Smartphones or Converged Mobile Devices are the in-thing these days. Everyone wants to get their hands on them. And rightly so! The market for these devices is exploding despite the extended global recession. Consumers, aided by the carriers and device vendors have not held back in their spending when it comes to smartphones.
What does this market look like? Well, according to IDC, in 2009, around 1.15 billion cell phones were sold worldwide. Smartphones accounted for 15% of this volume – around 174 million worldwide. That’s a pretty big number. But wait! In 2010, based on smartphone sales volumes YTD, it is quite likely that smartphones will account for 20% of all mobile phones sold worldwide. And IDC predicts that in the year 2014, smartphones will account for more than 31% of the worldwide market. That’s a CAGR of around 25%! If this is right, around 1.66 billion mobile phones will be sold in 2014, of which around 526 million of them will be smartphones – that’s a whopping number!
We now know that Apples foray into the smartphone market has basically been a boon for the mobile industry. The iPhone (and its subsequent versions) has been a game changer for this industry and has helped catalyze growth in this segment. And just who are the key players in this market? – Nokia, Apple, RIM, Samsung and HTC. The smartphone market is also characterized by several OS’s that are playing a key role in the evolution and growth of this segment. Nokia, Apple and RIM are subservient to their native OS’s viz. Symbian, iPhone OS and Blackberry OS respectively. The other vendors, notably, Samsung and HTC, have chosen Google’s Android and/or Windows Mobile. It is indeed noteworthy that the OS has played a pivotal role in each vendor’s market strategy.
The fact that Symbian, iPhone OS and Blackberry OS are closed platforms, tightly controlled by the vendors, may cause growth pains for these vendors by essentially disenfranchising developers from being able to fully utilize the flexibility of these platforms. In addition, it is also locking in (or out) component suppliers by imposing stringent hardware requirements that will impact unit BOM costs. On the other hand, open OS’s such as Android is enabling developers and component vendors. Phone vendors using Android will be able to drop BOM costs by using some components that can be re-used across multiple generations of smartphones without impacting user experience and quality in addition to cutting down software development costs.
Simply put, what is happening is this – Native OS’s are locking out vendors such as Nokia, Apple and RIM from the projected market growth, while Open OS’s (aka Android) are enabling vendors such as Samsung/HTC to capitalize on the growth. In 2009, Android had 4.1% share of the smartphone business. That number has quadrupled in 2010 (YTD) to around 16.3% and it is expected that in 2014, Android may have up to 25% of the smartphone market (~130 million phones). And with this rising tide, the Samsung and HTC boats will ride the growth wave at the expense of Nokia in particular. Apple and RIM are also projected to lose marginal share in the next few years. Other OS’s, such as Windows Mobile, webOS (Palm, now HP), Maemo, Linux – all have unique opportunities to also hook themselves to the gravy train. They need to play their cards right though!
What can the incumbents do? Two things – (a) Innovate like crazy and (b) Open up the locked doors – meaning cut their OS’s lose to the world. There are risks associated with either strategy but I think that doing nothing is the biggest risk they face.