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    Smartphone futures 2011 2015 Smartphone futures 2011 2015 Document Transcript

    • Smartphone Futures 2011-2015 © 2010, Portio Research. All Rights Reserved 1
    • Smartphone Futures 2011-2015 Portio Research Limited. Published December 2010 by Portio Research Limited © Copyright 2010. www.portioresearch.com info@portioresearch.com Disclaimer and Legal Notices Disclaimer Every care has been taken in the preparation of this study to ensure that the information contained herein is accurate, factual and correct to the best of our knowledge, at time of publishing. All opinions, suppositions, estimates and recommendations included in this document are solely the opinions of the authors unless otherwise stated. Portio Research Limited accepts no liability for any loss or damage or unforeseen consequential loss or damage arising from the use of the information contained within this document. The opinions, suppositions, estimates and recommendations within this document cannot be guaranteed, and readers use this information at their own risk. The information published in this document is subject to change without notice at any time, and Portio Research Limited accepts no liability or obligation to inform the reader of such changes. Portio Research Limited do not promote or endorse any specific companies or products, the views and opinions we express in this document are wholly our own assessments, and independent from any external interest or influence. Many terms and phrases and trade names used in this document are proprietary and Portio Research Limited recognises and acknowledges that all trademarks are copyright, belonging to their respective owners. Where possible, this document accords such terms and phrases and trade names to their respective owners. All Rights Reserved. No part of this document can be copied, shared, redistributed, transmitted, displayed in the public domain, stored or displayed on any internal or external company or private network or electronic retrieval system, nor reprinted, republished or reconstituted in any way without the express written permission of the publisher. Forwarding of this electronic document without the correct legal licence is theft. It’s unethical, immoral and against the law. If you have any questions about the legal licence conditions under which this document has been distributed, please contact Portio Research on info@portioresearch.com If you did not buy this document and a colleague or associate has sent it to you, do not assume you are legally entitled to read it, it is your responsibility to ensure you have the correct legal licence to read this document. 2 © 2010, Portio Research. All Rights Reserved
    • Smartphone Futures 2011-2015 Contents Introduction ..............................................................................................................................8 Handset Market Summary ................................................................................................................... 8 Handset Shipments ........................................................................................................................... 8 Handset Revenues .......................................................................................................................... 11 Handset Market Evolution and Emergence of Smartphones ............................................................. 12 Restructuring of the Mobile Handset Market ................................................................................... 14 Emergence of the Smartphone ....................................................................................................... 16 The Aftermath of Recession ............................................................................................................ 17 A Comparison of Asia Pacific and North America ........................................................................... 18 Regions of Strength ........................................................................................................................... 19 Nokia ............................................................................................................................................... 19 RIM.................................................................................................................................................. 20 Apple ............................................................................................................................................... 20 HTC ................................................................................................................................................. 20 Comparison of BlackBerry and iPhone Growth ............................................................................... 21 The Growth of Android OS (Operating System) .............................................................................. 22 Comparison of Android and iPhone Growth .................................................................................... 24 Smartphone Market ................................................................................................................27 Smartphone Value Chain .......................................................................................................32 Key Players in the Value Chain ......................................................................................................... 35 Smartphone Vendors .............................................................................................................37 Market Share of Smartphone Vendors............................................................................................... 37 Regional Market Share of Smartphone Vendors ............................................................................... 38 Nokia.................................................................................................................................................. 41 Apple.................................................................................................................................................. 47 Research in Motion ............................................................................................................................ 53 HTC Corporation ................................................................................................................................ 62 Samsung............................................................................................................................................ 68 Motorola ............................................................................................................................................. 72 Sony Ericsson .................................................................................................................................... 76 Operating Systems ................................................................................................................81 Market Share of Operating System Vendors ..................................................................................... 81 Regional Market Share of Operating System Vendors ...................................................................... 82 Symbian OS....................................................................................................................................... 84 Apple iPhone OS ............................................................................................................................... 87 BlackBerry OS ................................................................................................................................... 90 Microsoft OS ...................................................................................................................................... 93 Android OS ........................................................................................................................................ 96 Applications and Content Market .......................................................................................101 Apple App Store ............................................................................................................................... 102 BlackBerry App World ...................................................................................................................... 