2013), Ericsson, Facebook and a number of other tech giants took a step closer to realizing these benefits through the announcement of a global initiative we call Internet.org. Through this, we aim to reduce the cost of delivering basic internet services and make them available to everyone, everywhere.

So, why is this initiative so important? In the Networked Society, connectivity is the starting point for new ways of innovating, collaborating and socializing. It’s about creating freedom, empowerment and opportunity, transforming industries and society while helping find solutions to some of the greatest challenges facing our planet.

Hans Vestberg, President and CEO of Ericsson, says: “For more than 100 years, Ericsson has been enabling communications for all, and today more than 6 billion people have access to mobile communications. We are committed to shaping the Networked Society – where everyone and everything will be connected in real time; creating the freedom, empowerment and opportunity to transform society. We believe affordable connectivity and internet access improves people’s lives and helps build a more sustainable planet, and therefore we are excited to participate in the Internet.org initiative.”

Some of the initial areas that are considered barriers to increasing access to the internet are the cost of smartphones, the cost of delivering data, and inefficient data-hungry applications. Cheaper phones, improved data compression techniques, and apps that use less data and reduce battery usage are some of the initial areas of investigation. Others include more efficient allocation of spectrum, edge caching, sharing hardware design, and efficiency optimization.

Ericsson has several areas of expertise to offer the initiative, including: knowledge of scale, its global presence and local expertise, and its technology leadership in the area of mobile networks and supporting service enablers.

Ericsson believes that communication is a basic human need, and fulfilling this has been our mission since the foundation of our company.

Opera helps connect the next 5 billion online [Opera News, Aug 21, 2013]

Today, only 2.7 billion people are connected to the internet. The cost of getting online is one of the biggest challenges for users worldwide. We want to help get the next five billion online.

For the last 17 years, we have built products and services to get people online. We believe in the power of sharing ideas. Opera Mini is our mobile browser that uses compression technology to save you time and money. Operators around the world have embraced Opera Mini and Opera Web Pass as the best choice for their users to get online.

WE HAVE PARTNERED WITH FACEBOOK TO GET THE NEXT 5 BILLION ONLINE

Meet Internet.org – a partnership between Facebook, Opera, and other technology companies. This is a global effort that will also involve help from local communities, non-profit organisations and experts across the world. We are proud to contribute to the project with our competence in Internet technology.

WE WANT TO HEAR FROM YOU

Are you among the few in your country who has access to the internet? Tell us how you spend your time online. How has the internet helped you? We’d love to hear from you. Get in touch with us on Twitter, Facebook or byemail.

image“Today, more than 300 million people use Opera every month to access the Internet.

Tomorrow, we have a chance to serve the next 5 billion people connecting on mobile devices in developing countries. It’s in Opera’s DNA to save people time, money and data, and through internet.org we think we can help advance these goals.”

— Lars Boilesen, CEO Opera Software.

Further information about the other companies’ involvement you can find in the following article also linked on the internet.org homepage:
Facebook Leads an Effort to Lower Barriers to Internet Access [The New York Times, Aug 20, 2013]

MENLO PARK, Calif. — About one of every seven people in the world uses Facebook. Now, Mark Zuckerberg, its co-founder and chief executive, wants to make a play for the rest — including the four billion or so who lack Internet access.

On Wednesday, Facebook announced an effort aimed at drastically cutting the cost of delivering basic Internet services on mobile phones, particularly in developing countries, where Facebook and other tech companies need to find new users. Half a dozen of the world’s tech giants, including Samsung, Nokia, Qualcomm and Ericsson, have agreed to work with the company as partners on the initiative, which they call Internet.org.

The companies intend to accomplish their goal in part by simplifying phone applications so they run more efficiently and by improving the components of phones and networks so that they transmit more data while using less battery power.

For Mr. Zuckerberg, the formation of the coalition is yet another way in which he is trying to position himself as an industry leader. He has been speaking out more forcefully than other tech executives on topics like immigration overhaul, which the industry sees as critical to its hiring needs. With Internet.org, he is laying out a philosophy that tries to pair humanitarian goals with the profit motive.

“The Internet is such an important thing for driving humanity forward, but it’s not going to build itself,” he said in a recent interview. “Ultimately, this has to make business sense on some time frame that people can get behind.”

But the effort is also a reflection of how tech companies are trying to meet Wall Street’s demands for growth by attracting customers beyond saturated markets in the United States and Europe, even if they have to help build services and some of the infrastructure in poorer, less digitally sophisticated parts of the world.

Google, for example, began a program with phone carriers last year that offers wireless users in some developing countries free access to Gmail, search and the first page clicked through from a search’s results. Google is also reaching for the sky with Project Loon, an attempt to beam Internet access down to earth from plastic balloons floating more than 11 miles in the atmosphere.

Twitter, which is preparing to offer shares to the public in an initial stock offering, has struck its own deals with about 250 cellphone companies in more than 100 countries to offer some free Twitter access, and worked to make sure its service is easy to use on even the cheapest cellphones.

These companies have little choice but to look overseas for growth. More than half of Americans already use Facebook at least once a month, for instance, and usage in the rest of the developed world is similarly heavy. There is nearly one active cellphone for every person on earth, making expansion a challenge for carriers and phone makers.

Poorer countries in Asia, Africa and Latin America present the biggest opportunity to reach new customers — if companies can figure out how to get people there online at low cost.

The immediate goals of the new coalition are to cut the cost of providing mobile Internet services to 1 percent of its current level within five to 10 years by improving the efficiency of Internet networks and mobile phone software. The group also hopes to develop new business models that would allow phone companies to provide simple services like e-mail, search and social networks for little or no charge.

While that sounds far less exciting than, say, Google’s idea of delivering the Internet by balloon, Mr. Zuckerberg says small efforts can add up to big changes.

“No one company can really do this by itself,” he said.

Facebook is already working on techniques to reduce the average amount of data used by its Android mobile app from the current 12 megabytes a day to 1 megabyte without users noticing.

Qualcomm, whose chip technology is prevalent in advanced cellphones, has created new designs to stretch a phone’s battery life, slice the amount of data needed to transmit a video and extend the reach of mobile networks through tiny devices similar to Wi-Fi routers.

The coalition partners have also begun trying new ways of reducing the data charges paid by cellphone customers while still enabling phone makers and carriers to make money.

For example, Nokia, the Finnish cellphone maker, ran a recent experiment with Facebook and the Mexican phone carrier Telcel, in which it bundled free Facebook access with some of its Asha feature phones. Sales rose significantly, and the company decided to run similar promotions for customers of Bharti Airtel, a mobile carrier in India and Africa.

[Note that with new Nokia Asha platform, which is a full platform enhancement of the earlier Asha Touch upgrade of the legacy S40 platform, Nokia has done already the most among the internet.org founding members to achieve the now declared common challenges of Making access affordable, Using data more efficiently and Helping businesses drive access. You can check that by reading the posts behind the indicated tags on this blog.]

However, the Internet.org team does not plan to tackle some thorny infrastructure issues that are huge barriers in the developing world, particularly the long-distance transmission of data to far-flung places.

Michuki Mwangi, regional development manager for Africa at the Internet Society, a nonprofit group that has long worked to expand global Internet access, said the continent sorely lacked local interconnection points, forcing most requests for content like YouTube videos to be routed through Europe at high cost. Creating more connection points would require navigating a thicket of government interests and powerful incumbents. But at the very least, the group would like Facebook and Google to put copies of their content on a greater number of African servers to deliver it more quickly and cheaply, something that both companies say they are considering.

As with the Open Compute coalition started by Facebook in 2011 to improve the efficiency of data centers, Facebook will seek to add other partners to Internet.org, including national governments, wireless phone carriers and Microsoft, a longtime Facebook ally that has its own projects to expand access.

But Google — whose search and YouTube video products are as fundamental as Facebook’s social network to many Internet users — is likely to remain outside the group.

For one, its own efforts to expand Internet access are aggressive. In addition, the company is constantly refining its Android software, which runs the majority of new smartphones sold, to improve efficiency and battery life.

“We’re always making investments in technology and programs to help people get online,” said Courtney Hohne, a Google spokeswoman. “We have teams around the world working on products tailored to local needs.”

Bill Gates, the chairman of Microsoft and co-chairman of the Bill and Melinda Gates Foundation, recently suggested that Project Loon and similar projects were not the best use of resources to help people in the poorest nations.

“When a kid gets diarrhea, no, there’s no Web site that relieves that,” he said in a recent interview with Bloomberg Businessweek.

Mr. Zuckerberg acknowledged that basic health care is essential, but said that “if you can afford a phone, I think it would be really good for you to have access to the Internet.”

The potential is already obvious in places like the Philippines, where the second-largest mobile phone company, Globe Telecom, has used free Twitter, Facebook or Google access as promotions to increase the number of its 37 million users who also subscribe to a mobile data plan to 20 percent from virtually zero in two years.

“Once you’re connected, you’re connected, and you don’t want to look back,” said Peter Bithos, Globe’s senior adviser for consumer business.

For Facebook, which generates most of its revenue from selling advertising that it shows to its users, the immediate profits from expanding Internet access will be minimal, Mr. Zuckerberg said, although he acknowledged that the long-term potential was there.

“We’re focused on it more because we think it’s something good for the world,” he said, “rather than something that is going to be really amazing for our profits.”

An ARM-focussed Microsoft spin-off could be the only solution to save Microsoft in the crucial next 3-years period

This is the only real answer of mine to the question of Microsoft’s CEO Steve Ballmer Retiring: Who’s Next? [Bloomberg YouTube channel, Aug 23, 2013]

Bloomberg’s Betty Liu and senior markets correspondent Julie Hyman report that Microsoft CEO Steve Ballmer has announced he will retire within the next 12 months.

As an ex Softie doing a full .NET adoption program for Hungarian developers between 2000 and 2008 and then following Microsoft woes via blogs Beyond Win32: “Win32 utáni” történések a világban (in Hungarian) [May 2008. – March 2011] and Experiencing the Cloud [June 2010 …] I could not imagine any other way out of Microsoft’s troubled situation today than a spin-off solely dedicated to conquerring the ARM client space independently of the current Microsoft organisation completely bound to the survival of the already outdated Wintel model.

Particularly I don’t believe at all in the possibility of a true success of How the device play will unfold in the new Microsoft organization? [July 14, 2013] as was introduced in the latest reorg under the “One Microsoft” concept.

On the other hand I am absolutely confident in the success of an ARM-focussed spin-off as the only solution to save Microsoft in the crucial next 3-years period as such spin-off should only exploit the extraordinary advantages of current Microsoft as described in Microsoft partners empowered with ‘cloud first’, high-value and next-gen experiences for big data, enterprise social, and mobility on wide variety of Windows devices and Windows Server + Windows Azure + Visual Studio as the platform [July 10, 2013]. Moreover there is an excellent candidate to lead such a spin-off even internally. He is Scott Guthrie with an excellent track record of succeeding in impossible undertakings along his relatively short career, as described in his LinkeIn profile:

Corporate Vice President Microsoft
Public Company; 10,001+ employees; MSFT; Computer Software industry
May 2011Present (2 years 4 months)
I lead the Windows Azure Application Platform Team at Microsoft, and help drive Microsoft’s cloud computing platform.
I also run the teams responsible for delivering Windows AppFabric Server, BizTalk Server, IIS, ASP.NET, WCF, WF and the Web, Web Service and Workflow features of Visual Studio.
Corporate Vice President Microsoft
Public Company; 10,001+ employees; MSFT; Computer Software industry
February 2008May 2011 (3 years 4 months)
I was a Corporate Vice President within the Developer Division at Microsoft. I ran the teams that built the .NET Framework, Silverlight, the XAML runtimes for Windows Phone and Windows 8, and several of the tooling features within Visual Studio.
General Manager Microsoft
Public Company; 10,001+ employees; MSFT; Computer Software industry
November 2005February 2008 (2 years 4 months)
I was a General Manager within the Developer Division of Microsoft. I ran the teams that built the .NET Framework, Silverlight, ASP.NET, IIS and several of the tooling features within Visual Studio.
Product Unit Manager Microsoft
Public Company; 10,001+ employees; MSFT; Computer Software industry
January 2001November 2005 (4 years 11 months)
I ran the Web Platform and Tools team within the Developer Division of Microsoft. We owned building and delivering ASP.NET, IIS, and the Web Tooling features within Visual Studio.
Lead Program Manager Microsoft 
Public Company; 10,001+ employees; MSFT; Computer Software industry
November 1999January 2001 (1 year 3 months)
I managed the team that created ASP.NET, and personally designed core parts of the .NET Framework.
Program Manager Microsoft
Public Company; 10,001+ employees; MSFT; Computer Software industry
May 1997November 1999 (2 years 7 months)

Reasons for all that, especially regarding why the next 3 years will be crucial for Microsoft, have already been extensively given in my posts that came out BEFORE the announcement of Steve Ballmer retirement:

… Broadband China strategy, Softbank, Sprint, Clearwire, Tencent, WeChat, Goldman Sachs, Юрий Мильнер, Masayoshi Son, JD.com, 360buy, Jingdong, Naspers, Mail.ru, Koos Bekker, Larry Summers, Leader Technologies, Mark Zuckerberg, James W. Breyer, Reid Hoffman, Peter Thiel, Facebook IPO, Federal Reserve Chairman, World Bank, Russian voucher system, Goldman Sachs and Morgan Stanley bail-out, Michael McKibben, LEADER V. FACEBOOK patent infringement lawsuit, U.S. Patent Office, U.S. judicial system, corruption, Barack Obama, U.S. Constitution, Mark Pincus, Zynga, Lawrence Summers, Alisher Usmanov, Irina Viner, Farhad Moshiri, Алишер Усманов, Металлоинвест, Ирина Винер, Узбекистан, Россия, USM Holdings, MegaFon, Russian Federation, Russia, Yota, Scartel, Euroset, Peter-Service, Ukraine, Belarus, UTH Russia, Metalloinvest, Uzbekistan, Gazprom Investholding, Kommersant Holding, Arsenal, Vladimir Skoch, Andrey Skoch, mafia ties, Leonid Reima

To show the significance of that extension for the current subject it is worth to inlude here the last image from that extended post:

Then the range of such posts continues with:

Windows [inc. Phone] 8.x chances of becoming the alternative platform to iOS and Android: VERY SLIM as it is even more difficult for Microsoft now than any time before

First recent findings about The hierarchy of developer needs: Creativeness, not money is the top motivator [VisionMobile blog, Aug 12, 2013] are showing quite clearly how much Microsoft is in disadvantage in the global developers community not only vs. iOS and Android, but even vs. HTML5 in general, which is already a real third platform for developers. Regarding that read UPDATE: HTML5 Vs. Native Mobile Apps — HTML5 Is Down But Not Out [Business Insider Australia, Aug 14, 2013], HIGHLY RECOMMENDED!

