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:
- Superphones turning point: segment satured with Tier 1 globals while the Chinese locals are at less than 40% of the Samsung price [‘Experiencing the Cloud’, Aug 3, 2013] OR Samsung is leapfrogging Apple while the Chinese local brands are coming close to Samsung but at less than 40% price. Meanwhile the superphone segment of the market becomes saturated.
- Xiaomi, OPPO and Meizu–top Chinese brands of smartphone innovation [‘Experiencing the Cloud’, Aug 1, 2013]
- GiONEE (金立), the emerging global competitor on the smartphone market [‘Experiencing the Cloud’, July 22, 2013]
- Eight-core MT6592 for superphones and big.LITTLE MT8135 for tablets implemented in 28nm HKMG are coming from MediaTek to further disrupt the operations of Qualcomm and Samsung [‘Experiencing the Cloud’, July 20-29, 2013]
- China: Entry-level dual core IPS WVGA (480×800) smartphones $65+ now, quad-core $70+ in June [‘Experiencing the Cloud’, April 29, 2013]
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:
- China is the epicenter of the mobile Internet world, so of the next-gen HTML5 web [‘Experiencing the Cloud’, Aug 5, 2013]
- The Upcoming Mobile Internet Superpower [‘Experiencing the Cloud’, Aug 13, 2013]
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:
High-volume Nokia Lumia superphones with Windows Phone 8 extended on the top for China, and on the entry level needed for Asia and Middle-East as well UPDATE: at even lower price by 27% [‘Experiencing the Cloud’, Dec 5, 2012 – March 21, 2013] Note that the Lumia 520 W-CDMA mentioned there for ¥ 1299.00 [$209] is now (Aug 17) ¥ 899.00 [$147] while in India it is even lower priced at Rs 7,667+ [$124+]
Nokia’s expanded, new risks and uncertainties for its Windows Phone strategy for 2013 [‘Experiencing the Cloud’, March 17, 2013]
while the Q3’13-related actions of improvements in these posts:
Nokia Lumia 1020: an excellent case of Nokia’s contribution to Microsoft as a key innovation partner [‘Experiencing the Cloud’, July 12, 2013]
Minutes of a high-octane but also expert evangelist CEO: Stephen Elop, Nokia [‘Experiencing the Cloud’, July 12, 2013]
Now look again at the performance chart for the reflections:
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:
- Nokia’s non-Windows crossroad [‘Experiencing the Cloud’, May 2, 2013]
- New Asha platform and ecosystem to deliver a breakthrough category of affordable smartphone from Nokia [‘Experiencing the Cloud’, May 9, 2013] my composite post of the all relevant launch information
- New Nokia Asha platform for developers [‘Experiencing the Cloud’, May 9, 2013] my composite post of the all relevant development platform information
- Nokia becoming the next Samsung from its new Vietnamese manufacturing base? [‘Experiencing the Cloud’, June 24, 2013]
And here is how Gartner was assessing the Q2’13 overall market situation and the changes:
- 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.
Worldwide Smartphone Sales to End Users by Vendor in 2Q13 (Thousands of Units)
2Q13 Market Share (%)
2Q12 Market Share (%)
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.
Worldwide Smartphone Sales to End Users by Operating System in 2Q13 (Thousands of Units)
2Q13 Market Share (%)
2Q12 Market Share (%)
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.
Worldwide Mobile Phone Sales to End Users by Vendor in 2Q13 (Thousands of Units)
2Q13 Market Share (%)
2Q12 Market Share (%)
TCL Communi-cation [Alcatel]
Sony Mobile Communications
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.