104 Nokia Ovi Store ................................................................................................................................ 105 Google Android Market .................................................................................................................... 106 Symbian Horizon.............................................................................................................................. 107 Windows Marketplace ...................................................................................................................... 108 Positioning of Applications Stores .................................................................................................... 109 Summary and Conclusions .................................................................................................112 Positioning of Smartphone Vendors................................................................................................. 113 Positioning of Operating System Vendors ....................................................................................... 115 Appendices ...........................................................................................................................121 Glossary ........................................................................................................................................ 122 Portio Research Classifications ..................................................................................................... 134 Companies Mentioned in this Report ............................................................................................ 135 About the Authors.......................................................................................................................... 138 Also available from Portio Research Limited ................................................................................. 139 © 2010, Portio Research. All Rights Reserved 3
    • Smartphone Futures 2011-2015 List of Figures Figure 1: Figure 2: Figure 3: Figure 4: Figure 5: Figure 6: Figure 7: Figure 8: Figure 9: Figure 10: Figure 11: Figure 12: Figure 13: Figure 14: Figure 15: Figure 16: Figure 17: Figure 18: Figure 19: Figure 20: Figure 21: Figure 22: Figure 23: Figure 24: Figure 25: Figure 26: Figure 27: Figure 28: Figure 29: Figure 30: Figure 31: Figure 32: Figure 33: Figure 34: Figure 35: Figure 36: Figure 37: Figure 38: Figure 39: Figure 40: Figure 41: Figure 42: Figure 43: Figure 44: Figure 45: Figure 46: Figure 47: Figure 48: Figure 49: Figure 50: Figure 51: 4 Handset Shipments – Worldwide (In Million, 2009 – 2015F) ............................................ 9 Worldwide Handset Shipments — Regional Contribution (In Percent, 2010) ................. 10 Worldwide Handset Shipments — Regional Contribution (In Percent, 2015F) ............... 11 Handset ASPs of Leading Vendors (In USD, Q3 2009 – Q4 2010) ................................ 11 Handset Revenues – Worldwide (In USD Billion, 2009 – 2015F) ................................... 12 Market Share of Handset Vendors – Worldwide (In Percent, 2007 – 2010).................... 14 Market Share of Handset Vendors – Worldwide (In Percent, 2007 – 2010).................... 15 Smartphone Shipments as a Percentage of Total Handset Shipments – Worldwide ( In Percent, 2007 – 2010) .................................................................................................... 17 Smartphone Shipments Growth and Smartphone Share Growth as a Percentage – Worldwide (In Percent, 2007 – 2015F) ........................................................................... 18 Contribution to Total Worldwide Handset Shipments and Smartphone Shipments – Asia Pacific (In Percent , 2007 – 2010) ................................................................................... 18 Contribution to Total Worldwide Handset Shipments and Smartphone Shipments – North America (In Percent , 2007 – 2010) ................................................................................ 19 Worldwide Subscriber Growth – BlackBerry vs. iPhone (In Millions) .............................. 21 OS Shipments (In Millions, 2009-2010) .......................................................................... 23 Smartphone Shipments as a Percentage of Handset Shipments – Worldwide (In Million, 2009 – 2015F)................................................................................................................. 27 Smartphone Shipments – Worldwide (In Million, 2009 – 2015F) .................................... 28 Worldwide Smartphone Shipments — Regional Contribution (In Percent, 2010) ........... 29 Worldwide Smartphone Shipments — Regional Contribution (In Percent, 2015F) ......... 30 Smartphone Value Chain ................................................................................................ 33 Market Share of Smartphone Vendors – Worldwide (In Percent, 2010) ......................... 37 Market Share of Smartphone Vendors – Worldwide (In Percent, 2015F) ....................... 38 Smartphone Market Share — North America (In Percent, Q3 2010) .............................. 38 Smartphone Market Share — Asia Pacific (In Percent, Q3 2010)................................... 39 Smartphone Market Share — Europe (In Percent, Q3 2010).......................................... 39 Smartphone Market Share — Rest of World (In Percent, Q3 2010) ............................... 40 Revenue by Business Segments — Nokia (In USD Billion, 2008, 2009 & 9M 2010) ...... 42 Regional Break-out of Smartphone Shipments — Nokia (In Percent, Q3 2010) ............. 43 Nokia’s Business Development during September 2009 – September 2010 .................. 44 SWOT Analysis – Nokia .................................................................................................. 45 Revenue by Business Segments — Apple (In USD Billion, FY 2008 – FY 2010) ........... 48 iPhone Shipments – Worldwide (In Million, Q2 2007 – Q3 2010) ................................... 49 Growth in iPhone Users (In Million, Q2 2007 – Q3 2010) ............................................... 49 Regional Break-out of Smartphone Shipments — Apple (In Percent, Q3 2010) ............. 50 SWOT Analysis – Apple .................................................................................................. 51 Revenue by Business Segments — RIM (In USD Billion, FY 2009 – H1FY 2011) ......... 54 Growth in BlackBerry User-Base .................................................................................... 57 Regional Break-out of Smartphone Shipments — RIM (In Percent, Q3 2010)................ 58 RIM’s Business Development During March 2006 – September 2010 ........................... 59 SWOT Analysis – RIM .................................................................................................... 60 Revenue — HTC (In USD Billion, 2008 – 9M 2010) ....................................................... 63 Regional Break-out of Smartphone Shipments — HTC (In Percent, Q3 2010) ............... 64 HTC’s Evolution from ODM to OEM................................................................................ 65 SWOT Analysis – HTC ................................................................................................... 66 Revenue by Business Segments — Samsung (In USD Billion, 2008 – 9M 2010) .......... 69 SWOT Analysis – Samsung ............................................................................................ 70 Revenue by Business Segments — Motorola (In USD Billion, 2008 – 9M 2010)............ 73 SWOT Analysis – Motorola ............................................................................................. 74 Revenue — Sony Ericsson (In USD Billion, 2008 – 9M 2010) ........................................ 77 SWOT Analysis – Sony Ericsson .................................................................................... 78 Market Share of OS by Shipments – Worldwide (In Percent, 2010) ............................... 81 Market Share of OS by Shipments – Worldwide (In Percent, 2015F) ............................. 81 Market Share of OS by Shipments — North America (In Percent, Q3 2010) .................. 82 © 2010, Portio Research. All Rights Reserved