It is even more so as a much better HTML5 platform (than the corresponding Windows 8 subset, so called WinJS) came now to the market with FireFox OS:
– as its “first two devices hitting the market – the Alcatel OneTouch Fire and ZTE Open – the latter just launched in Spain from Telefonica for €69 ($90) contract-free including €30 ($39) of airtime for prepaid” according to p. 12 of the free Developer Economics Q3 2013 [VisionMobile, July 29, 2013] report
– and “In just a short space of time, Firefox OS has managed to amass a respectable Developer Intent share, even before devices hit the market, and while competing for Windows Phone, Windows 8 and BlackBerry 10 all of which are much older platforms, with devices in market and billions of market dollars behind them.” as per p. 24 of the same report.

Now the quite important findings from The hierarchy of developer needs: Creativeness, not money is the top motivator [VisionMobile blog, Aug 12, 2013]

image

What motivates developers? Is it fame or fortune? Our new Developer Segmentation 2013 report [starting from £1,495.00] addresses this questions, presenting a needs-bases segmentation model that focuses on developer goals, not just demographics. Based on data from our latest Developer Economics survey (6,000 respondents from 115 countries [FREE to download from here: HIGHLY RECOMMENDED]), this article gives you some insights from the report, discussing how the sense of achievement, not money is the prime motivator for developers.

Most business are resorting to traditional, textbook marketing techniques to segment developers – by technology (web, Java, Windows, Android, Apple), job function (coders, designers, architects, team leads, IT managers, CxOs), by company size, app category (games vs enterprise developers), by audience (B2C vs B2B) or by demographics (age, income, education or location).

Yet all these segmentation models are bound to fail, as they fundamentally neglect to address how developers make investment decisions in a new platform, API or SDK. In other words, it’s not age, job function, audience or technology background that influences how a developer chooses between Apple, Google, Windows Phone, BlackBerry or Tizen.

To understand the complex mosaic of developer personas we segment developers in terms of their outcomes, or what developers are trying to achieve. This is based on the Jobs to Be Done methodology, popularized by Harvard Professor Clay Christensen and which constitutes today’s cutting edge in segmentation techniques. We have backed this model with unprecedented statistical rigor and hard data, from the largest-ever mobile developer survey of 6,000+ developers.

Building on our earlier Developer Economics 2012 research work, we extracted hard data on thousands of developers in terms of their aspirations, motivations, challenges and plans in app development. We produced a unique model of eight developer segments – the Hobbyists, the Explorers, the Hunters, the Guns for Hire, the Product Extenders, the Digital Content Publishers, the Gold Seekers and the enterprise IT developers.

How do these eight segments and three clusters contribute to the app economy? More importantly, when do these segments interact with platforms?

We find that Explorers and Hobbyists, those seeking to learn, have fun and self-improve, make up 33% of the mobile developer population but only 13% of the app economy revenues. These segments prefer – more than average – BlackBerry 10, Windows Phone as a platform, as these are more often associated with experimentation and learning.

The Hunters and Guns for Hire, those seeking revenues from the app economy, make up 42% of the developer population and 48% of the app economy revenues. These segments prefer – more than average – iOS as a platform, due to the consistent revenue-generating opportunities of the platform.

Product Extenders, Enterprise IT developers, Digital Content Publishers and Gold Seekers, aiming at extending a [non-mobile] business [with apps], make up 29% of the developer population, and a whopping 39% of app economy revenues. These segments prefer – more than average – Android and HTML5 as a platformdue to the reach that these platforms offer across the entire smartphone and feature phone installed base.

… <goes to “The Hierarchy of Developer Motivations” chart, not relevant to this post, so omitted> …

Then Microsoft should take into account The evolution of handset business models: From source of profits to distribution channel [VisionMobile blog, Aug 5, 2013]

The evolution of the PC and mobile handset industry have been mirror images of each other, as both saw two distinct disruptions: a new market disruption, followed by a low-end disruption. Guest author Sameer Singh discusses how the shift from integrated companies to modular competitors will pressure hardware profit margins across the industry, leading to the emergence of a new business model, i.e. hardware-as-distribution.

image

The mobile handset industry has already seen two waves of disruption: A “new market disruption”, led by Apple, and a “low-cost disruption”, driven by Google and its Android platform. Each wave created distinctly different business models that completely realigned competitive dynamics in the industry. Where do we go from here?

We believe that the coming, third wave of disruption will again reshuffle the deck for all industry players. We will see growth in a new class of business models, where handset hardware is no longer seen as a source of profits, but is treated as a distribution channel for digital products and services.

… <two long sections about “Dual Disruption Patterns in Computing” and “Impact of Value Chain Integration on Business Model Evolution” which are quite important to prove the author’s prediction about the inevitability of the third wave of mobile handset industry disuption, but for us here it is sufficient for our subject to include his “Third Disruption” discussion> …

The Third Disruption: Hardware as a Distribution Channel

As there will be fewer profits left in the handset industry, a third wave of disruption is a certainty.

In the PC industry, once the dominance of modular architectures led to deep commoditization, hardware just became a distribution channel for software (the operating system and applications). The evolution of the mobile handset industry works out slightly differently. Google essentially destroyed the software licensing business model by giving the Android operating system away for free. Consequently, the cost of owning a proprietary operating system became unviable for most players (like Motorola, Sony Ericsson or Nokia) because hardware margins became severely pressured. This ensured that industry focus and profitability would accrue to the next layer of the value chain that was underserved, i.e. Google’s core business – online services.

In the PC industry, OEMs like Dell and Sony used the “hardware as distribution” approach to charge software vendors to pre-install applications on their devices and boost margins. In the mobile industry, we have seen already numerous companies follow this model to create a competitive advantage by leveraging established ecosystems. Many service companies like Baidu, Dropbox, Opera, Facebook and Whatsapp have attempted this strategy by partnering with OEMs to pre-install or use their services by default.

Another variation of this strategy, followed by services and content companies, is selling relatively high-end hardware at cost, in order to enable deeper penetration of the company’s core services. Companies like Amazon and Xiaomi compete asymmetrically with true hardware vendors in order to expand their consumer base. Both strategies have been quite successful – Amazon has expanded Kindle Fire availability to numerous countries based on strong sales and Xiaomi expects to double its handset sales to 15 million this year [to 20 million, see p. 25 of my The Upcoming Mobile Internet Superpower mini e-book]. Many more services companies like Evernote and Spotify are contemplating the low-cost, “hardware as distribution” strategy in the future. We have already seen a smartphone called SmartNamo dedicated to an Indian politician, Narendra Modi. Will we see a “Justin Bieber phone”, “Shah Rukh Khan phone” or even a “Real Madrid phone”?

Rapid commoditization will only make it easier for companies to convert hardware into a distribution channel. The tablet industry has seen more price competition than the smartphone market in the absence of carrier-driven price distortions. As a result, commoditization has been much more rapid and the “hardware as distribution” model has come to the forefront in a very narrow time frame. Low-cost tablet hardware has allowed companies like Newscorp to enter the industry with preloaded, education-focused content. We have seen similar models emerge in South Africa, India, China and many more countries. As price competition increases, commoditization pressure in the smartphone industry, variations of “hardware as distribution”, could become one of the primary drivers of profitability.

The expected shift in handset business models will reshuffle the deck once again. Companies that catch the trend early will find plenty of opportunities to create competitive advantages and thrive in the new environment. Those who miss it will be destined to fight the losing battle of “competition to the best”, which Prof. Porter calls “the granddaddy of all strategy mistakes”.

On pp. 32-33 of my The Upcoming Mobile Internet Superpower mini e-book [Aug 14, 2013] it was further noted that:

China Daily reported not less than 14 months ago that Xiaomi, China’s Apple success story?

The broader vision of Xiaomi, Lei [Jun, chairman and chief executive officer of Xiaomi Corp] pointed out, is to ship more than 100 million smartphones annually for one model by 2016.

“I know it (the vision) is crazy, but we would like to have a try,” said Lei. Cupertino-based Apple managed to sell more than 90 million iPhone devices last year. It is widely believed that Apple will break the 100 million unit mark this year, although it has been less than five years since the first iPhone launched in 2007.

The difference in business model was even more clearly communicated in this recent interview: Xiaomi CEO: Don’t call us China’s Apple [Reuters TV YouTube channel, Aug 15, 2013]

Aug. 15 – China’s Xiaomi has sparked a frenzy with a low-cost smartphone that may help the tech firm widen its lead over Apple in the local market — but CEO Lei Jun says it has very different ambitions.

This shows very well how the above mentioned third disruption could fundamentally alter the current state of mobile intelligent devices market. As far as our subject is concerned my three other posts are giving further clues about growing Microsoft difficulties:


Watch also a recent video report closely related to that: In China smartphone market, cheap rules – and Apple suffers [Reuters TV YouTube channel, Aug 19, 2013]

Aug. 19 – Apple’s seen its market share in China dwindle as homegrown smartphone makers crank out feature-packed budget models. Could the launch of a cheaper iPhone restore its flagging fortunes?

Consider also Apple and Samsung Losing Share to Chinese Smartphone Makers [China Internet Watch, Aug 7, 2013]

image

The high-end players like Apple and Samsung are losing share to Chinese manufacturers like ZTE, Huawei, and Lenovo, and no-name brands which are willing to make extremely cheap smartphones. As you can see in the picture, Samsung’s Q2 share in 2013 is 1% lesser than that of 2012, and Apple decreases 3.6% share, while Chinese manufacturers grow 3.5%.

Android to overtake the overall PC market?

I came to this after the recent posts of mine (between July 20 and August 17, 2013):

as well as after the accumulated contents of my separated website on the whole issue of ‘USD99 Allwinner’ devoted to a multifaceted disruption to not only the traditional PC market but even to the current tablet market as the analyst companies are viewing that.

Those analyst companies are already hinting indirectly to the possibility of Android (sooner or later) overtaking the overall PC market via the following headlines which I derived from their recent press release contents:

  • IDC: ‘Tablets will surpass portable PC volumes already this year’
  • Gartner: ‘Traditional PC shipments to decline as tablets are becoming the primary consumption device’
  • Digitimes Research: ‘Overtaking iPad will happen in 2H13’
  • Canalys says ‘Yes’
  • EnfoDesk (Analysys International) from China says ‘For sure, as it is already happening against the iPad in China even at a nascent stage of the local tablet market’

You can read those release in the detailed sections given below.

Before that first note: Everything is rooted in the established fact that: TrendForce: iPad Marked Historically Low Market Share 35% of Global Q2 Tablet Shipment [press release, July 25, 2013] (although the exact number differs between the different market research organisations, as you will see in the detailed sections below)

image

According to the survey by WitsView, the display research division of the global market intelligence provider TrendForce, the global shipment of the 7” tablets with WSVGA resolution and above attained 41.1 million units, dropping 12.4% from the previous quarter. The seasonal factor, the generation shuffles for some mainstream products, and the inventory adjustments amid the weakening sales were all key reasons for declining shipments.

WitsView’s research director Eric Chiou says that Apple, as one single brand that controls the most volumetric tablet shipment, saw its 9.7” iPad entering the end of life cycle in Q2, and iPad mini’s relatively selling prices caused slow sales and the impacts from the inventory adjustments, leading to a dropping shipment of 14.6 million units compared with 19.5 million units in Q1. On top of the quarterly drop as high as 25%, its market share has dropped to 35.5%, the new historical low.

Samsung’s ambition of boosting the tablet shipment was also shown on the Q2 shipment. Despite its slightly decreased shipment of 8.8 million units from the previous quarter, the Korean maker’s market share, supported by the newly launched 8” model, grew from 20.2% to 21.5%, still a remarkable result. As for the two leading PC brands, Asus and Acer, their business cores both were placed on the under-$130 7” products, and the price-cutting strategy helped them become the two of a few brands counter to the declining trend, seeing excellent QoQ growth of 60% and 36%, respectively.

“The two long-term winners of the entry-level tablet segment, Amazon and Google, showed unideal shipment results, holding shipment volumes of only 1.1 million and 0.9 million units, respectively,” Chiou indicates. Amazon’s 2013 new models are all concentrated after September and the brand is in an empty-product period, while Google’s fighter model Nexus 7 had the 1st generation approach the end of life cycle in Q2 and saw a significantly dropping shipment. The single-quarter shipment will bounce back to more than 2 million units in Q3 as the 2nd generation product is projected to ship smoothly.