    • Smartphone Futures 2011-2015 Figure 52: Figure 53: Figure 54: Figure 55: Figure 56: Figure 57: Figure 58: Figure 59: Figure 60: Figure 61: Figure 62: Figure 63: Figure 64: Figure 65: Figure 66: Figure 67: Figure 68: Market Share of OS by Shipments — Asia Pacific (In Percent, Q3 2010) ...................... 82 Market Share of OS by Shipments — Europe (In Percent, Q3 2010) ............................ 83 Market Share of OS by Shipments — Rest of World (In Percent, Q3 2010) ................... 83 Regional Break-out of Symbian OS Shipments (In Percent, Q3 2010) ........................... 85 Regional Break-out of Apple iPhone OS Shipments (In Percent, Q3 2010).................... 88 Regional Break-out of BlackBerry OS Shipments (In Percent, Q3 2010)........................ 91 Regional Break-out of Microsoft OS Shipments (In Percent, Q3 2010) ......................... 94 Regional Break-out of Android OS Shipments (In Percent, Q3 2010)............................ 97 Apple’s App Store Growth (July 2008 – October 2010) ................................................ 102 Break-out of Available Applications by Type – Apple App Store (In Percent, October 2010)............................................................................................................................. 103 Break-out of Available Applications by Type – BlackBerry App World (In Percent, October 2010)............................................................................................................................. 104 Break-out of Available Applications by Type – Nokia Ovi Store (In Percent, October 2010)............................................................................................................................. 105 Break-out of Available Applications by Type – Google Android Market (In Percent, October 2010) ............................................................................................................... 106 Break-out of Available Applications by Type – Windows Marketplace (In Percent, October 2010)............................................................................................................................. 108 Break-out of Available Mobile Applications by Free and Paid Application Type – The US (In Percent, July 2010) .................................................................................................. 110 Positioning of Smartphone Vendors.............................................................................. 114 Positioning of OS Vendors ............................................................................................ 115 © 2010, Portio Research. All Rights Reserved 5
    • Smartphone Futures 2011-2015 List of Tables Table 1: Table 2: Table 3: Table 4: Table 5: Table 6: Table 7: Table 8: Table 9: Table 10: Table 11: Table 12: Table 13: Table 14: Table 15: Table 16: Table 17: Table 18: Table 19: Table 20: Table 21: Table 22: Table 23: Table 24: Table 25: Table 26: Table 27: Table 28: Table 29: Table 30: Table 31: Table 32: Table 33: Table 34: Table 35: Table 36: Table 37: Table 38: Table 39: 6 Handset Shipments — Worldwide (In Million, 2009 – 2015F) ............................................. 9 Market Share of Handset Vendors — Worldwide (In Percent, 2007 – 2010) ................... 15 Emergence of the Smartphone.......................................................................................... 16 Regional Break-out of Smartphone Shipments — Nokia (In Percent, Q3 2010) ............... 19 Regional Break-out of Smartphone Shipments — RIM (In Percent, Q3 2010) .................. 20 Regional Break-out of Smartphone Shipments — Apple (In Percent, Q3 2010) ............... 20 Regional Break-out of Smartphone Shipments — HTC (In Percent, Q3 2010) ................. 20 Smartphone Shipments — RIM & Apple (In Million, 2005 – 2010) .................................... 21 Geographical Presence — RIM & Apple (November 2010) .............................................. 22 An overview of Android and iPhone – November 2010 ..................................................... 24 Smartphone Shipments — Worldwide (In Million, 2009 – 2015F) ..................................... 28 Key Players in the Smartphone Value Chain..................................................................... 35 Smartphone Shipments and Smartphone Market Share — Nokia (2009 – 2015F) ........... 42 Smartphone Shipments and Smartphone Market Share — Apple (2009 – 2015F) ........... 48 Smartphone Shipments and Smartphone Market Share — RIM (2009 – 2015F).............. 54 BlackBerry Subscriber Base Growth (FY 2002 – FY 2006) ............................................... 55 BlackBerry Subscriber Base Growth (FY 2007 – Q2FY 2011) .......................................... 56 Smartphone Shipments and Smartphone Market Share — HTC (2009 – 2015F) ............. 63 Smartphone Shipments and Smartphone Market Share — Samsung (2009 – 2015F) ..... 69 Smartphone Shipments and Smartphone Market Share — Motorola (2009 – 2015F) ...... 73 Smartphone Shipments and Smartphone Market Share —Sony Ericsson (2009 – 2015F) .. ..................................................................................................................................... 77 OS Shipments and OS Market Share — Symbian (2009 – 2015F) ................................... 84 OS Shipments and OS Market Share — Apple iPhone (2009- 2015F) ............................. 87 OS Shipments and OS Market Share – BlackBerry (2009 – 2015F) ................................. 90 OS Shipments and OS Market Share — Microsoft (2009 – 2015F) .................................. 93 OS Shipments and OS Market Share — Android (2009 – 2015F) ................................... 96 Android OS-based Smartphone Releases in 2010 (As of October 2010).......................... 98 Most Popular Paid and Free Applications, Apple App Store (The US, October 2010) .... 103 Most Popular Paid and Free Applications, BlackBerry App World (The US, October 2010) . ................................................................................................................................... 104 Most Popular Paid and Free Applications, Nokia Ovi Store (The US, October 2010) ..... 105 Most Popular Paid and Free Applications, Google Android Market (The US, October 2010) ................................................................................................................................... 106 Most Popular Paid and Free Games, Google Android Market (The US, October 2010) . 107 Most Popular Paid and Free Applications, Symbian Horizon (Worldwide, October 2010)..... ................................................................................................................................... 107 Most Popular Paid and Free Applications, Windows Marketplace (The US, October 2010) . ................................................................................................................................... 108 Application Downloads for Major Application Stores ....................................................... 109 Strategies of the top smartphone vendors ....................................................................... 112 Key Weaknesses to Top Smartphone Vendors ............................................................... 113 Total Number of Smartphones by Vendor ....................................................................... 114 Comparison of Smartphone Vendors based on Selected Parameters ............................ 118 © 2010, Portio Research. All Rights Reserved
    • Smartphone Futures 2011-2015 Chapter 1 Introduction © 2010, Portio Research. All Rights Reserved 7
    • Smartphone Futures 2011-2015 Introduction Handset Market Summary Handset Shipments Handset shipments are influenced by different factors, such as mobile penetration in a given geography, subscriber additions in a given period, and handset replacement rates 1. Rising mobile penetration increases the subscriber base, which fuels the demand for handsets; and higher penetration rates also impact replacement rates. However, an increase in subscriber base does not always translate to an upward trend in handset shipments, as was the case during the recent recession. During a recessionary period, there is typically a downward trend in replacement rates, as subscribers do not replace their existing handsets as fast as they otherwise would. During 2009-2010, the total worldwide handset shipments recorded an impressive growth of 12.2 percent year-on-year. Customer spending on handsets is expected to increase in the coming years, primarily due to: • • • • Implementation of new technologies (3G, 4G/LTE) in key geographies including North America, Europe and Asia Pacific. Availability of new devices with better features and designs. There have been numerous product launches in the last year from key vendors including Apple, RIM, Nokia, HTC, Samsung, Sony Ericsson and Motorola – at varying price points. Availability of wide device portfolios across different markets, as vendors enter into region-wide partnerships with MNOs to launch their products across multiple geographies. With the increasing popularity of Android OS, there has been rising demand for Androidbased handsets. With a combination of the above factors, handset shipments are expected to grow at a CAGR of 6 percent during the period 2010-2015 to reach 1,752.4 million handset shipments by end2015. The next figure provides worldwide handset shipments for the period 2009-2015. 1 8 Replacement rates: This is the frequency at which mobile subscribers substitute their old handsets with new ones. Higher replacement rates result in growth in demand. An average replacement rate of 50 percent means average replacement time for handsets is 2 years. © 2010, Portio Research. All Rights Reserved During 2009-2010, the total worldwide handset shipments recorded an impressive growth of 12.2 percent yearon-year
    • Smartphone Futures 2011-2015 Figure 1: Handset Shipments – Worldwide (In Million, 2009 – 2015F) 2 2,000 1,687.5 Handset Shipments (In Million) 1,600.3 1,600 1,375.4 1,307.9 1,752.4 1,481.7 1,165.6 1,200 800 400 0 2009 2010 2011F 2012F 2013F 2014F 2015F Year Source: Portio Research Ltd. F – Forecasted Handset shipment forecasts for different regions are given in the table below, as are respective Compound Annual Growth Rates (CAGR). The Rest of World region will witness the highest growth in handset shipments during 2010-2015, followed by Europe. Table 1: Handset Shipments — Worldwide (In Million, 2009 – 2015F) 3 Handset Shipments (In Million) 2009 2010 2011F 2012F 2013F 2014F 2015F CAGR (In Percent, 2010-2015F) Asia Pacific 521.4 580.9 587.4 614.1 670.5 705.8 740.7 5.0 Europe 226.5 275.0 306.2 338.4 363.5 377.3 379.3 6.6 North America 143.0 174.7 188.2 202.5 213.0 221.1 228.6 5.5 Rest of World 274.6 277.3 293.7 326.7 353.4 383.3 403.7 7.8 Total 1165.6 1307.9 1375.4 1481.7 1600.3 1687.5 1752.4 6.0 Region Source: Portio Research Ltd. Regional contributions to worldwide handset shipments during 2010 are given in the next figure. Asia Pacific is the largest market—accounting for 44.4 percent of 2010 shipments. 2 Note: This report was written in the fourth quarter of 2010. As such, quoted full year 2010 figures throughout this report use data collected from the first three quarters of 2010 and estimations for the fourth unavailable quarter. 3 Note: The total may not be equal to sum of regional numbers due to rounding-off errors. © 2010, Portio Research. All Rights Reserved 9
    • Smartphone Futures 2011-2015 Figure 2: Worldwide Handset Shipments — Regional Contribution (In Percent, 2010) 21.0% 13.4% 44.4% Asia Pacific 21.2% Europe North America Rest of World Source: Portio Research Ltd. Owing to a large subscriber base, Asia Pacific is expected to be the region with the highest contribution towards worldwide handset shipments during the period 2010-2015. However, its share in total shipments is expected to decrease from 44.4 percent in 2010 to 42.3 percent by-end 2015. The major reasons associated with the decline include slowing growth in the subscriber base, lower regional handset replacement rates, and the increasing popularity of dual/triple-SIM handsets. In India, for example, the share of multiple-SIM handsets increased to 38.5 percent of total handset shipments in Q2 2010, up from under 1 percent in Q2 2009. 4 Between 2010-2015, handset shipments in Europe and North America are expected to grow at CAGRs higher than that for Asia Pacific: 6.6 percent and 5.5 percent respectively. The main drivers for this higher growth are new network technologies in the market, which are boosting the demand for high-end handsets and are increasing replacement rates (compared to Asia Pacific). The arrival of Android OS has resulted in increased sales of Android-based handsets by vendors including Motorola, HTC, Samsung and Sony Ericsson. Rest of World—comprising Latin America, the Middle East and Africa—is expected to grow at a CAGR of 7.8 percent during 2010-2015. Growth will be driven primarily by an increase in the subscriber base, coupled with a wide availability of handsets from leading vendors, including Apple and RIM. The forecasts for regional contributions to worldwide handset shipments during 2015 are given in the following figure. 4 Source: http://teck.in/multi-sim-mobile-phones-38-5-of-total-handset-sales-in-india.html 10 © 2010, Portio Research. All Rights Reserved Between 2010-2015, handset shipments in Europe and North America are expected to grow at CAGRs higher than that for Asia Pacific: 6.6 percent and 5.5 percent respectively
    • Smartphone Futures 2011-2015 Figure 3: Worldwide Handset Shipments — Regional Contribution (In Percent, 2015F) 5 21.6% 13.0% 42.3% 23.0% Asia Pacific Europe North America Rest of World Source: Portio Research Ltd. F – Forecasted Handset Revenues Worldwide handset revenues are derived from handset shipments and their Average Selling Price (ASP). Higher ASPs are attributed to increasing shipments of high-end handsets. The overall ASPs of leading handset vendors are depicted in the graph below. Figure 4: Handset ASPs of Leading Vendors (In USD, Q3 2009 – Q4 2010) 240.8 250 223.0 230 208.9 ASP (in USD) 210 192.0 190 150 130 110 207.0 169.0 170 90 104.0 70 80.9 Q3 2009 Nokia 200.0 174.9 148.8 124.0 119.0 198.7 148.8 115.0 106.0 82.2 Q4 2009 Motorola 116.0 108.0 117.0 107.0 79.6 80.9 Q1 2010 Q2 2010 Samsung 125.0 122.0 109.0 112.0 83.9 86.0 Q3 2010 Sony Ericsson Q4 2010 LG Source: Portio Research Ltd. By end-2010, worldwide handset revenues rose by 19 percent year-on-year, due to factors including an increase in ASPs of key vendors, rising smartphone shipments, increasing sales of Android-based handsets, and successful launches of high-end devices by prominent vendors. Revenue growth is forecast to stabilise during 2010-2015, with ASPs anticipated to fall in the long-run because of saturation in the handset market. 5 Note: The total may not add up to 100 percent due to rounding-off errors. © 2010, Portio Research. All Rights Reserved 11 Revenue growth is forecast to stabilize during 2010-2015, with ASPs anticipated to fall in the long-run because of saturation in the handset market.
    • Smartphone Futures 2011-2015 Average Selling Price Nokia has seen an increase in ASP mainly due to the growth of sales from high-end handsets launched during 2010. The ASPs of Motorola and Sony Ericsson have seen rapid increases since late 2009 primarily due to their focus on high-end handset shipments based on Android OS – including the Droid series (Motorola) and Xperia series (Sony Ericsson) Samsung’s ASP has also increased, for the most part due to strong smartphone sales on the back of more high-end smartphone launches. Apple and RIM are excluded from this analysis of overall handset ASPs, as they are only present in the smartphone segment. Worldwide handset revenues for 2009-2015 are shown below. Figure 5: Handset Revenues – Worldwide (In USD Billion, 2009 – 2015F) Handset Revenues (In USD Billion) 200 160 140.3 149.0 169.1 158.6 6 175.9 180.2 2014F 2015F 118.0 120 80 40 0 2009 2010 2011F 2012F 2013F Year Source: Portio Research Ltd. F – Forecasted After a sharp year-on-year decline of 18.5 percent during 2008-2009, handset revenues are expected to show a CAGR of approximately 5.1 percent between 2010 and 2015. Handset Market Evolution and Emergence of Smartphones Mobile services have transformed from an era of only providing voice and messaging services to a new generation of value-added services including games, video messaging and location–based services to name a few. This evolution is attributed to factors including: • • • • 6 Increase in demand for mobile connectivity Product availability through vendors, MNOs Evolution of network and handset technologies MNOs promoting value-added services that can increase their ARPUs Assumptions: Handset revenue forecasts have been calculated based on the handset shipment forecasts and expected Average Selling Price for handsets. 12 © 2010, Portio Research. All Rights Reserved