The white-box tablet couldn’t avoid the decline in Q2. The price increases and the short supply for the key component RAM led to double strikes of cost increase and insufficient supply to white-box tablets that had smaller production scales, in addition to brands’ strongly promoted entry-level tablets that squeezed their room for survival. Under both the internal and external impacts, the white-box tablet saw a shipment volume of only 9.7 million units, declining 7% QoQ

Based on WitsView’s analysis, on top of Amazon’s yearly new 7” model and the 2nd generation of Nexus 7, several highly-anticipated models will be revealed in Q3, including Apple’s heavyweight Generation 5 iPad and the new Android 10.1” tablet intensively designed by PC brands. With the stimulation of improved spec and tempting prices, the Q3 shipment is projected to reach an amount of 49.6 million units, challenging a QoQ growth of 21%. The tablet shipment for the entire 2013 is estimated at 196.5 million units, including 153.2 million units of brand tablets and 43.3 million units of white-box tablets.

The second well established fact affecting the future is that Surface RT was a huge market failure first recognized indirectly via the FORM 10-K submission of the Microsoft on July 18, 2013.

… The general availability of Surface RT and Windows 8 started on October 26, 2012. The general availability of Surface Pro started on February 9, 2013. …

ITEM 6. SELECTED FINANCIAL DATA

includes a charge for Surface RT inventory adjustments recorded in the fourth quarter of fiscal year 2013, which decreased operating income by $900 million, net income by $596 million, and diluted earnings per share by $0.07. …

RESULTS OF OPERATIONS

  • Cost of revenue increased $2.7 billion or 16%, reflecting increased product costs associated with Surface and Windows 8, including an approximately $900 million charge for Surface RT inventory adjustments, higher headcount-related expenses, payments made to Nokia related to joint strategic initiatives, royalties on Xbox LIVE content, and retail stores expenses, offset in part by decreased costs associated with lower sales of Xbox 360 consoles and decreased traffic acquisition costs.
  • Sales and marketing expenses increased $1.4 billion or 10%, reflecting advertising of Windows 8 and Surface.

Windows Division

Fiscal year 2013 compared with fiscal year 2012

Windows Division revenue increased $839 million. Surface revenue was $853 million. …

Cost of revenue increased $1.8 billion, reflecting a $1.6 billion increase in product costs associated with Surface and Windows 8, including a charge for Surface RT inventory adjustments of approximately $900 million. Sales and marketing expenses increased $1.0 billion or 34%, reflecting an $898 million increase in advertising costs associated primarily with Windows 8 and Surface.

The possibility of such failure was already recognized in my other posts:


IDC: ‘Tablets will surpass portable PC volumes already this year’

IDC Forecasts Worldwide Tablet Shipments to Surpass Portable PC Shipments in 2013, Total PC Shipments in 2015 [press release, May 28, 2013]

image

According to a new forecast from the International Data Corporation (IDC) Worldwide Quarterly Tablet Tracker, tablet shipments are expected to grow 58.7% year over year in 2013 reaching 229.3 million units, up from 144.5 million units last year. IDC now predicts tablet shipments will exceed those of portable PCs this year, as the slumping PC market is expected to see negative growth for the second consecutive year. In addition, IDC expects tablet shipments to outpace the entire PC market (portables and desktops combined) by 2015. (A press release summarizing IDC’s latest PC market forecast can be found here.)

“What started as a sign of tough economic times has quickly shifted to a change in the global computing paradigm with mobile being the primary benefactor,” said Ryan Reith, Program Manager for IDC’s Mobility Trackers. “Tablets surpassing portables in 2013, and total PCs in 2015, marks a significant change in consumer attitudes about compute devices and the applications and ecosystems that power them. IDC continues to believe that PCs will have an important role in this new era of computing, especially among business users. But for many consumers, a tablet is a simple and elegant solution for core use cases that were previously addressed by the PC.”

While Apple has been at the forefront of the tablet revolution, the current market expansion has been increasingly fueled by low-cost Android devices. In 2013, the worldwide average selling price (ASP) for tablets is expected to decline -10.8% to $381. In comparison, the ASP of a PC in 2013 is nearly double that at $635. IDC expects tablet prices to decline further, which will allow vendors to deliver a viable computing experience into the hands of many more people at price points the PC industry has strived to meet for years.

“Apple’s success in the education market has proven that tablets can be used as more than just a content consumption or gaming device,” said Jitesh Ubrani, Research Analyst for the Worldwide Quarterly Tablet Tracker. “These devices are learning companions, and as tablet prices continue to drop, the dream of having a PC for every child gets replaced with the reality that we can actually provide a tablet for every child.”

In addition to lower prices, another major shift in the tablet market has occurred around screen sizes. Apple’s first generation iPad, which included a 9.7-inch display, was perceived by many as the sweet spot for tablets. That is, until 7-inch Android-based tablets began to gain traction in the market. Apple responded with the iPad mini in the fourth quarter of 2012, and in the space of two quarters the sub-8-inch category exploded to overtake the larger-sized segment in terms of total shipments.

Worldwide Tablet Market Share by Screen Size Band, 2011 – 2017

Screen Size

2011

2013

2017

< 8″

27%

55%

57%

8″ – 11″

73%

43%

37%

11″+

0%

2%

6%

Total

100%

100%

100%

Source: IDC Worldwide Tablet Tracker, May 28, 2013.

* Forecast Data

Table Notes:

  • Shipments include shipments to distribution channels or end users. OEM sales are counted under the vendor/brand under which they are sold.
  • IDC considers all LCD-based slate devices with screens between 7 and 16 inches as tablets, regardless of whether or not they include a removable keyboard (such as the Surface RT). Convertible devices with non-removable keyboards (such as Lenovo’s Yoga) are not counted as Tablets.

Tablet Shipments Slow in the Second Quarter As Vendors Look To Capitalize on a Strong Second Half of 2013, According to IDC [press release, Aug 5, 2013]

image

As expected, worldwide tablet shipment growth slowed in the second quarter of 2013 (2Q13), according to preliminary data from the International Data Corporation (IDC)Worldwide Quarterly Tablet Tracker. Worldwide tablet shipments finally experienced a sequential decline as total volumes fell -9.7% from 1Q13. However, the 45.1 million units shipped in the second quarter was up 59.6% from the same quarter in 2012, when tablet vendors shipped 28.3 million devices.

Lacking a new product launch in March to help spur shipments, Apple’s iPad saw a lower-than-predicted shipment total of 14.6 million units for the quarter, down from 19.5 million in 1Q13. In years past, Apple has launched a new tablet heading into the second quarter, which resulted in strong quarter-over-quarter growth. Now, Apple is expected to launch new tablet products in the second half of the year, a move that better positions it to compete during the holiday season. Meanwhile, the other two vendors in the top 3 also saw a decline in their unit shipments during the quarter. Second-place Samsung shipped 8.1 million units, down from 8.6 million in the first quarter of 2013, although up significantly from the 2.1 million units shipped in 2Q12. And third-place ASUS shipped a total of 2.0 million units in 2Q13, down from 2.6 million in 1Q13.

“A new iPad launch always piques consumer interest in the tablet category and traditionally that has helped both Apple and its competitors,” said Tom Mainelli, Research Director, Tablets at IDC. “With no new iPads, the market slowed for many vendors, and that’s likely to continue into the third quarter. However, by the fourth quarter we expect new products from Apple, Amazon, and others to drive impressive growth in the market.”

Not all vendors experienced a slowdown during the quarter. PC stalwarts Lenovo and Acer both re-entered the top five this quarter. Lenovo continued to make headway into the world of mobility and for the first time had shipments surpass the million unit mark in a quarter, shipping a total of 1.5 million devices. This was up 313.9% from a year ago and enough to capture 3.3% market share. Rounding out the top 5 was Acer, which shipped 1.4 million tablets in 2Q13 for 247.9% year-over-year growth and an increase of 35.4% over the first quarter of 2013.

“The tablet market is still evolving and vendors can rise and fall quickly as a result,” said Ryan Reith, Program Manager for IDC’s Mobility Tracker programs. “Apple aside, the remaining vendors are still very much figuring out which platform strategy will be successful over the long run. To date, Android has been far more successful than the Windows 8 platform. However, Microsoft-fueled products are starting to make notable progress into the market.”

Top Five Tablet Vendors, Shipments, and Market Share, Second Quarter 2013 (Shipments in millions)

Vendor
2Q13 Unit Ship-ments
2Q13 Market Share
2Q12 Unit Ship-ments
2Q12 Market Share
Year-over-Year Growth
1. Apple
14.6
32.4%
17.0
60.3%
-14.1%
2.Samsung
8.1
18.0%
2.1
7.6%
277.0%
3. ASUS
2.0
4.5%
0.9
3.3%
120.3%
4. Lenovo
1.5
3.3%
0.4
1.3%
313.9%
5. Acer
1.4
3.1%
0.4
1.4%
247.9%
Others
17.5
38.8%
7.4
26.2%
136.6%
Total
45.1
100.0%
28.3
100.0%
59.6%

Source: IDC Worldwide Tablet Tracker, August 5, 2013.

See additional Table Notes following the last table.

Top Tablet Operating Systems, Shipments, and Market Share, Second Quarter 2013 (Shipments in Millions)

Vendor
2Q13 Unit Ship-ments
2Q13 Market Share
2Q12 Unit Ship-ments
2Q12 Market Share
Year-over-Year Growth
1. Android
28.2
62.6%
10.7
38.0%
162.9%
2. iOS
14.6
32.5%
17.0
60.3%
-14.1%
3.Windows
1.8
4.0%
0.3
1.0%
527.0%
4. Windows RT
0.2
0.5%
N/A
N/A
N/A
5.BlackBerry OS
0.1
0.3%
0.2
0.7%
-32.8%
Others
0.1
0.2%
N/A
N/A
N/A
Total
45.1
100.0%
28.3
100.0%
59.6%

Source: IDC Worldwide Tablet Tracker, August 5, 2013

Table Notes:

  • All data are preliminary and subject to change. Vendor shipments are branded shipments and exclude OEM sales for all vendors.
  • Some IDC estimates prior to financial earnings reports.
  • Shipments include shipments to distribution channels or end users. OEM sales are counted under the vendor/brand under which they are sold.
  • IDC considers all LCD-based slate devices with screens between 7 and 16 inches as tablets, regardless of whether or not they include a removable keyboard (such as the Surface RT). Convertible devices with non-removable keyboards (such as Lenovo’s Yoga) are not counted as Tablets.


Gartner: ‘Traditional PC shipments to decline as tablets are becoming the primary consumption device’

Gartner Says Worldwide PC, Tablet and Mobile Phone Shipments to Grow 5.9 Percent in 2013 as Anytime-Anywhere-Computing Drives Buyer Behavior [press release, June 24, 2013]

Traditional PC Shipments to Decline 10.6 Percent in 2013, While Tablet Shipments Increase 67.9 Percent

Worldwide devices (the combined shipments of PCs, tablets and mobile phones) are projected to reach 2.35 billion units in 2013, a 5.9 percent increase from 2012, according to Gartner, Inc. The market is being driven by sales in tablets, smartphones, and to a lesser extent, ultramobiles, as PC shipments are on the decline.

Worldwide traditional PC (desk-based and notebook) shipments are forecast to total 305 million units in 2013, a 10.6 percent decline from 2012 , while the PC market including ultramobiles is forecast to decline 7.3 percent in 2013 (see Table 1). Tablet shipments are expected to grow 67.9 percent, with shipments reaching 202 million units, while the mobile phone market will grow 4.3 percent, with volume of more than 1.8 billion units. The sharp decline in PC sales recorded in the first quarter was the result in a change in preferences in consumers’ wants and needs, but also an adjustment in the channel to make room for new products hitting the market in the second half of 2013.

“Consumers want anytime-anywhere computing that allows them to consume and create content with ease, but also share and access that content from a different portfolio of products. Mobility is paramount in both mature and emerging markets,” said Carolina Milanesi, research vice president at Gartner.

Table 1
Worldwide Devices Shipments by Segment (Thousands of Units)

Device Type

2012

2013

2014

PC (Desk-Based and Notebook)

341,273

305,178

289,239

Ultramobile

9,787

20,301

39,824

Tablet

120,203

201,825

276,178

Mobile Phone

1,746,177

1,821,193

1901,188

Total

2,217,440

2,348,497

2,506,429

Source: Gartner (June 2013)

Demand for ultramobiles (which includes Chromebooks, thin and light clamshell designs, and slate and hybrid devices running Windows 8) will come from upgrades of both notebooks and premium tablets, such as the Apple iPad or Galaxy Tab10.1. Analysts said ultramobile devices are gaining in attractiveness and drawing demand away from other devices. This will be even more evident in the fourth quarter of 2013 when the combination of new design based on Intel processors Bay Trail and Haswell running on Windows 8.1 will hit the market. Although these devices will only marginally help overall sales volumes initially, they are expected to help vendors increase average selling prices (ASPs) and margins.

The tablet and smartphone markets are facing some challenges as these devices gain longer life cycles. There has also been a shift as many consumers go from premium tablets to basic tablets. The share of basic tablets is expected to increase faster than anticipated, as sales of the iPad Mini already represented 60 percent of overall iOS tablet sales in the first quarter of 2013.

“The increased availability of lower priced basic tablets, plus the value add shifting to software rather than hardware will result in the lifetimes of premium tablets extending as they remain active in the household for longer. We will also see consumer preferences split between basic tablets and ultramobile devices,” said Ranjit Atwal, research director at Gartner. “With mobile phones, volume expectations for 2013 have been brought down as the life cycles lengthen as consumers wait for new models and lower prices to hit the market in the Fall and holiday season. The challenge in the smartphone market is also that, as penetration moves more and more to the mass market, price points are lowering and in most cases so do margins.”

“Although the numbers seem to paint a clear picture of who the winner will be when it comes to operating systems (OS) in the device market (see Table 2), the reality is that today ecosystem owners are challenged in having the same relevance in all segments,” said Ms. Milanesi. “Apple is currently the more homogeneous presence across all device segments, while 90 percent of Android sales are currently in the mobile phone market and 85 percent of Microsoft sales are in the PC market.”