    • Smartphone Futures 2011-2015 Handset vendors, according to the varying needs of subscribers in different markets, have launched handsets with appropriate features and at different price points. Based on pricing and accompanying features, handsets can be classified into the following categories: • • • Low-end handsets: These are targeted at subscribers who require basic functionalities, such as voice and SMS (text messaging). Mid-range handsets: In addition to basic features, these handsets have functionalities such as a mid-resolution camera, music player, MMS capability (multimedia messaging), and provision for external memory. High-end handsets: This segment includes the following: o Feature phones: Feature-phones are handsets with a browser (primarily based on embedded J2ME and BREW platforms) to enable access to web based e-mail, and sometimes have embedded applications for social networking, instant messaging (IM) and mobile banking. These phones often come with high resolution cameras, GPS and innovative multimedia features. o Smartphones: The major differentiating factor between a smartphone and a feature phone is the presence of an Operating System (OS). The OS, through its Application Programming Interface (API), enables subscribers to install and remove third-party applications. Smartphones generally have large displays and faster processors, and their operating systems are better integrated with the handset's User Interface than Java applications. Handset vendors worldwide are looking to make their products more appealing by enhancing them with more features. Some features of high-end phones are now available in mid-range handsets as well; and some features of mid-range handsets are being embedded in low-end handsets. As a result, boundaries are blurring. And, as we’ve written before, with handset vendors and MNOs planning to provide more features at affordable prices, moving to featurephones and smartphones might prove to be a natural progression. Smartphones have been developed to address the growing consumer demand for seamless PC-like Internet experiences, and requirements for better processing capabilities to support multi-tasking. Value added and Internet-based services cannot realise their full potential on mobile handsets without a capable smartphone manufacturing ecosystem with the ability to provide rich user-experiences. Providing rich user-experiences is significant because the services launched over smartphones have generally been seen and used before on PCs, and if the user’s experience does not match or come close to their prior PC-based experience, the services might not gain traction over mobile handsets. Furthermore, there are incentives attached with the launch of these services on mobile platforms and this drives players to invest in research and development for smartphones. The primary driving factors are as follows: • Better margins in selling high-end handsets • Addition of features and capabilities to handsets increases the replacement rate and, as a result, the demand for new handsets (this factor is more important for pushing sales in saturated markets) • Adding differentiating factors keeps handsets ahead of the competition • Additional revenue generation channels by embedding applications onto the handsets Key Observations Significant developments in the worldwide handset market over the past few years have radically changed the shape and future course of this industry. Developments that have fundamentally altered market dynamics include the gaining prominence of iPhone and now Android-based devices, as well as Nokia’s declining smartphone market share. The following section briefly discusses such developments and their impact. © 2010, Portio Research. All Rights Reserved 13 Smartphones have been developed to address the growing consumer demand for seamless PC-like internet experiences and requirements for better processing capabilities to support multitasking
    • Smartphone Futures 2011-2015 Restructuring of the Mobile Handset Market With the emergence of new players, the market has undergone major changes in terms of key vendor positioning. Over the years, these new players emerged as a major threat to incumbents by increasing their market shares through, for example, new product launches, exploring geographies, and strengthening application portfolios; vendors who remained static amidst these market changes lost market share. The section below lists vendors who lost/ gained market share during 2009-2010. Handset Vendors Losing Market Share Motorola and Sony Ericsson have seen sharp decreases in market share during the period 2007-2010, with Motorola’s share falling from over 13.9 percent in 2007 to 2.7 percent by the end of 2010. Market leader Nokia has been facing intense competition from Apple and RIM in the high-end handsets segment, and other new and existing players for their mid and low-end handsets. Figure 6: Market Share of Handset Vendors – Worldwide (In Percent, 2007 – 2010) 45 37.0 38.6 38.4 36.3 Market Share (In Percent) 36 27 18 13.9 8.3 9 4.9 8.7 8.0 4.7 0 2007 2008 2009 3.4 2.7 2010 Year Motorola Nokia Sony Ericsson Source: Portio Research Ltd. Handset Vendors Gaining Market Share Samsung, RIM and Apple experienced steadily increasing market share during the period 2007-2010. Samsung has the second largest handset market share worldwide after Nokia, having held this rank since 2007 when it overtook Motorola. RIM and Apple are expected to see further growth, driven by new product launches at regular intervals, expansion in to new geographies, and multiple partnerships with MNOs worldwide. Samsung’s recent decision to shift to Android-based devices is expected to support its ongoing growth. 14 © 2010, Portio Research. All Rights Reserved RIM and Apple are expected to see further growth, driven by new product launches at regular intervals, expansion to new geographies, and multiple partnerships with MNOs worldwide
    • Smartphone Futures 2011-2015 Figure 7: Market Share of Handset Vendors – Worldwide (In Percent, 2007 – 2010) 24 21.2 19.5 Market Share (In Percent) 20 16 17.6 19.6 18.6 16.1 14.2 16.2 12 10.1 8 7.1 4 1.1 0.5 2007 Samsung 2008 LG 3.7 3.0 1.9 1.2 0 9.4 8.3 3.7 2.2 Year 2009 RIM 2010 Apple Others Source: Portio Research Ltd. The table below highlights the market shares of handset vendors during 2007-2010 and changes in their market share from 2009 to 2010 in percentage points. Table 2: Market Share of Handset Vendors — Worldwide (In Percent, 2007 – 2010) Market Share (In Percent, 2007-2010) 7 2007 2008 2009 2010 Change in Market Share (In Percentage Points, 2009-2010) Nokia 38.4 38.6 37.0 36.3 -0.7 Motorola 13.9 8.3 4.7 2.7 -2.0 Samsung 14.2 16.2 19.5 21.2 +1.7 LG 7.1 8.3 10.1 9.4 -0.7 Sony Ericsson 8.7 8.0 4.9 3.4 -1.5 RIM 1.2 1.9 3.0 3.7 +0.7 Apple 0.5 1.1 2.2 3.7 +1.5 Others 16.1 17.6 18.6 19.6 +1.0 Handset Vendor Source: Portio Research Ltd. 7 Note: Compiled market shares may not add up to 100 percent due to rounding-off errors © 2010, Portio Research. All Rights Reserved 15
    • Smartphone Futures 2011-2015 Emergence of the Smartphone The table below depicts the emergence of Smartphones (in terms of functionality) over the years. Table 3: Emergence of the Smartphone Vendor Smartphone IBM Simon Nokia 9000 Communicator Launch Date August 1994 September 1996 Description Simon is a touch-screen phone that combined the features of a mobile phone, pager, FAX and PDA Main applications include Fax, SMS, E-mail, Digital camera connectivity, Smart messaging, Web terminal, Contacts, Notes, Calendar, Calculator, World time clock, Composer This was the first phone in North America that came on Palm OS Kyocera QCP 6035 April 2001 RIM BlackBerry 5810 April 2002 The Palm OS system benefits from the integrated cell phone by utilizing it as an attached modem The most popular feature on the device is the "Push E-mail Support” Introduced in 2005, the N-Series platform gave a new definition to digital media Nokia Apple Google N-Series (N70, N90, N91) iPhone G1 Android April 2005 June 2007 September 2008 Some of the prominent features include megapixel camera, Carl Zeiss optics, support for 3G, external memory card slot and MP3 player iPhone revolutionized the smartphone industry with new takes on the touchscreen concept, mobile browsing, and the installation of third-party software (Apps) The "Open-source" nature of Android prompted handset vendors to shift to the Android platform and launch more "customized" devices for end users Source: Portio Research Ltd. 16 © 2010, Portio Research. All Rights Reserved
    • Smartphone Futures 2011-2015 Figure 8: Smartphone Shipments as a Percentage of Total Handset Shipments – Worldwide ( In Percent, 2007 – 2010) Smartphones as a Percentage of Total Handset Shipments (In Percent) 40 Android-based phone Launched 30 20 iPhone Launched 23.1 10 10.5 12.2 2008 2009 29.5 39.7 14.7 2007 26.3 36.1 32.8 0 2010 2011F 2012F 2013F 2014F 2015F Year Source: Portio Research Ltd. F – Forecasted The Aftermath of Recession The market registered an increase in year-on-year smartphone shipments growth, from 16.4 percent in 2009 to 76.5 percent at end-2010. Factors fuelling this growth include increasing disposable incomes, new technologies, new product launches and availability of products in key geographies, vendors focusing on expanding their distribution networks, and subsidies from MNOs. In 2009, smartphones’ contribution to total worldwide handset shipments increased by 2.6 percent; in 2010 it increased by 8.4 percent. The next figure highlights smartphone shipments growth during the period 2007-2015. © 2010, Portio Research. All Rights Reserved 17 In 2009, smartphones’ contribution to total worldwide handset shipments increased by 2.6 percent; in 2010 it increased by 8.4 percent
    • Smartphone Futures 2011-2015 Figure 9: Smartphone Shipments Growth and Smartphone Share Growth as a Percentage – Worldwide (In Percent, 2007 – 2015F) 90 10 75 66.7 8 8.4 Recession 60 6 45 3.2 30 3.2 22.8 15 2.6 1.6 2009 3.2 21.0 19.8 3.3 3.6 16.2 14.1 2014F 2015F 4 2 16.4 2008 19.5 3.2 Smartphone Share Growth (In Percent) Smartphone Shipments Growth (In Percent) 76.5 0 0 2007 2010 2011F 2012F Smartphone Shipments Growth 2013F Smartphone Share Growth Source: Portio Research Ltd. F – Forecasted A Comparison of Asia Pacific and North America In this section, Asia Pacific, the region with the largest subscriber base, is compared with North America, the region with the highest smartphone penetration. The graph below analyses handset and smartphone shipments in Asia Pacific. Figure 10: Contribution to Total Worldwide Handset Shipments and Smartphone Shipments – Asia Pacific (In Percent , 2007 – 2010) 46.0 50 37.0 40 35.9 33.6 30 30 20 40 39.1 44.7 41.4 44.4 20 10 10 0 Share in Smartphone Shipments (In Percent) Share in Total Handset Shipments (In Percent) 50 0 2007 2008 2009 2010 Year Share in Total Handset Shipments Share in Smartphone Shipments Source: Portio Research Ltd. Although the Asia Pacific region has observed an increase in its share in total worldwide handset shipments over recent years, its contribution to worldwide smartphone shipments is declining. This is primarily due to lower replacement rates of smartphones, and slower progress on new technology upgrades. 18 © 2010, Portio Research. All Rights Reserved
    • Smartphone Futures 2011-2015 The graph below analyses North American handset and smartphone shipments. Figure 11: Contribution to Total Worldwide Handset Shipments and Smartphone Shipments – North America (In Percent , 2007 – 2010) 31.1 29.0 30.7 32 24 10 17.0 12.4 5 13.5 16 13.4 12.3 8 0 Share in Smartphone Shipments (In Percent) Share in Total Handset Shipments (In Percent) 15 0 2007 2008 2009 Year Share in Total Handset Shipments 2010 Share in Smartphone Shipments Source: Portio Research Ltd. North America witnessed relatively stagnant growth in handset shipments during 2007-2010. However, in contrast to Asia Pacific, its share of worldwide smartphone shipments has grown in this period. The main reasons associated with this growth include higher replacement rates for smartphones, rapid advancement of technology, and availability of new products. Regions of Strength Smartphone vendors worldwide are trying to increase their share in the smartphone market. Although each vendor is trying to maximise market share worldwide, each vendor has created particular pockets of influence. The following section explains these pockets of influence for the four major smartphone vendors worldwide. Nokia In Q3 2010, Asia Pacific was the largest smartphone market for Finland-based Nokia. Asia Pacific accounted for 44.5 percent of Nokia’s worldwide smartphone shipments. Nokia’s differential advantage in the region is attributed to its market segmentation and wide range of products, and high brand perception. Unsurprisingly, Nokia tops the list of preferred smartphone brands in several major markets of Asia Pacific. Asia Pacific accounted for 44.5 percent of Nokia’s worldwide smartphone shipments Europe is another important smartphone market for Nokia, accounting for 39.2 percent of the vendor’s worldwide smartphone shipments in Q3 2010. Nokia’s stronghold in the region can be attributed to its solid distribution network and highly-regarded brand image. Table 4: Regional Break-out of Smartphone Shipments — Nokia (In Percent, Q3 2010) 8 Regions Vendor Europe Nokia Asia Pacific North America Rest of World 39.2 44.5 0.8 15.5 Source: Portio Research Ltd. 8 Note: The regional break-out of shipments for each vendor is calculated on the basis of total shipments in the quarter, the total shipments in the region, and other information related to market presence of each of the vendors in different regions. This is an estimated market share © 2010, Portio Research. All Rights Reserved 19
    • Smartphone Futures 2011-2015 RIM North America continued to be RIM’s key market contributing 46.6 percent to Q3 2010 global BlackBerry shipments; growth in this region can be attributed to the gaining traction of prepaid plans. The contributions from Europe and Asia Pacific also increased year-on-year due to increasing product availability through a greater number of distribution partnerships and expanding distribution networks. Table 5: Regional Break-out of Smartphone Shipments — RIM (In Percent, Q3 2010) 9 Regions Vendor UK RIM Asia Pacific North America Rest of World 20.7 14.9 46.6 17.9 Source: Portio Research Ltd. Apple Aided by great brand recognition, Apple enjoyed continued success with the iPhone in North America. New product launches at regular intervals and the availability of a wide array of applications in its App Store has helped Apple maintain market share in the region. At the end of Q3 2010, North America contributed 43.3 percent of total iPhone shipments. To increase its market share in Asia Pacific and Europe, Apple has been aggressively partnering with multiple MNOs to ensure increased product availability. Table 6: At the end of Q3 2010, North America contributed 43.3 percent of total iPhone shipments Regional Break-out of Smartphone Shipments — Apple (In Percent, Q3 2010) Regions Vendor Europe Apple Asia Pacific North America Rest of World 19.9 21.3 43.3 15.6 Source: Portio Research Ltd. HTC The arrival of Android OS has boosted sales of HTC smartphones in North America. North America contributed more than half of HTC’s total smartphone shipments in Q3 2010. The latest move to launch Windows 7 phones might further stimulate shipments in this region. The share of shipments from Europe and Asia Pacific is expected to increase with the gaining popularity of Android OS. HTC’s strategy has been building and strengthening relationships with MNOs in the regions that will help in increasing shipment volumes in these regions. Table 7: Regional Break-out of Smartphone Shipments — HTC (In Percent, Q3 2010) 10 Regions Vendor Europe HTC Asia Pacific North America Rest of World 20.6 17.6 54.4 7.4 Source: Portio Research Ltd. 9 Note: Compiled regional break-out of smartphone shipments may not add up to 100 percent due to rounding-off errors 10 Note: The regional break-out of shipments for each vendor is calculated on the basis of total shipments in the quarter, the total shipments in the region, and other information related to market presence of each of the vendors in different region s. This is an estimated market share 20 © 2010, Portio Research. All Rights Reserved
    • Smartphone Futures 2011-2015 Comparison of BlackBerry and iPhone Growth BlackBerry and iPhone have achieved extraordinary growth rates since their launch. RIM launched its first BlackBerry smartphone in 1999 and Apple its iPhone in 2007. The figure below compares the performance of RIM and Apple through the growth of their user base Figure 12: Worldwide Subscriber Growth – BlackBerry vs. iPhone (In Millions) 11 72 62.0 BlackBerry CAGR (2007-Q2 2011) = 69 percent 63 50.7 Users (In Million) 54 41.3 45 36 35.5 22.3 27 18 9 7.3 0.5 0.1 0.2 1999 2000 2001 0.9 2.2 2003 0.3 2004 4.5 14.8 12.7 iPhone CAGR (2007-Q3 2010) = 253.9 percent 3.7 0 2002 2005 2006 2007 2008 2009 Q2 2011 Period BlackBerry Apple Source: Portio Research Ltd. The table below mentions the smartphone shipments for RIM and Apple during 2005-2010. Table 8: Smartphone Shipments — RIM & Apple (In Million, 2005 – 2010) Smartphone Shipments (In Million) Vendor 2005 2006 2007 2008 2009 2010 RIM 4.0 6.4 13.8 24.9 32.4 48.1 Apple NA NA 3.7 13.7 22.4 49.4 Source: Portio Research Ltd. Geographical Presence BlackBerry devices have been in the smartphone market for more than ten years, whereas iPhones have been around for only three years now. While Apple out-shipped RIM in 2010, BlackBerry presently retains a larger geographical footprint than the iPhone. As of November 2010, BlackBerry was available in over 140 countries worldwide and the iPhone was available in 101 countries. The geographical presence of BlackBerry and iPhone is shown below. 11 Note: Financial year for RIM concludes at end-February; FY 2010 denotes the period from March 2009 to February 2010; Q2 FY 2011 denotes the period June to August 2010. © 2010, Portio Research. All Rights Reserved 21