Table 2
Worldwide Devices Shipments by Operating System (Thousands of Units)

Operating System

2012

2013

2014

Android

505,509

866,781

1,061,270

Windows

346,464

339,545

378,142

iOS/MacOS

212,878

296,356

354,849

RIM

34,584

25,224

22,291

Others

1,118,004

820,592

689,877

Total

2,217,440

2,348,497

2,506,429

Source: Gartner (June 2013)

Additionally, with enterprises’ growing acceptance of bring your own device (BYOD), there is an increase in consumer-owned devices in the computing world. Gartner forecasts that computing devices bought by consumers will grow from 65 percent in 2013 to 72 percent in 2017. This signifies the growing importance of designing for the consumer inside the enterprise.

Gartner’s detailed market forecast data is available in the report, “Forecast: Devices by Operating System and User Type, Worldwide, 2010-2017, 2Q13 Update.” The report is on Gartner’s website athttp://www.gartner.com/resId=2524916.

Gartner Says Worldwide PC Shipments in the Second Quarter of 2013 Declined 10.9 Percent [press release, July 10, 2013]

PC Industry Continues to Shrink as the Installed Base Restructures to Accommodate Tablets as the Primary Consumption Device

Worldwide PC shipments dropped to 76 million units in the second quarter of 2013, a 10.9 percent decrease from the same period last year, according to preliminary results by Gartner, Inc. This marks the fifth consecutive quarter of declining shipments, which is the longest duration of decline in the PC market’s history.

All regions showed a decline compared to a year ago. The fall in the Asia/Pacific PC market continued, showing five consecutive quarters of the shipment decline, while the EMEA PC market registered two consecutive quarters of double-digit decline.

“We are seeing the PC market reduction directly tied to the shrinking installed base of PCs, as inexpensive tablets displace the low-end machines used primarily for consumption in mature and developed markets,” said Mikako Kitagawa, principal analyst at Gartner. “In emerging markets, inexpensive tablets have become the first computing device for many people, who at best are deferring the purchase of a PC. This is also accounting for the collapse of the mini notebook market.”

HP and Lenovo’s neck-and-neck competition continued. This time, Lenovo was back in the top position by only a small difference in share (see Table 1). Lenovo showed mixed regional results, as it experienced strong growth in the Americas and EMEA, while showing a major decline in Asia/Pacific. Weakness in China was most likely the contributor of Lenovo’s shipment decline in the region as the majority of Lenovo’s volume came from China.

While HP was slightly behind Lenovo, HP is a market leader in key regions including the U.S., EMEA and Latin America. Asia/Pacific has been a weakness the last three years for HP, but preliminary second quarter results suggest an improvement of their performance in the region.

Table 1
Preliminary Worldwide PC Vendor Unit Shipment Estimates for 2Q13 (Units)

Company
2Q13 Ship-ments
2Q13 Market Share (%)
2Q12 Ship-ments
2Q12 Market Share (%)
2Q12-2Q13 Growth (%)
Lenovo
12,677,265
16.7
12,755,068
14.9
-0.6
HP
12,402,887
16.3
13,028,822
15.3
-4.8
Dell
8,984,634
11.8
9,349,171
11.0
-3.9
Acer Group
6,305,000
8.3
9,743,663
11.4
-35.3
ASUS
4,590,071
6.0
5,772,043
6.8
-20.5
Others
31,041,130
40.8
34,675,824
40.6
-10.5
Total
76,000,986
100.0
85,324,591
100.0
-10.9

Note: Data includes desk-based PCs and mobile PCs, including mini-notebooks but not media tablets such as the iPad.

Source: Gartner (July 2013)

Dell’s shipments declined compared to a year ago, but its 2Q13 results showed a smaller decline than the past several quarters. Dell showed good growth in the U.S. and Japan, but struggled to increase shipments in Asia/Pacific and EMEA. Both Acer and ASUS showed steep declines compared to the second quarter last year. The decline was partly affected by their strategies to exit the mini-notebook market.

“While Windows 8 has been blamed by some as the reason for the PC market’s decline, we believe this is unfounded as it does not explain the sustained decline in PC shipments, nor does it explain Apple’s market performance,” Ms. Kitagawa said.

In the U.S. market, PC shipments totaled 15 million units in the second quarter of 2013, a 1.4 percent decline from the second quarter of 2012 (see Table 2). This decline was less than the past seven quarters, and the market grew 8.5 percent sequentially.

“Our preliminary results indicate that this reduced market decline was attributed to solid growth in the professional market,” Ms. Kitagawa said. “Three of the major professional PC suppliers, HP, Dell and Lenovo, all registered better than U.S. average growth rate. The end of Windows XP support potentially drove the remaining PC refresh in the U.S. professional market.” 

Table 2
Preliminary U.S. PC Vendor Unit Shipment Estimates for 2Q13 (Units)

Company
2Q13 Ship-ments
2Q13 Market Share (%)
2Q12 Ship-ments
2Q12 Market Share (%)
2Q12-2Q13 Growth (%)
HP
3,957,761
26.4
3,976,041
26.2
-0.5
Dell
3,681,725
24.6
3,458,736
22.8
6.4
Apple
1,740,500
11.6
1,818,959
12.0
-4.3
Lenovo
1,515,562
10.1
1,266,109
8.3
19.7
Toshiba
848,984
5.7
1,006,900
6.6
-15.7
Others
3,230,717
21.6
3,659,220
24.1
-11.7
Total
14,975,249
100.0
15,185,965
100.0
-1.4

Note: Data includes desk-based PCs and mobile PCs, including mini-notebooks but not media tablets such as the iPad.

Source: Gartner (July 2013)

PC shipments in Europe, Middle East and Africa (EMEA) were weakened in the second quarter of 2013, with a 16.8 per cent decline over the same period last year, marking the fifth consecutive quarter of decreasing shipments.

“The sharp decline in the second quarter of 2013 was partly due to the shift in usage patterns away from notebooks to tablets, and partly because the PC market was exposed to inventory reductions in the channel due to the start of the transition to new Haswell-based products,” said Isabelle Durand, principal research analyst at Gartner. “Touch-based notebooks still account for less than 10 per cent of the total consumer notebook shipments in the last quarter.”

“Shipment levels remained weak in Western Europe in the second quarter of 2013 as PC replacement rates continued to be extremely low, while the challenging economic environment is muting spending in consumer markets,” said Ms Durand. “Shipments in Eastern Europe also remained low as this is typically a quiet quarter for business buyers in the region, and consumers are predominantly looking for Android-based tablets. In the Middle East and Africa, tablet and smartphone adoption also continued to draw demand away from PCs in the second quarter of 2013.”

Despite the steep shipment decline, HP retained the top position in EMEA due to better results in the professional PC market. Lenovo was the only top five vendor to exhibit shipment growth, recording a fourth consecutive quarter of growth and taking second place in the EMEA PC vendor rankings in the second quarter of 2013.

Acer exhibited the worst performance of the second quarter with a shipment decline of 38.5 percent year-on-year. Most of Acer’s decline resulted from its portfolio shifting away from netbooks to Android tablets. ASUS also experienced a PC shipment decline in the second quarter 2013. The drop of its netbooks continued to impact its overall notebook results.

Table 3

Preliminary EMEA PC Vendor Unit Shipment Estimates for 2Q13 (Units)

Company
2Q13 Ship-ments
2Q13 Market Share (%)
2Q12 Ship-ments
2Q12 Market Share (%)
2Q12-2Q13 Growth (%)
HP
3,779,160
17.8
4,683,376
18.3
-19.3
Lenovo
2,641,622
12.4
2,180,362
8.5
21.2
Acer Group
2,456,255
11.5
3,995,518
15.6
-38.5
Dell
1,979,895
9.3
2,173,552
8.5
-8.9
ASUS
1,743,345
8.2
2,670,268
10.4
-34.7
Others
8,675,143
40.8
9,864,285
38.6
-12.1
Total
21,275,420
100.0
25,567,361
100.0
-16.8

Notes: Data includes desk-based PCs and mobile PCs, including x86 tablets equipped with Windows 8. All data is estimated, based on a preliminary study. Final estimates will be subject to change. The statistics are based on the shipments selling into channels.

Source: Gartner (July 2013)

In Asia/Pacific, PC shipments surpassed 26.8 million units in the second quarter of 2013, an 11.5 percent decline from the first quarter of 2012. All country markets across the region showed weakness, but India performed slightly better due to a state PC tender fulfillment. China’s PC shipment remained weak as the consumer market was hampered with lack of new demand generation programs, such as subsidized PC program in the rural cities.

These results are preliminary. Final statistics will be available soon to clients of Gartner’s PC Quarterly Statistics Worldwide by Region program. This program offers a comprehensive and timely picture of the worldwide PC market, allowing product planning, distribution, marketing and sales organizations to keep abreast of key issues and their future implications around the globe. Additional research can be found on Gartner’s Computing Hardware section on Gartner’s website at http://www.gartner.com/it/products/research/asset_129157_2395.jsp.


Digitimes Research: ‘Overtaking iPad will happen in 2H13’

Digitimes Research: iPad sees its first on-year shipment drop in 2Q13 [July 29, 2013]

image

Global tablet shipments reached 29.32 million units in the second quarter of 2013, down 8.2% sequentially, but still up 46.6% compared to the same period a year ago. As overall market demand is declining, both iPad and non-iPad product shipments have been impacted. Because of the iPad mini’s significant shipment drop, Apple’s tablet shipments in the second quarter were only 14.6 million units, down 25.1% sequentially and 2.7% on year, according to Digitimes Research’s latest figures.

As for non-iPad tablet shipments, non-Apple brand vendors’ new products and the second-generation Nexus 7 have both contributed to the volume, helping it to grow 18.5% on quarter and reach 14.72 million units. However, since Samsung Electronics and Lenovo have both increased their in-house production rates, Taiwan’s share of global tablet shipments dropped below 70% in the second quarter with shipments of only 20.38 million units, Digitimes Research figures showed.

In terms of brand vendors’ ranking, Apple and Samsung Electronics were the top-two players, followed by Asustek Computer third, Lenovo fourth and Acer sixth. As for processor rankings, MediaTek was the third-largest supplier in the second quarter thanks to its strategy of pushing mainly in the entry-level segment, only behind Apple and Texas Instruments (TI). Nvidia was the fourth largest with Samsung and Intel following closely behind.

Digitimes Research: Tablet shipments to grow 17.7% on year in 2H13 [Aug 6, 2013]

image

Tablet shipments in the second half are expected to reach 82.07 million units, up 17.7% on year; however, several changes will also occur during the period: hardware brand vendors will dominate the small-size tablet segment; non-iPad tablet shipments will surpass those of iPad; closed Android platforms will be impacted by the official Android platform; and Qualcomm and MediaTek will replace Texas Instruments (TI) and Nvidia in the non-Apple camp, according to Digitimes Research’s latest figures.

Small-size devices are expected to become mainstream products of the tablet market, accounting for 70% of total shipments in the second half. Non-iPad tablet shipments are also expected to surpass those of iPad and reach 45.07 million units. With the non-iPad camp’s strong shipments, over 50% of global tablets will adopt the Android operating system in the second half, Digitimes Research estimates.

Android’s large market share will also strongly impact closed Android platforms such as Amazon’s operating system for its tablets due to lack of key application support.

The Retina display-featured iPad mini may not appear before the end of 2013 due to the panel’s weak yield rate and the possibility that the device may undermine sales of the new high-end iPad. As a result, Apple’s shipments in the second half may drop to 37 million units with an on-year growth of 3%.

As for Windows-based tablets, although Microsoft is offering more price cuts for its Small Screen Touch (SST) program, the deal is unlikely to help push vendors to release Windows-based devices and the platform will only account for 3.8% of second-half tablet shipments.

Qualcomm became the processor supplier of the second-generation Nexus 7 and the third-generation Kindle Fire, replacing Nvidia and TI. Qualcomm will ship close to 10 million processors in the second half of 2013, becoming the largest CPU supplier of the non-Apple camp. MediaTek, thanks to its hardware brand clients’ small-size tablet orders, will become the second largest supplier, followed by Samsung Electronics and Intel, both of whom will ship over seven million units.

Taiwan makers’s tablet shipments will reach 59.45 million units in the second half, but as Samsung and Lenovo are increasing their in-house production rates, Taiwan makers’ share of global tablet shipments will drop to around 70%. As ODMs are aggressively competing for orders, Apple, Amazon and Asustek Computer will no longer place most of their orders with only Foxconn Electronics (Hon Hai Precision Industry) and Quanta Computer and will spread out their orders more evenly, Digitimes Research believes.


Canalys says ‘Yes’

Small tablets drive big share gains for Android [Canalys press release, Aug 1, 2013]
– Android overtakes iOS with 53% market share in tablets

Over 34 million tablets shipped in Q2 2013, a 43% year-on-year increase. Tablets now account for 31% of worldwide PC shipments. But Apple’s performance faltered. Its tablet shipments declined 14% on Q2 2012 and its market share dropped to 43%. The chasing pack of Samsung, Amazon, Lenovo and Acer each grew annually by over 200%, driven by increasing demand for small-screen tablets. Canalys estimates that 68% of tablets shipped in Q2 had a screen size smaller than 9″. ‘Consumers have been evaluating tablets and the results are now in,’ said Tim Coulling, Canalys Senior Analyst. ‘With touch-screens contributing to a high proportion of the build cost of a tablet, small-screen products can be priced very aggressively.’

image

Apple’s decline in shipments and share has been partly attributed to its aging portfolio. But Canalys believes that new product launches will have less impact on its shipments in future. ‘When Apple does decide to refresh its iPad range it will not experience the buzz of previous launches,’ said Canalys Analyst James Wang. ‘Tablets are now mainstream products and hardware innovation is increasingly difficult. With branded Android tablets available for less than $150, the PC market has never been so good for consumers, who are voting with their wallets.’ The move to smaller tablets has sparked a price war that has real consequences for the entire supply chain. These products generate little absolute margin for channel partners, vendors or component manufacturers. Content, applications and accessories (especially cases and keyboards) are now even more important to boost margins – areas where Apple remains a leader.