    • Smartphone Futures 2011-2015 Table 9: Geographical Presence — RIM & Apple (November 2010) Geographical Presence (Number of Countries, Nov 2010) Smartphone Europe Asia Pacific North America Rest of World Total BlackBerry 41 22 2 75 140 iPhone 36 14 2 49 101 Source: Portio Research Ltd. During mid 2008, Apple announced a shift in its distribution strategy to focus on tying up with multiple operators in key geographies. This ongoing strategy is set against a backdrop of increasing competition from Android devices. Though RIM scores higher than Apple with regard to distribution tie-ups, Apple is expected to reduce the lead in the coming years. Some examples of such multi-operator agreements include: • Australia: Vodafone and Optus • Austria: Orange and T-Mobile • Canada: Rogers Communications, Fido Mobile, Bell, Telus Mobility • France: Orange, Bouygues Telecom, SFR • Italy: Telecom Italia and Vodafone • North America: AT&T, Verizon Wireless (Verizon deal is effective from January 2011) • Portugal: Orange and Vodafone • Switzerland: Orange and Swisscom • UK: O2, T-Mobile/Orange (UK operations of Deutsche Telekom and France Telecom merged in November 2009) The switch from the one-operator-per-country model has worked well for Apple. A case in point is France, where iPhone sales increased significantly after launching with Bouygues Telecom and SFR in April 2009; Orange had previously been the sole French MNO offering iPhones. The Growth of Android OS (Operating System) The growth stories of Android-based devices and iPhone are quite similar with respect to phenomenal increases in handset shipments after launch. The iPhone provided a fresh dimension to the mobile experience by building an App Store consisting of a wide array of applications. Android has given this space a further boost by building an open source platform where developers can build and upload applications without stringent filtering rules. The open source nature of Android has been highly successful, and has led prominent vendors to alter allegiances from their existing OS (most notably Symbian) to the Android platform. The growth of Android has come at the expense of other leading OS vendors’ market shares – including Symbian, RIM and Microsoft. The figure below shows Android OS shipment growth, compared to other leading OS vendors. 22 © 2010, Portio Research. All Rights Reserved Apple announced a shift in its distribution strategy to focus on tying up with multiple operators in key geographies. This ongoing strategy is set against a backdrop of increasing competition from Android devices
    • Smartphone Futures 2011-2015 Figure 13: OS Shipments (In Millions, 2009-2010) 2009 80.9 2010 121.3 Change in Market share percent 20092010 Symbian 32.4 48.1 -7.1 BlackBerry 22.4 49.4 -3.0 Apple iOS 3.3 Android 8.1 42.7 9.4 Windows 15.1 12.6 20.6 20.5 -2 -0.6 Others Source: Portio Research Ltd. As observed from the figure, Android OS shipments have grown at the expense of leading OS vendors including Symbian, RIM and Windows. © 2010, Portio Research. All Rights Reserved 23
    • Smartphone Futures 2011-2015 Comparison of Android and iPhone Growth The table below compares Android and iPhone on a set of features including market dynamics, growth, SWOT analysis and future outlook. Table 10: An overview of Android and iPhone – November 2010 Android iPhone Owner Google Apple Entry Strategy Through acquisition of Android in 2005 Building on success of key product portfolio including iPod, Mac and iTunes Total Shipments 42.7 million (end 2010) 49.4 million (end 2010) Popular Vendor Tie-ups HTC, Motorola, Sony Ericsson, Samsung, LG Exclusive to Apple Popular Handsets Motorola Droid, HTC Desire, Samsung Galaxy, Sony Ericsson Xperia X10 iPhone 4, iPhone 3GS Mobile Applications 109,415 341,997 Strengths Weaknesses Opportunities 24 • • • • Google brand Choice of a wide variety of devices Open source platform Over 109,415 applications in a short time (from launch till date) • Developer-friendly OS (in terms of submitting new applications) • Multimedia Support: unlike the popular iTunes application and market place, Android doesn’t have a central or cohesive source of multimedia support • Reliance on hardware makers for upgrades: though OS updates are available from Google, it is up to the vendors to test the functionality of the upgrades on their devices • Lack of Enterprise support • Multi-vendor tie-ups • Huge opportunity in Tablet and Ebook reader space • Smartphone market has a huge growth potential owing to technology advancements • Ability to integrate complete value chain of design, OS development, hardware, application software, and services to come up with innovative and appealing products • Brand loyalty to Apple, and large base of users of other Apple devices, such as Apple iPod, iPad and MacBooks, who might be potential iPhone purchasers • Lack of product diversification and high pricing compared to the competition • Low penetration in the enterprise segment • Delay in product availability across regions, as exclusive partnerships might hamper the growth • Departure from the singleoperator to multi-operator distribution in some countries is expected to increase its market share • Leveraging expertise in the consumer segment to tap the emerging consumer-centric applications market © 2010, Portio Research. All Rights Reserved
    • Smartphone Futures 2011-2015 Threats • Platform fragmentation: numerous customised versions depending on vendors • A change in iPhone’s distribution strategy (wide network of MNOs in key geographies) might have a huge impact on the market Market Dynamics Android has been gaining OS market share at the expense of Symbian, RIM and Microsoft, since its launch in 2008 iPhone has been facing intense competition from RIM and Android Distribution Strategies Built on an open source platform, Android is available to a wide network of vendors and developers. iPhone’s distribution started on the basis of “exclusivity”. Currently, the phone is available with multiple operators across geographies • Additional vendors are expected to release Android-based phones Future Outlook • The recent decision of Samsung and Sony Ericsson to shift from Symbian to Android has further fuelled the market for Android phones • Stringent norms for developers might force them to shift to Android • Expansion of direct sales is affecting the distributor business • The number of competitors is expected to markedly increase. Apple’s new releases of iPhones over the years have only been in terms of software upgrades and new features, but no new products. • Apple might need to diversify their product portfolio to withstand the competition from Android and other smartphone vendors. Source: Portio Research Ltd. The following chapters cover the developments in the smartphone market. We have discussed the current market size and expected growth in the smartphone market during 2009-2015 in Chapter 2. The evolution of the smartphone market and the changing scenario of the smartphone value chain have been discussed in more detail in Chapter 3. © 2010, Portio Research. All Rights Reserved 25
    • Smartphone Futures 2011-2015 Chapter 2 Smartphone Market 26 © 2010, Portio Research. All Rights Reserved