In addition to disappearing margins, inventory management is emerging as a major challenge. If a vendor overcommits at the product planning stage, unsold inventory can play havoc with a company’s balance sheet, even with other hit products in a portfolio. The market for full-sized tablets has stalled and even Apple has found it harder to sell its larger iPads in recent quarters. ‘Microsoft’s inventory issues with the Surface have been well publicized,’ said Coulling. ‘Heavily discounted Surface RTs will fly off the shelves. Expect prices to continue to fall though, as the starting price of $350 is still too expensive to spark an HP TouchPad-style buying frenzy.’

Despite its 53% share, Android still lags far behind iOS in the availability of fully-optimized tablet apps, and tablet app downloads from the Apple App Store dwarf those from Google Play. But Android is expected to continue to close the ecosystem lead iOS has in tablets and increase share in coming quarters. ‘Developers can and will quickly switch their priorities as different opportunities evolve and improve,’ said Canalys Senior Analyst Tim Shepherd. ‘We expect to see a substantial increase in the quantity, as well as the quality, of apps built or optimized for Android tablets over the next 12 months, as Google brings more attention to them through improvements to the Play store, and as the addressable base of devices continues to soar.’

While it is true that Apple is losing its stranglehold on the tablet market in terms of volume, it will remain its most profitable vendor for years to come. Apple has already faced a similar battle in the smart phone market, and it now looks increasingly likely that it is readying a product that can address lower price tiers and high-growth markets in that space. If this is indeed the case, Apple could replicate a similar portfolio play in the tablet market. It will be in no rush – after all, the launch of the iPad mini was designed to address this segment. But its hand could be forced if competitors’ prices continue to plummet. The margin models in the smart phone and tablet markets are very different. It will still make good margin on a cheaper iPhone but will struggle to do so with a cheaper tablet, and would instead need to rely increasingly on accessory sales and, likely, subsidy from apps and content purchases.

PC market flat in Q2 2013, despite tablet growth [Canalys press release, Aug 6, 2013]
– Android takes 17% of PC market in Q2 as PC vendors turn to Google for tablets

The worldwide PC market experienced a quarter without growth, as a 42.9% increase in tablet shipments was offset by declines in desktop and notebook shipments, which fell 7.4% and 13.9% respectively. Despite tablet growth slowing in Q2, Canalys still believes that tablets will outsell notebooks by Q4 of this year.

image

PC shipments in EMEA fell by 3% year-on-year in Q2, the first decline after two successive quarters of double-digit growth. Western Europe and Central and Eastern Europe continue to be challenging for vendors, with annual declines of 10% and 3% respectively. PC shipments in the Asia Pacific region declined 0.5% year-on-year to just over 40 million units. The region was badly affected by slow shipments in the People’s Republic of China, which accounted for almost 45% of the region’s shipments and declined by approximately 6%. Demand for smart phones and tablets is increasing around the world. Faced by an industry in transition, channel partners are exercising caution when planning and placing orders.

Apple remained the top PC vendor in Q2, with a 4.5 million unit lead over second-placed Lenovo. But Apple’s share fell more than two percentage points to 17.1% from 19.4% in Q2 last year due an annual decrease in iPad shipments. Desktop and notebook shipments only accounted for around 20% of its total PC shipments. With tablet vendors attacking Apple on price it must bring fresh innovation to future generations of its iPad range if it is to maintain the lead it has built in the PC market.

Lenovo had a strong quarter, gaining share in its core notebook and desktop categories, as well as tablets. Its performance in Q2 was helped by strong annual growth in EMEA (34%), the US (28%) and Latin America (93%). Lenovo’s tablet business also performed well – it shipped around 1.5 million units. ‘It is striking how successful it has been in globalizing its PC business and breaking the 1 million unit barrier is an important milestone for its tablet shipments,’ noted Canalys Analyst James Wang. ‘Lenovo is on an upward curve with its tablets, expanding in mainland China and Latin America, where there is little competition from the likes of Google or Amazon.’

HP has overtaken Samsung to regain third place. HP has recently changed its tablet strategy and launched its first Android tablet in Q2, the Slate 7. ‘HP has a broad enterprise portfolio, channel relationships and global reach that others still cannot match,’ said Canalys Research Analyst Pin-Chen Tang. ‘To increase its market share it should look to leverage its strengths in the enterprise to advance Android in business.’

iOS and Android have profited from the shift to tablets, as they have proved to be the only type of PC with any momentum. Android’s share of the total PC market increased to 17% in Q2 2013 from 6% a year ago. With the likes of HP, Lenovo and Samsung looking to use Android to compete with iOS in the tablet space, the platform is well placed to continue increasing its share. Google is targeting the consumer market and has its sights set on beating Apple in the smart phone and tablet space. Android remains weak in management and security, which is preventing commercial uptake. Google, or its partners, must address this shortfall quickly if it is to penetrate the enterprise

There has been rapid innovation in the Windows category, as vendors such as HP, Lenovo, Toshiba and Acer have built PCs using a variety of new form factors. These products are struggling to take off as the difference in price between Android and Windows-based tablets remains high. ‘Component pricing has been an issue, particularly with multi-touch screens, though scale economies make this less of an issue as demand increases. The price of Windows itself is a contributing factor and one that Microsoft must address as a matter of urgency. Its PC OEM partners are in an increasingly difficult position and consolidation in the PC market is inevitable within the next 12 months,’ said Tim Coulling, Canalys Senior Analyst.

Half a billion PCs to ship in 2013 as tablet sales rocket [Canalys press release, June 11, 2013] – Tablet shipments to grow by 59% this year to reach 182.5 million units

Canalys’ latest forecasts for the PC market (desktops, notebooks and tablets) predict that 493.1 million units will ship in 2013, representing 7% year-on-year growth. The key driver behind this growth will be tablets, which will account for 37% of the market, up from a quarter in 2012. Looking ahead to 2017, Canalys expects that 713.8 million PCs will ship worldwide (a CAGR of 9.7%), with 64% being tablets and 25% notebooks.

Worldwide demand for tablets has gone from strength to strength, while that for desktops and notebooks has waned. In the first quarter of 2013, the desktop market fell 10.3% and the notebook market declined 13.1%. The size of the tablet market, however, more than doubled in Q1 2013, with a 106.1% increase in shipments to 41.9 million units. Shipments show no sign of slowing and Canalys forecasts that in 2013 tablet shipments will reach 182.5 million units, with global tablet shipments surpassing those of notebooks in the final quarter of the year.

The reception to Windows 8 has not reinvigorated demand for Microsoft-based PCs but there is a glimmer of hope for OEMs with Microsoft’s plan to release Windows 8.1 as a free upgrade. ‘Microsoft will continue to innovate. New versions will come and its OS release cycle will gain speed. But it must address some of the criticisms that have been directed at the OS’s user interface or it risks losing even more ground to iOS and Android in the PC space,’ said Tim Coulling, Senior Analyst at Canalys.

image

A plethora of PC vendors have now come to market with cheaper Android devices, notably Acer, Asus and HP, but these vendors are joining a crowded market. ‘Shipment numbers can be high but absolute margins on these products are expected to be small. Low-priced tablets will not be lucrative but it is necessary to compete or a vendor will simply lose relevance and scale. In fact, accessories, particularly cases, as well as the new generation of high-tech ‘appcessories’ will likely provide higher margins than the products themselves,’ said Pin-Chen Tang, Research Analyst. ‘This new influx of Android devices will provide a boost to the platform and Canalys therefore expects Android to take a 45% share this year, behind Apple at 49% [this prediction failed already for Q2 results as was reported on Aug 1 by Canalys: ‘Android overtakes iOS with 53% market share in tablets‘]. The iPad mini is expected to continue selling well, becoming more significant in terms of the product mix and spawning a further increase in consumer demand for smaller tablets.’

The great hope for Windows 8 was that it would unleash new PC form factors, combining the best of both PCs and tablets. But James Wang, an Analyst at Canalys, noted, ‘These convertible products have disappointed so far. Convertibles are too heavy in tablet form and too expensive when compared with clamshell products. Canalys therefore expects that, for at least the next 18 months, consumers will buy separate products, rather than compromise on a Windows 8 convertible or hybrid PC. Even for Android products, alternative form factors are not expected to grow rapidly due to the category being sandwiched between low-cost slates and more familiar Windows-based clamshell notebooks.’ Out of the 388.1 million mobile PCs (notebooks and tablets) that Canalys forecasts will ship in 2013, it estimates that less than 2% will be hybrids or convertibles.

Another ray of light for PC vendors is that PC sales to businesses are, and will continue to be, far stronger than those to consumers. This trend favors the likes of HP and Lenovo, though competition will increase as others shift resources toward the commercial channels to maximize their opportunity.

Canalys definitions

Appcessories: Products that connect to applications on smart devices (smart phones, tablets and notebook PCs).

Clamshell: A notebook with keyboard/second screen fixed with a one-directional hinge only enabling movement up to 180⁰.

Convertible: A notebook with keyboard/second screen that can be converted to a tablet form factor.

Slate: A tablet that is not designed by its manufacturer to be fixed to a keyboard accessory with a hinge.

Hybrid: A tablet that is designed by its manufacturer to be fixed to a keyboard accessory with a hinge.

About Canalys

Canalys is an independent analyst firm that strives to guide clients on the future of the technology industry and to think beyond the business models of the past. We deliver smart market insights to IT, channel and service provider professionals around the world. Our customer-driven analysis and consulting services empower businesses to make informed decisions and generate sales. We stake our reputation on the quality of our data, our innovative use of technology, and our high level of customer service.


EnfoDesk (Analysys International) from China says ‘For sure, as it is already happening against the iPad in China even at a nascent stage of the local tablet market’

Industry data: 2013Q2 Chinese Tablet PC market sales of 3.58 million, the rapid expansion of domestic [products], apple [products] decline significantly [enfodesk.com, Aug 14, 2013] as translated by Google and Bing, with manual edits:

According to Analysys think tank EnfoDesk latest monitoring data shows that in the second quarter of 2013 tablet PC sales in China reached 3,576,000 units, up 5.2% Q/Q growth.

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According to Analysis think tank EnfoDesk in the last quarter of 2013 sales growth on the tablet PC market in China slowed down to only 5.2% Q/Q growth rate, mainly due to weak sales of Apple’s tablet computers, as its sales fell for the first time. And Samsung had eye-catching performance this quarter, after N5110 Galaxy Note 8 has been released, and sought after by the market, so the Samsung Tablet PC overall sales increased dramatically, pulling the overall market growth. Worth mentioning this quarter is that domestic brand tablet PCs, such as Teclast (台电) [see Teclast’s Tmall site in Chinese, or Pandawill’ Teclast global online site in English] and ONDA (昂达) [see ONDA’s global site in English] have gained more market share with their low prices, ultra high yield of price/performance, and best selling online channels.

Throughout the three major tablet platforms, iOS declined significantly, it will be difficult to stop its market share erosion trends; Windows was tepid, the release of Microsoft Surface and continuous price cuts did not enhance the Windows market activity; Android cut right through the market, by virtue of many manufacturers to compete, high performance models being abundant, covering all price points of consumer groups, and with product prices constantly being refreshed, quickly seized the tablet PC market. If Apple can not launch innovative tablet PC products in the near future, [the event of] Android surpassing iOS market share is around the corner.

Compare this to the situation in 2012:

Apple occupied 71.6% of consumer tablets sold in the China market during the fourth quarter of 2012, according to China-based Analysys International.

For business-use tablets alone, Eben had the largest market share at 41.9%, followed by Samsung Electronics with 21.0%, Asustek Computer with 6.6% and Lenovo with 4.5%, Analysys indicated.

Vendor

Market share

Apple

71.6%

Lenovo

10.2%

Eben

4.0%

Samsung

3.9%

Acer

2.3%

Asustek

1.5%

Teclast

1.0%

Source: Analysys, compiled by Digitimes, April 2013

According to the Quarterly Survey of China’s Tablet PC Market 2012Q3, 2.60 million sets tablet PC have been sold in Chinese market in Q3, 2012. Apple occupied 71.4% market share with a slight drop, Lenovo ranked second, reaching 10.52% and Ereneben ranked third with its market share being 3.61% and Samsung ranked fourth, taking up 3.53% market share.

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EnfoDesk, Analysys International finds that 4 factors require our attention concerning China’s tablet PC manufacturers’ market layout in Q3, 2012:

  1. Compared with last quarter, Apple’s market share dropped from 72.66% to 71.42%. New iPad marketing promotions were made mainly in Q2. In Q3, iPad 2and The New iPad were in normal sales.
  2. The sales volume of Lenovo tablet PC rose considerably with its market share being 10.52%. Such a growth is resulted from the issue of its new products S2107 and S2109 and promotions when new semester begins for students.
  3. Ereneben issued its new product T5 in Q3, which drives the overall sales volume, and the price of T4 came down slightly in some provinces, thus increasing the sales volume of Ereneben.
  4. Samsung tablet PC enjoyed relatively stable sales in Chinese market. The company doubled their efforts in the marketing of tablet PC Note series (7 inches or above versions). Its branding effects gradually brought about and increased its sales in the Chinese market.

Besides, the research on e-business tablet PC market conducted by EnfoDesk, Analysys International shows that Ereneben ranked first with market share being 41.07%. Samsung offered Galaxy Note 10.1 e-tablet PC to consolidate its positioning in e-business tablet PC market. Its market share was 19.66% of total e-tablet PC market. Lenovo’s Thinkpad was in normal sales, only occupied 3.89% market share.

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Analysys International: iPad took up 73% of Tablet PC Market 2012Q2 [Analysis International, published in English on May 16, 2013]

According to the Quarterly Survey of Tablet Market in China 2012Q2, released by EnfoDesk, Analysys International, market share of Apple rose to 72.66% with a sequential growth rate rising by 20.06%. Top 2 was Lenovo that witness a drop of its market share (Its market share was 8.38%). Eben ranked third with its market share being 3.63% and the market share of Samsung came down to 3.59% with its sequential growth rate dropping by 7.69%.

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EnfoDesk Analysys International believes that three aspects should be noticed concerning the market layout of tablet PC market in Q2, 2012.

First, the market share of Apple has risen from 65.21% in Q1 to 72.66% in Q2. New iPad came into the market in March; however, since no substantial improvement has been made on the new products, consumers would rather wait to buy in Q2. The price reduction of iPad 2 promoted the sales volume of Apple products, allowing its market share to grow.

Second, compared with Q1, market share of Lenovo shrank. On one hand, it was a dull season; on the other hand, it was caused by its internal policy. In September, Lenovo will launch its promotion of new products when new term begins in September (during the peak season) and the company would rather clean up stocks of its other products in Q2.

Finally, iOS tablet PC suffers less seasonal factors than Android tablet PC. Currently, Android tablet PC market is getting stabilized. Solely relying on traditional sales channel to educate consumers was too slow and manufacturers could carry out more promotions to increase brand influence and brand concentration, grab the market share of smuggled products and clarify market layout of Android tablet PC. In addition, other tablet PC manufactures except Apple should consider its own market position and offer its unique products, gradually getting rid of homogenization of Android tablet PC. Eben as a leader in business tablet PC market offers unique products and its market positioning is clear.

According to the statistics recently released by Analysys International, 2.34 million tablet PCs were sold in China in Q2, 2012. The sequential growth rate has reached 7.8%.

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Analysys International holds that sales growth of China’s tablet PC in Q2, 2012(The growth rate has reached 7.8%) is due to the following factors:

iPad directly triggered the market fluctuation. The price reduction of iPad forced the average price of tablet PC to go down. As a result, consumers with cash in hand developed their desire to buy and such a desire transformed into procurement, which allowed the sales volume to grow in the dull season.

EnfoDesk, Analysys International predicts that the future market layout will be even clearer. Android manufacturers and others will target middle and low-end consumers with an attempt to avoid direct competition with Apple. Even though the sales volume of Apple will increase, its market share will continue to shrink. The market share of Android manufacturers is expected to grow and the market concentration will increase. The smuggled products will face the question of survival and the market will get further standardized.

Research Definitions

Tablet PC is a portable mobile internet device accessible to the network. It has independent mobile OS and is able to expand its applications. The screen ranges from 5 to 11 inch. Touch screen or pen is served as a basic input device.

The Sales Volume is tablet PC manufacturers’ sale in China, including some overseas brands which are sold by a purchasing agency (OEM labeling products is regarded as the labeled brand. Some device manufacturers also sell some products to market abroad. This part of sales volume is not calculated in the said report).

Research Statement

The industrial analyses, provided by Analysys International, mainly reflect the current situation, trend, inflection point, commercial law and manufacturers’ situation. The figures and statistics are drawn by adopting a unique industrial analysis model combined with the research and study methods used by market, industry and manufactures. All the data are based on industrial macro and historical data, seasonal end-users’ and business information.

It is believed that data concluded from research into market and trade is within acceptable errors. It can reflect the trend and commercial laws accurately.

Results obtained by the means of professional research methods are for reference. The actual data can be obtained by checking on financial report issued by manufacturers.

About Analysys International

Analysys International is a leading advisor on the technology, media and telecom (TMT) industries in China. We provide data, information and advice to 50,000 clients worldwide representing 1,500 distinct organizations, deliver over 150 consulting engagements a year, and hold more than 20 events that draw in over 8,000 attendees. Our clients include executives from companies as technology vendors, vertical information technology users, as well as professionals from professional service companies, the investment community and government agencies. Our mission is simple and clear: we help our clients make better business decisions. For more information, please visit our website at http://english.analysys.com.cn.

About EnfoDesk

EnfoDesk is an industrial data base for subscription offered by Analysys International. It aims to help you perceive opportunities and risks in the Internet age with online database search, analyst interaction, market alarms and other functions. EnfoDesk can help you get information in time and know more about:

–        The business mode and trend of the Internet and mobile web market

–        The trend in policy towards the Internet and Internetized market

–        The activities and preferences of Internet and mobile web users

–        The potential clients and commercial opportunities

–        The more valuable partners and cooperation mode

–        The trend and effects of e-marketing

With Android and forked Android smartphones as the industry standard Nokia relegated to a niche market status while Apple should radically alter its previous premium strategy for long term

Here is the chart reflecting the performance of the market-leading mobile phones upto Q2’13:

From this the most visible things are:

  • Android and Android-forked (Xiaomi etc.) smartphones are the undisputed industry standards to dominate the market in years to come
  • Both the Symbian to Windows Phone and S40 to Asha Full Touch smartphone platform transition strategies from Nokia could survive the continued Android onslaught but only in a niche market status
  • There is no room for Apple’s further growth, and both the platform and the company could face a gradual decline in the smartphone market

My other observations about the state of the smartphone market after Q2’13 were already presented in the following posts:

In essence we came to a point when the superphone market came down in price to as low as $110 and up, while the entry-level segment of good quality came down to a $65+ price level. Also the smartphone market became saturated in all segments which brings an end to Samsung’s ability to base its premium profitability ambitions on smartphones alone (almost), as it was reflected in 20 years of Samsung “New Management” as manifested by the latest, June 20th GALAXY & ATIV innovations [‘Experiencing the Cloud’, July 2-26, 2013]:

… innovations in the broadest sense of the world: technology, hardware and software engineering and design, marketing in general and branding in particular etc.

Updates: Q2 record-high operating profit + smartphone worries deepen + overall business situation + nonproportionally high capex of the semiconductor business +  the #2 capex beneficiary, the Display Panel Segment

These observations also led to much greater conclusions about the upcoming changes:

Below I will assess the ‘Nokia Q2’13 market situation and changes’ as well as include ‘Gartner’s own assessment of the Q2’13 overall market situation and the changes’ to complete the picture.


Nokia Q2’13 market situation and changes:

Looking at the progress of Nokia Symbian to Windows Phone transformation Q2’13 was a straight continuation of the trends noted for Q1’13 in Nokia: Continued moderate progress with Lumia, urgent Asha Touch refresh and new innovations to come against the onslaught of unbranded Android and forked Android players in China and India [‘Experiencing the Cloud’, April 18, 2013] as you could also well observe from the chart included here as well:

Nokia was extensively discussing its Windows Phone transition in Nokia Corporation Interim Report for Q2 2013 and January-June 2013 [press release, July 18, 2013]:

    • Lumia Q2 volumes increased 32% quarter-on-quarter to 7.4 million units, reflecting strong demand from customers for a broadened Lumia product range.
    • Commenting on the second quarter results, Stephen Elop, Nokia CEO, said: “ … In our Smart Devices business unit, we continue to focus on delivering meaningful differentiation to consumers around the world. We are very proud of the recent creations by our Lumia team, from the Lumia 520 – our most affordable Windows Phone 8 product which has enjoyed a strong start in markets like China, France, India, Thailand, the UK, the US and Vietnam – to the Lumia 1020, our star imaging product which we unveiled to the world last week. Overall, Lumia volumes grew to 7.4 million in the second quarter, the highest for any quarter so far and showing increasing momentum for the ecosystem. During the third quarter, we expect that our new Lumia products will drive a significant part of our Smart Devices revenue.”
    • In the third quarter 2013, supported by the wider availability of recently announced Lumia products as well as recently announced Mobile Phones products, Nokia expects higher Devices & Services net sales, compared to the second quarter 2013.
    • The year-on-year decline in our Smart Devices volumes in the second quarter 2013 continued to be driven by the strong momentum of competing smartphone platforms and our portfolio transition from Symbian products to Lumia products. The decline was primarily due to lower Symbian volumes, partially offset by higher Lumia volumes. Our Symbian volumes decreased from 6 million units in the second quarter 2012 to approximately zero in the second quarter 2013. Our Lumia volumes increased from 4.0 million in the second quarter 2012 to 7.4 million in the second quarter 2013.
    • On a sequential basis, the increase in our Smart Devices volumes in the second quarter 2013 was due to higher Lumia volumes, as we started shipping the Lumia 520 and 720 in significant volumes. In the second quarter 2013, the vast majority of Smart Devices volumes were from Windows Phone 8-based Lumia products.
    • The year-on-year increase in our Smart Devices ASP in the second quarter 2013 was primarily due to a positive mix shift towards sales of our Lumia products which carry a higher ASP than our Symbian products, partially offset by our pricing actions. Sequentially, the decrease in our Smart Devices ASP in the second quarter 2013 was primarily due to a negative mix shift towards sales of our lower priced Windows Phone 8-based Lumia products as well as our pricing actions.
    • Nokia announced and started shipments in select markets of the Nokia Lumia 925, a new interpretation of its award-winning flagship, the Nokia Lumia 920. The Nokia Lumia 925 introduces metal for the first time to the Nokia Lumia range and includes the most advanced lens technology and next-generation imaging software to capture clearer and sharper pictures and video even in low light conditions. The Nokia Lumia 925 offers a variety of exclusive services such as Nokia Music for unlimited streaming of free playlists, integrated HERE services, and the option to add wireless charging with a snap-on wireless charging cover.
    • Nokia announced the Nokia Lumia 928 smartphone, exclusive to Verizon Wireless. With a 8.7MP camera and Nokia’s PureView imaging innovation, the Nokia Lumia 928 delivers superior imaging and video performance that enables people to capture bright, blur free photos and videos, even in low light conditions. The sleek and stylish smartphone comes with the latest high-end Nokia Lumia experiences, including Nokia Music, HERE services, and built-in wireless charging.
    • Nokia started shipping in volumes the Nokia Lumia 520, its most affordable Windows Phone 8 smartphone, delivering experiences normally found only in high-end smartphones, such as the same digital camera lenses found on the Nokia Lumia 920, Nokia Music for free music out of the box and even offline, and HERE services.
    • Nokia’s Lumia range of smartphones continued to attract businesses, including Miele & Cie. KG, a global leader in domestic appliances and commercial machinery, which has chosen the Nokia Lumia range as the smartphone of choice for its global employees.
    • The Windows Phone Store continued to strengthen in terms of the quantity and quality of applications. The Windows Phone Store today offers more than 165 000 applications and games.

The Q2’13-related improvements mentioned above and influencing the below chart were even more extensively discussed in my earlier posts:

while the Q3’13-related actions of improvements in these posts:

Now look again at the performance chart for the reflections:

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From the further decline of Asha Full Touch you could see that the Temporary Nokia setback in India [‘Experiencing the Cloud’, April 28, 2013] continued into the Q2’13 as well as the result of entry-level local brand Android smartphones being in heavy price competition with Nokia Asha Full Touch during Q2 while having superior hardware specifications. Even Samsung’s REX 70 competed in price with Asha Full Touch.

Nokia was talking in his Nokia Corporation Interim Report for Q2 2013 and January-June 2013 [press release, July 18, 2013] only about the following future-oriented actions that were introduced in Q2 in order to remedy this situation:

  • In Devices & Services, our Mobile Phones business unit started to demonstrate some signs of recovery in the latter part of the second quarter following a difficult start to the year. Also, towards the end of the second quarter, we started to ship the Asha 501, which brings a new design and user experience to the highly competitive sub-100 USD market. While we are very encouraged by the consumer response to our innovations in this price category, our Mobile Phones business unit is planning to take actions to focus its product offering and improve product competitiveness.
  • On a year-on-year basis, our Mobile Phones volumes in the second quarter 2013 were negatively affected by competitive industry dynamics, including intense smartphone competition at increasingly lower price points and intense competition at the low end of our product portfolio. Compared to the second quarter 2012, our Mobile Phones volumes declined across our portfolio, most notably for our non-full-touch devices that we sell to our customers for above EUR 30, partially offset by higher sales volumes of Asha full-touch smartphones.
  • Nokia started production at its new manufacturing facility in Hanoi, Vietnam. The new site has been established to produce our most affordable Asha smartphones and feature phones.
  • Nokia announced and started shipments of the Nokia Asha 501, the first of a new generation of smartphones to run on the new Asha platform. Retailing at a suggested price of USD 99, the Nokia Asha 501 offers users affordable smartphone design with bold color, a high-quality build and an innovative user interface. The new Asha platform also allows developers who write applications for the Nokia Asha 501 to reach all smartphones based on the new Asha platform without having to re-write code.

These things were already extensively discussed in my earlier posts:


And here is how Gartner was assessing the Q2’13 overall market situation and the changes:

Gartner Says Smartphone Sales Grew 46.5 Percent in Second Quarter of 2013 and Exceeded Feature Phone Sales for First Time [press release, Aug 14, 2013]

  • Worldwide Mobile Phone Sales Grew 3.6 Percent in Second Quarter of 2013
  • Microsoft Has Become the No. 3 Smartphone OS Overtaking BlackBerry

Worldwide mobile phone sales to end users totaled 435 million units in the second quarter of 2013, an increase of 3.6 percent from the same period last year, according to Gartner, Inc. Worldwide smartphone sales to end users reached 225 million units, up 46.5 percent from the second quarter of 2012. Sales of feature phones to end users totaled 210 million units and declined 21 percent year-over-year. 

“Smartphones accounted for 51.8 percent of mobile phone sales in the second quarter of 2013, resulting in smartphone sales surpassing feature phone sales for the first time,” said Anshul Gupta, principal research analyst at Gartner. Asia/Pacific, Latin America and Eastern Europe exhibited the highest smartphone growth rates of 74.1 percent, 55.7 percent and 31.6 percent respectively, as smartphone sales grew in all regions.

Samsung maintained the No. 1 position in the global smartphone market, as its share of smartphone sales reached 31.7 percent, up from 29.7 percent in the second quarter of 2012 (see Table 1). Apple’s smartphone sales reached 32 million units in the second quarter of 2013, up 10.2 percent from a year ago. 

Table 1

Worldwide Smartphone Sales to End Users by Vendor in 2Q13 (Thousands of Units)

Company

2Q13 Units

2Q13 Market Share (%)

2Q12 Units

2Q12 Market Share (%)

Samsung

71,380.9

31.7

45,603.8

29.7

Apple

31,899.7

14.2

28,935.0

18.8

LG Electronics

11,473.0

5.1

5,827.8

3.8

Lenovo

10,671.4

4.7

4,370.9

2.8

ZTE

9,687.6

4.3

6,331.4

4.1

Others

90,213.6

40.0

62,704.0

40.8

Total

225,326.2

100.0

153,772.9

100.0

Source: Gartner (August 2013)

In the smartphone operating system (OS) market (see Table 2), Microsoft took over BlackBerry for the first time, taking the No. 3 spot with 3.3 percent market share in the second quarter of 2013. “While Microsoft has managed to increase share and volume in the quarter, Microsoft should continue to focus on growing interest from app developers to help grow its appeal among users,” said Mr. Gupta. Android continued to increase its lead, garnering 79 percent of the market in the second quarter. 

Table 2

Worldwide Smartphone Sales to End Users by Operating System in 2Q13 (Thousands of Units)

Operating System

2Q13 Units

2Q13 Market Share (%)

2Q12  Units

2Q12 Market Share (%)

Android

177,898.2

79.0

98,664.0

64.2

iOS

31,899.7

14.2

28,935.0

18.8

Microsoft

7,407.6

3.3

4,039.1

2.6

BlackBerry

6,180.0

2.7

7,991.2

5.2

Bada

838.2

0.4

4,208.8

2.7

Symbian

630.8

0.3

9,071.5

5.9

Others

471.7

0.2

863.3

0.6

Total

225,326.2

100.0

153,772.9

100.0

Source: Gartner (August 2013)

Mobile Phone Vendor Perspective

Samsung: Samsung remained in the No. 1 position in the overall mobile phone market, with sales to end users growing 19 percent in the second quarter of 2013 (see Table 3). “We see demand in the premium smartphone market come mainly from the lower end of this segment in the $400-and-below ASP mark. It will be critical for Samsung to step up its game in the mid-tier and also be more aggressive in emerging markets. Innovation cannot be limited to the high end,” said Mr. Gupta. 

Nokia: Slowing demand of feature phone sales across many markets worldwide, and fierce competition in the smartphone segment, affected Nokia’s mobile phone sales in the second quarter of 2013. Nokia’s mobile phone sales totaled 61 million units, down from 83 million units a year ago. Nokia’s Lumia sales grew 112.7 percent in the second quarter of 2013 thanks to its expanded Lumia portfolio, which now include Lumia 520 and Lumia 720. “With the recent announcement of the Lumia 1020, Nokia has built a wide portfolio of devices at multiple price points, which should boost Lumia sales in the second half of 2013,” said Mr. Gupta. “However, Nokia is facing tough competition from Android devices, especially from regional and Chinese manufacturers which are more aggressive in terms of price points.” 

Apple: While sales continued to grow, the company faced a significant drop in the ASP of its smartphones. Despite the iPhone 5 being the most popular model, its ASP declined to the lowest figure registered by Apple since the iPhone’s launch in 2007. The ASP reduction is due to strong sales of the iPhone 4, which is sold at a strongly discounted price. “While Apple’s ASP demonstrates the need for a new flagship model, it is risky for Apple to introduce a new lower-priced model too,” said Mr. Gupta. “Although the possible new lower-priced device may be priced similarly to the iPhone 4 at $300 to $400, the potential for cannibalization will be much greater than what is seen today with the iPhone 4. Despite being seen as the less expensive sibling of the flagship product, it would represent a new device with the hype of the marketing associated with it.” 

Lenovo: Lenovo’s mobile phone sales grew 60.6 percent to reach 11 million units in the second quarter of 2013. Lenovo’s quarter performance was bolstered by smartphone sales. Its smartphone sales grew 144 percent year-over-year and helped it rise to the No. 4 spot in the worldwide smartphone market for the first time. Lenovo continues to rely heavily on its home market in China, which represents more than 95 percent of its sales. It remains challenging for Lenovo to expand outside China as it has to strengthen its direct channel as well as its relationships with communications service providers. 

Table 3

Worldwide Mobile Phone Sales to End Users by Vendor in 2Q13 (Thousands of Units)

Company

2Q13 Units

2Q13 Market Share (%)

2Q12 Units

2Q12 Market Share (%)

Samsung

107,526.0

24.7

90,432.1

21.5

Nokia

60,953.7

14.0

83,420.1

19.9

Apple

31,899.7

7.3

28,935.0

6.9

LG Electronics

17,016.4

3.9

14,345.4

3.4

ZTE

15,280.7

3.5

17,198.2

4.1

Huawei

11,275.1

2.6

10,894.2

2.6

Lenovo

10,954.8

2.5

6,821.7

1.6

TCL Communi-cation [Alcatel]

10,134.3

2.3

9,355.7

2.2

Sony Mobile Communications

9,504.7

2.2

7,346.8

1.7

Yulong [Coolpad]

7,911.5

1.8

4,016.2

1.0

Others

152,701.5

35.1

147,354.60

35.1

Total

435,158.4

100.0

420,120.0

100.0

Source: Gartner (August 2013)

“With second quarter of 2013 sales broadly on track, we see little need to adjust our expectations for worldwide mobile phone sales forecast to total 1.82 billion units this year. Flagship devices brought to market in time for the holidays, and the continued price reduction of smartphones will drive consumer adoption in the second half of the year,” said Mr. Gupta. 

Additional information is in the Gartner report “Market Share Analysis: Mobile Phones, Worldwide, 2Q13.” The report is available on Gartner’s website at http://www.gartner.com/document/2573119.

Upcoming H2CY13 revitalization of E Ink Holdings’ business by greater cost effectiveness and next-gen EPD technology for the traditional e-book reader market (remaining flat), exiting the commodity LCD market, and addition of new applications for digital magazines, smart watches, handset covers and luggage tags

$66 6″ front-lit E Ink e-readers from Jawei [Charbax YouTube channel, May 26, 2013]

Jawei shows their latest range of E Ink based e-readers, starting at $40 for a 4.3″ E Ink e-reader without touch, $66 for 6″ without touch, add a bit for touch. Minimum order quantity is 2K.

OR While the jury is still out on E-paper renaissance because of A4 format on a lighter, plastic substrate? [‘Experiencing the Cloud’, May 15, 2013] E Ink Holdings’ so far ‘LCD only’ subsidiary Hydis gathers ammunition with e-paper displays [The Korea Herald, June 26, 2013]:

Hydis Technologies is not what one would call a big company, but for Korea, it has a symbolic meaning. It was one of the firms that foreign capital gobbled up, only to spit out after stripping it of vital assets and technology.

Now, Hydis, owned by Taiwan-based E Ink Holdings, is out to get back on the map with the production of e-paper displays, the main element for e-books.

Starting in July, Hydis expects to start rolling out electronic paper displays, an area that E Ink is a global leader in.

Hydis officials said the contract is expected to extend to December.

“These displays are next-generation displays, and our technology is sufficient,” said one official, speaking anonymously.

Rollable displays also are in discussion, but that needs to be seen, as Hydis currently lacks the right equipment and capital.

Hydis was formerly a unit under Hyundai Electronics, the precursor to SK Hynix. It once supplied some of the big fish in the industry, such as Samsung and LG.
Prior to the acquisition by E Ink, Hydis had been exploited by China-based BOE Display, which bought Hydis from Hyundai, only to feed its technology to BOE’s Chinese operations.
E Ink initially appeared to have similar plans as it was reticent to make big investments, but both Hydis and E Ink claim that the only plans they have are to get the Gyeonggi Province-based display manufacturer back on track.
“The turnaround plan is aimed to optimally resize the company so that it can focus manufacturing on existing industrial products and explore other new high-margin niche opportunities,” the Hydis management said in a statement to The Korea Herald.
The management added that the focus now will be on high-margin industrial products, such as panels used in applications for medical equipment, avionics and automobiles.
The restructuring itself was painful as it involved letting go of more than half of the workforce, which at one point reached nearly 1,000.
There are now fewer than 400 employees, but those who left are said to have departed in peace, as they were offered an acceptable retirement package.
The restructuring was completed as of May 30.
The plants at Icheon are not yet running, but employees hope they can reactivate them by July, when the EPD orders go in.
“We are trying to optimize and rationalize productivity,” said Oscar Huang, a spokesperson for E Ink in Taiwan.
He also said he knew of the restructuring, but was not aware of the details, saying E Ink chose to leave those up to the Hydis management in Korea.
E Ink acquired Hydis in 2008. Prior, it was named PVI.
As the pioneer in electrophoretic displays used in gadgets like the Amazon Kindle, PVI also merged with E Ink, which is where it got its name.
E Ink is known for having only a small assembly line of its own, choosing to make money mainly from licensing deals.

E Ink suffers sharp revenue drop in 2Q13 [DIGITIMES, Aug 16, 2013] with slide inserts from E Ink Investor Conference Presentation [Aug 15, 2013]

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Electrophoretic display (EPD) maker E Ink Holdings has reported consolidated revenues of NT$2.928 billion (US$98 million) for the second quarter, decreasing 45.56% sequentially and 34.61% on year mainly because Hydis Technologies, its South Korea-based subsidiary, has been reducing production of commodity LCD in line with its operational transformation.

E Ink said during its investors conference on August 15 that it has adjusted the organization of Hydis, downsizing its personnel from 800-900 to about 400.

image

But E Ink noted global demand for e-book readers is on the rise. According to the company, Amazon started selling Kindle Paperwhite in China and India in June 2013. Japan-based Rakuten has been selling its e-book reader Kobo Aura HD in the US and Europe and will soon tap the China, India and Russia markets. Korea Epub will launch its Android 4.0 e-book reader Crema Shine in late August 2013.

North America will account for 35% of global e-book reader shipments in 2013, Western Europe and Asia Pacific each for 27%, Latin America 6%, the Middle East and Africa 3% and East Europe 2%, E Ink cited forecast by IHS as indicating.

EPD can also be used in smartwatches and other types of wearable devices, electronic tags and back covers of handsets, E Ink indicated.

E Ink posted gross margin of 7.14%, net operating loss of NT$953 million, net loss of NT$1.008 billion and net loss per share of NT$0.93 for the second quarter.

Hands on with the Sony 13.3 inch e-Reader [Goodereader YouTube channel, May 21, 2013]

Sony announced a new 13.3 inch e-Reader and we got a chance to play with it at SID 2013 in Vancouver. This is simply the best e-Reader if Complex PDF documents or editing them appeals to you. Check it out.

E-paper firm posts worst loss in 4 years [Taipei Times, Aug 16, 2013] with slide inserts from E Ink Investor Conference Presentation [Aug 15, 2013]

INNOVATE OR DIE:With demand for e-paper displays plunging, the firm has turned to other growth areas, including digital magazines, smart watches and luggage tags

image
E Ink Holdings Inc (元太科技), which supplies e-paper displays for Amazon.com Inc’s Kindle e-reader series, yesterday reported a widening net loss of NT$1.01 billion (US$33.63 million) for last quarter because of slack demand for e-paper displays and LCD panels.
The quarterly net loss represented a deterioration from the first quarter’s net loss of NT$492 million and a net loss of NT$818 million in the second quarter of last year, the company’s financial statement showed. That also marked the worst quarterly loss in about four years.
Last quarter, E Ink also booked a one-time severance payment of NT$500 million for a 50 percent workforce layoff at its South Korean LCD manufacturing subsidiary Hydis Technologies Co. The number of Hydis employees has been halved to about 400 from between 800 or 900 before the personal adjustment, E Ink said.

Meanwhile, the Hsinchu-based company said it received a record high royalties fee at NT$400 million [US$13.4 million] by licensing Hydis’ patents to Sharp, LG Display and other panel makers to make high-resolution LCD panels that are partly used in Apple Inc and Samsung Electronics patents.

E Ink was upbeat about this quarter’s prospects.

Customers have put off their new product launches to the third quarter from the second quarter,” company chief financial officer Eddie Chen (陳彥松) told investors.

“There is enormous growth momentum to arrive in the third quarter. You will feel the [strength of] an upswing,” Chen said.

This quarter, revenue is expected to at least double last quarter’s NT$2.93 billion, as customers were scheduled to ship new e-readers for the holiday shopping season, Chen said.

E-paper displays made up about 70 percent of the company’s overall revenue last quarter, according to E Ink.

Gross margin would rise further from last quarter’s 7.1 percent and 5 percent in the first quarter, as the company would ship more higher-margin e-paper displays, Chen said.
To reduce the impact of tablets, E Ink is seeking new growth areas in developing new e-paper applications such as displays for digital magazines, smart watches, handset covers and luggage tags.

By the end of this year, e-paper for those new applications are expected to make up less than 5 percent of the company’s overall revenue, Chen said.

Overall e-reader shipments are expected to be flat at a range between 10 million and 15 million units, compared with last year, E Ink said.

E Ink shares fell 1.23 percent to NT$16.1 yesterday, underperforming the TAIEX, which was down 0.81 percent.

Allwinner E200 Powered Gajah InkCase E Ink phablet case to be $99-$129 [Charbax YouTube czhannel, Aug 2, 2013]

Gajah International design house shows a unique Allwinner E200 powered E Ink Bluetooth case for you Galaxy Note 2 smartphone/phablet. “InkCase” works like a second casing or another panel for your gadget, On the back side of the casing you find E Ink panel serves as second panel to display photographs, you can read e-book, see the pop-up’s of Facebook and Twitter too. You can have eye on weather apps from your phone and all viewable apps you can see through this second panel. It works on Bluetooth connectivity has micro USB port for charging InkCase. Inside it has memory to facilitate switch over to next picture/page and to do this back panel has two keys.Price yet to be finalised may expect between $99-$129 You can have look here in this video of InkCase for Samsung S2. InkCase is also available for iPhones but works only as photo viewer, . Two colour variants Black & White are available. features: Ink Case Photo Epi reader FBInk TwitInk The problem is the way this one works is to beam pictures that it has to transmit, decode, instead of sending data to interpret and integrate in clever apps on the E Ink case device. That makes for slowish e-reader mode for now. But maybe they can improve this in software and other device like it a bit better integrated and much thinner and lighter could be huge advancement for changing the back-cover on your smartphone that has removable back-cover or for adding a back-casing to your smartphone and phablet to use the back surface of your devices for new smart potentially ultra-low power E Ink functionality. Filmed at Computex 2013

Here’s the flexible E Ink screen that could be in the 2014 Kindle [CNET, July 12, 2013]

Expect some incremental improvements to new e-ink e-readers this holiday season, but superslim designs are probably a year or two away.
I asked Giovanni Mancini, E Ink’s director of product management, what Amazon would be releasing this holiday season because, well, Amazon wouldn’t tell me.
“I can’t tell you, either,” he said. “We can’t comment on customers plans.”
I expected him to say that, but I figured I’d ask anyway. However, what he could tell me about was the advancements E Ink’s technology, some of which of which will find their way into new devices as soon as this year. In the next few months the company will announce its next-generation e-ink platform for e-readers, the successor to Pearl. That screen, released in 2010, is the one used in most current e-ink readers, including the Kindle, Nook, and Sony Reader.
The new platform will offer slightly improved contrast and better optical performance that’s “better tuned to capabilities of higher-resolution TFT displays that are making their way into e-readers,” Mancini said (the $169.99 Kobo Aura HD is an example of a high-resolution e-reader).
Also, and perhaps most importantly, the company has introduced new technology that reduces the amount of ghosting (the digital artifacts left behind as pages are turned), so you won’t have to refresh the page as much. A lot of people don’t like the flash a page refresh creates, and the new screens won’t have to refresh as much. Today, the outer limit is around every six to seven page turns, and some devices now allow you to customize the frequency of page refreshes. Mancini said you’d potentially be able to read up to 100 pages without having the page flash.
“So, is it called Pearl 2?” I asked.
“It doesn’t have a name we’re sharing just yet,” Mancini said. “But before the end of the year we expect to not only bring our technology to market but to have customers announce products with that technology.”
With the next e-ink Kindles, I expect to see some slight improvements to the design and some small performance gains, as well even more uniform lighting in the Paperwhite. And we may see an entry-level Kindle priced at $49 ($20 less than its current price). Just how much weight, if any, Amazon can shave off its e-ink Kindles remains unclear. But I know a lot of people who prefer the entry-level Kindle to the Paperwhite because it’s lighter (5.98 vs. 7.5 ounces*. An ounce and half doesn’t seem like a lot of weight, but in a handheld device it’s very noticeable.
Imagine a 6-inch e-reader that weighs just 3.5 ounces [~100 grams]. That just might make you want to upgrade your device.

* [one ounce is approximately 28 grams]

E Ink Booth Tour at SID 2013 [May 21-23, 2013] [EInkSeeMore YouTube channel, July 19, 2013]

Giovanni Mancini, Director of Marketing at E Ink, gives a tour of E Ink’s new products and technologies at SID 2013 in Vancouver. He shows new E Ink products Mobius, Spectra, and Aurora, as well as signage, ESL, and displays with even faster page turns.

Shares of E Ink rise on upbeat Q3 sales prospects [Focus Taiwan, Aug 16, 2013]

Shares of E Ink Holdings Inc. got a boost Friday morning after the electronics paper display supplier said a day earlier that its sales for the third quarter could double from the second quarter on peak season effects, dealers said.
The optimistic third quarter forecast led investors to think that E Ink has hit a turning point in the current quarter, despite the fact that the e-paper maker remained in the red the previous quarter, dealers said.
As of 11: 29 a.m., shares of E Ink had added 5.90 percent to reach NT$17.05 (US$0.57) with 11.36 million shares changing hands. The index of the over-the-counter market, where the stock is traded, was up 0.12 percent at 118.89 points.

E Ink said that Hydis owns patents in display production, in particular fringe field switching (FFS) technology [see: Hydis: its FFS succeeding IPS [‘Experiencing the Cloud’, May 11, 2011 – Oct 12, 2012]], and that the unit’s FFS technology generated about NT$400 million in licensing fees in the second quarter.

Hydis licensing fees are expected to continue to serve as an income source for the parent company, E Ink said.

“The current buying helped E Ink shares clear the strong technical hurdles at around NT$16.80 so the stock has become technically healthier,” [Ta Ching Securities analyst Andy] Hsu said.

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E Ink Launches Spectra, The World’s First True Three Pigment Electronic Paper Display [press release, May 21, 2013]

E Ink Technology Solves Unmet Need to Include Color on Electronic Shelf Labels to Highlight Promotions, Sales and Logos
May 21, 2013 – Cambridge, MA — E Ink® Holdings, “E Ink” (8069.TW), an ePaper and Electronic Shelf Label visionary, today introduced E Ink Spectra, the world’s first three pigment electronic paper display (EPD), featuring black, white and red pigments. Spectra is currently being demoed at SID Display Week 2013 in Vancouver, CA.
Price optimization strategies and adaptable technology are vital to ensuring retailers’ competitive advantage, success and growth. By using electronic shelf labels (ESL) with E Ink’s technology, retailers have the ability to change pricing strategies as needed in real time, allowing them to stay one step ahead of competitors while attracting consumers based on changing market conditions. Spectra allows retailers to elevate the impact of their ESLs, by adding color to logos and quickly directing consumers’ attention to important information, such as product sales and promotions.
“The three pigment system is a major achievement for E Ink, and a technological accomplishment in our industry,” explained Giovanni Mancini, director of product management, E Ink. “As the first product line to feature this advanced ink, Spectra provides retailers with the same visual and power savings attributes of our black and white ESL products, with the option of adding a third color to highlight promotions or other relevant information.”
“We are excited to see the addition of color, something requested by many of our customers,” said Niclas Qvist, Head of Marketing and Global Partner Management at Pricer, the leading Electronic Shelf Label (ESL) solution provider. “Pricer use E Ink’s e-paper in all our graphic products today. E Ink and Pricer are leading the way by giving shoppers the best in-store experience with clear and easy to read price tags. Product development is guided by market feedback and the first products will be developed in close cooperation with both E Ink and selected customers.”
“Pervasive Displays is committed to delivering innovative electronic paper enhancements and solutions that enable revolutionary commercial industrial electronic paper display applications,” said Scott Soong, CEO of Pervasive Displays. “Adding color to electronic paper is an effective advancement to this technology. Color adds the benefit of being able to quickly draw attention to specific messages – in retail, red is prevalent for promotions; in other industries red is used for exception management. The ability to quickly discern the importance of a message is critical in any environment.”
Spectra will support both active matrix and segmented format ESLs, making it the ideal product for a range of retail applications. The three pigment EPD is also appropriate for industrial, smart card and medical market applications, where Spectra can be used to display information on electronic identification badges.
While the eReader market continues to be an important part of E Ink’s business and the company is unequivocally committed to the eReader product line, over the past few years E Ink has invested resources into supporting different applications across markets.
“We have always been fortunate to have high customer demand for our electronic paper displays for non-eReader applications,” stated Mancini. “The results of our investments will be evident in 2013 as more non-eReader products using E Ink EPDs are released into the market.”
Spectra will be available in Q3 2013.

E Ink Triton II Won 2013 Display Taiwan’s Outstanding Photonics Product Award [press release, June 17, 2013]

June 17, 2013 – Cambridge, MA — E Ink® Holdings, “E Ink” (8069.TW), a global leader in ePaper technology today announced that its E Ink Triton II has won the 2013 Display Taiwan’s Outstanding Photonics Product Award with superior product performance.
E Ink ePaper technology is featured by reading comfort, sunlight readability, high contrast ratio, and low power consumption. Triton II, the award-winner, applies the optical design of front light module and optimize color resist arrangement of color filters, to reach high color saturation, high brightness, high contrast and low power consumption. This has led to the development of the new generation of color electronic paper display, and come into mass production. This is another award won by E Ink after its Spectra obtained the Display Week Best in Show Award by the Society for Information Display in 2013.
“We are honored that the organizers of Display Taiwan have selected Triton for this award.” said Felix Ho, interim chairman for E Ink Holdings, “E Ink continues to invest significantly in the development of electrophoretic display technology. It is great to see the results of this work incorporated into a product such as the PocketBook Color eReader.”

E Ink Introduces New 1.73″ Flexible Mobius Display For Smartwatch Applications [press release, June 3 2013]

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June 2, 2013 – Cambridge, MA — E Ink® Holdings, “E Ink” (8069.TW), a digital signage and display visionary, announces the addition of a 1.73″ flexible display to its Mobius product line of flexible electronic paper display (EPD) technology. The 1.73″ display has been specifically engineered for smartwatch and watch applications. The display is based on flexible TFT technology developed and brought to production by E Ink. The first commercial product to use this 1.73″ display is the Sonostar Smartwatch announced this week at Computex in Taipei, Taiwan.
The Sonostar smartwatch was jointly developed by E Ink’s subsidiary Transmart Co. Ltd and Sonostar. The smartwatch was chosen by the Taipei Computer Association as one of only 10 major product highlights at Computex, which will run from June 4-8 in Taipei, Taiwan.

The 1.73″ Mobius display supports a resolution of 320X240 pixels with 16 greyscale levels. The display size and characteristics make the technology ideal for the smartwatch market. Using a flexible substrate, the 1.73″ Mobius is lightweight and rugged and is conformable so the end product has a better fit for the consumer. Its low power usage and sunlight readability make this technology ideal for mobile devices. Unlike conventional displays, the 1.73″ Mobius display can be cut into different shapes.

“The joint development between Sonostar and Transmart is the perfect example of the how E Ink can help its customers get their product to market,” said Giovanni Mancini, director of product management for E Ink Holdings. “E Ink displays enable unique products that capture the customer’s imagination. Our business development team has the expertise to help our customers design the displays into their products in ways never before thought possible.”
More information on the Sonostar smartwatch can be obtained by visiting the Sonostar booth at Taipei World Trade Center Hall I (No: C0317) during Computex Taipei 2013 (June 4 to 8) or by going to www.sonostar.com/Smartwatch/. You can get more information about the Mobius 1.73″ display by visitingwww.eink.com.

E Ink Unveils Aurora, The World’s First Low Temperature Matrix Electronic Paper Display [press release, June 3 2013]

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May 21, 2013 – Cambridge, MA — E Ink® Holdings, “E Ink” (8069.TW), an ePaper and Electronic Shelf Label (ESL) visionary, today announced the upcoming release of E Ink Aurora, a first-of-its-kind electronic paper display (EPD) able to withstand freezer’s temperatures. The new solution provides retailers and business owners with greater flexibility and a more efficient solution in managing pricing strategies for products sold in freezers and cold outdoor climates. A demonstration of Aurora, along with E Ink’s latest products can be seen at Display Week 2013 in Vancouver, CA from May 21-23.
Providing low power usage and cost optimization through a 5-volt driving capability, Aurora supports applications in conditions as cold as -25 C. Additionally, Aurora has been tuned for non-eReader applications, and is ideal for electronic shelf labels (ESLs) and smart cards in the retail, medical and logistics markets. Aurora will be available to partners and customers starting in July 2013.
The release of Aurora is an indication of E Ink’s product diversification strategy and commitment to providing the ESL market with an extremely durable, low power display technology. While eReaders continue to be an important market for E Ink, and the company is unequivocally committed to the eReader product line, E Ink believes that its unique technology addresses retailers’ and business owners’ needs to install displays in previously impossible or impractical locations across markets.

“Opticon is excited to work with E Ink to expand our portfolio of e-paper based electronic shelf labeling (ESL) products. With the integration of a low temp film, we can finally install our ESL solution into all departments in a grocery or convenience store,” said Mike Waters, Opticon, Inc. “To date, we’ve lacked the technical capability to operate our wireless shelf tags inside a freezer, limiting the opportunities to completely eliminate manual paper price changes. Opticon will now be able to offer a line of IP rated freezer tags in 2″, 2.7″, 4.41″, and 7.4″ form factors.”

“Pervasive Displays is committed to advancing the use of electronic paper in industrial applications,” said Scott Soong, CEO of Pervasive Displays. “The new Aurora product from E Ink extends the reach of electronic paper to cold chain applications, signage, automotive and a myriad of additional industries, unlocking new ROI potential for e-paper applications.”
“Inaccurate prices are one of consumers’ major gripes when shopping at supermarkets,” said Giovanni Mancini, director of product management, E Ink. “With an average of close to 40,000 items carried in supermarkets, effective price management can become a herculean task. At E Ink we believe that ESLs not only cut down on the instances of mislabelled information, but also can ultimately help retail stores maximize profits.”
In the Food Marketing Institute’s 2012 Shopper Trends report, consumers rated accurate shelf tags as one of their most important criteria in selecting their primary store. Learn more about Aurora and E Ink’s other breakthrough digital signage and display technologies by visiting booth #1215 at SID from May 21-23.