    • Smartphone Futures 2011-2015 Smartphone Market Despite the worldwide economic slowdown, the smartphone market registered a modest growth rate of 16.4 percent during 2008-2009. In 2010, smartphone shipments grew at an impressive rate and were the growth driver for the rebound in 2010’s total handset shipments. The worldwide handset market witnessed a year-on-year growth of 12.2 percent during 20092010, primarily driven by 76.5 percent y-o-y growth in smartphone shipments during the same period. This massive growth in smartphone shipments is a result of increasing demand for smartphones in the western markets of North America and Europe. Also, the emerging markets of Asia Pacific and Latin America are seeing rising smartphone demand, due to the wide availability of affordable smartphone devices and supported applications. The share of smartphones as a percentage of total worldwide handset shipments is showing an upward trend, as depicted in the figure below. Figure 14: Smartphone Shipments as a Percentage of Handset Shipments – Worldwide (In Million, 2009 – 2015F) Share of Smartphone Shipments (In Percent) 39.7% 40% 36.1% 32.8% 35% 29.5% 30% 26.3% 23.1% 25% 20% 14.7% 15% 10% 5% 0% 2009 2010 2011F 2012F 2013F 2014F 2015F Year Source: Portio Research Ltd. F – Forecasted Smartphones accounted for 23.1 percent of worldwide handset shipments during 2010. This share is expected to grow to 39.7 percent by end-2015. Smartphones now have a wide appeal to users worldwide, with their attractive features and availability of innovative applications. These high-end smartphone applications and services can provide higher ARPU to operators, and hence MNOs are teaming with leading vendors to bring new smartphones into the market. Prominent examples of such partnerships include RIM and Apple who are associated with leading mobile operators worldwide to launch their handsets. The market is expected to witness more of these types of launches from other leading players including Nokia, Samsung and Sony Ericsson in the coming quarters. © 2010, Portio Research. All Rights Reserved 27 Smartphones accounted for 23.1 percent of worldwide handset shipments during 2010. This share is expected to grow to 39.7 percent by end-2015
    • Smartphone Futures 2011-2015 Smartphone shipments during 2010-2015 are expected to grow at an impressive CAGR of 18.1 percent, compared to a CAGR of 6.0 percent for total handset shipments worldwide. Smartphone shipments from 2009 to 2015 are given in the figure below. Figure 15: Smartphone Shipments – Worldwide (In Million, 2009 – 2015F) 800 Smartphone Shipments (In Million) 695.1 700 609.3 600 524.3 500 437.6 361.7 400 302.6 300 200 171.5 100 0 2009 2010 2011F 2012F 2013F 2014F 2015F Year Source: Portio Research Ltd. F – Forecasted The table below provides the regional split of worldwide smartphone shipments. Table 11: Smartphone Shipments — Worldwide (In Million, 2009 – 2015F) 12 CAGR (In Percent, 2010-2015F) Smartphone Shipments (In Million) Region 2009 2010 2011F 2012F 2013F 2014F 2015F Asia Pacific 61.5 101.8 124.5 148.6 184.4 217.4 254.1 20.1 Europe 44.4 83.0 107.5 140.9 170.8 192.4 210.3 20.4 North America 53.3 93.0 101.6 111.4 121.6 130.4 139.2 8.4 Rest of World 12.3 24.8 28.1 36.7 47.5 69.0 91.5 29.8 Total 171.5 302.6 361.7 437.6 524.3 609.3 695.1 18.1 Source: Portio Research Ltd. 12 Note: The total may not be equal to the sum of individual components due to rounding-off errors. 28 © 2010, Portio Research. All Rights Reserved
    • Smartphone Futures 2011-2015 In 2010, Asia Pacific recorded the largest share – with 33.6 percent – of worldwide smartphone shipments. The growth in the Asia Pacific region is expected to be driven by China, where the major operators are involved in the deployment of 3G and above networks. North America amassed the second highest contribution with 30.7 percent of 2010 worldwide smartphone shipments. Regional contributions to worldwide smartphone shipments during 2010 are given in the figure below. Figure 16: Worldwide Smartphone Shipments — Regional Contribution (In Percent, 2010) 13 27.4% 30.7% 33.6% Asia Pacific 8.2% Europe North America Rest of World Source: Portio Research Ltd. Asia Pacific is forecast to be the dominating market in terms of smartphone shipments during the period 2010-2015, with the market anticipated to grow at a CAGR of 20.1 percent during this period. The European region is also expected to sustain steady growth during 20102015, with a CAGR of 20.4 percent. The Rest of World region will help drive smartphone shipments uptake with the strongest growth rate of 29.8 percent, during 2010-2015, as Internet-based services on mobile handsets begin gaining traction in the region. North America, although having the highest smartphone penetration, will witness the slowest regional growth with a CAGR of 8.4 percent. 13 Note: The total may not add up to 100 percent due to rounding-off errors. © 2010, Portio Research. All Rights Reserved 29 Asia Pacific is forecast to be the dominating market in terms of smartphone shipments during the period 2010-2015, with the market anticipated to grow at a CAGR of 20.1 percent during this period
    • Smartphone Futures 2011-2015 Forecasts for regional contribution to worldwide smartphone shipments during 2015 are given in the figure below. Figure 17: Worldwide Smartphone Shipments — Regional Contribution (In Percent, 2015F) 14 30.3% 20.0% 36.6% Asia Pacific 13.2% Europe North America Rest of World Source: Portio Research Ltd. F – Forecasted 14 Note: The total may not add up to 100 percent due to rounding-off errors. 30 © 2010, Portio Research. All Rights Reserved
    • Smartphone Futures 2011-2015 Chapter 3 Smartphone Value Chain © 2010, Portio Research. All Rights Reserved 31
    • Smartphone Futures 2011-2015 Smartphone Value Chain The smartphone market value chain consists of the following stakeholders: • Device and network component manufacturers • Operating system (OS) vendors • Smartphone vendors • Third-party application developers • Mobile network operators The increasing demand in the Smartphone market has led to the entry of new players across the value chain and has intensified market competition. In addition to the new market entrants, existing players expanded their horizons by venturing into new areas of business (e.g., ZTE and Huawei launching handsets, HTC planning to launch their App Store etc.). • • • • • • • Original Design Manufacturers (ODMs) are looking to become Original Equipment Manufacturers (OEMs). HTC is a case in point MNOs and Equipment Manufacturers are launching their own branded handsets either on their own or through tie-ups with handset vendors. This trend has been observed in the key markets within Asia Pacific and Europe. OEMs associating themselves with multiple OS providers to provide more choice to the end user With Apps taking centre stage, OEMs and OS vendors are looking at pre-sales integration of third-party applications and content by embedding them into their smartphones MNOs expanded their role from “Service providers” to “Solution Providers”; they are partnering with OS vendors to launch their own App stores OS vendors are providing more freedom to the developer community by way of transparent procedures for selecting or rejecting an app, easing stringent rules etc Due to the above activities, the role of developers is slowly transforming from being “mere contributors” to “business partners” With the arrival of Android OS, the smartphone value chain has seen cosmetic changes in terms of OEM and OS partnerships. The figure below depicts the role performed by players in the smartphone value chain. 32 © 2010, Portio Research. All Rights Reserved The increasing demand in the Smartphone market has led to the entry of new players across the value chain and has intensified market competition
    • Smartphone Futures 2011-2015 Figure 18: Smartphone Value Chain Development of Device and Network Components Network Equipment Manufacturer Content Providers Integration OEM (Smartphone Vendors)/ODM Operating System Vendor Pre-sales Integration Pre-sales Integration Chip Vendor Third Party Software/Applications Developer Development of Customised Applications Partnerships with MNOs MNO Customised OS App Store for MNO’s Subscribers MNO App Store Direct Sales Direct Download Subscriber (Consumer/Enterprise) Source: Portio Research Ltd. The salient features of the smartphone value chain and the scenario at various levels of this value chain are explained below: • Device and Network Components Manufacturers o The handset industry is primarily vertically integrated. Vendors control the steps in the production and distribution of products and services and intend to increase their influence in the market. With the emergence of specialists for various production and distribution steps, the industry is looking to move out of the vertical integration paradigm. o OEMs are tending to outsource components of the phone to specialised companies called ODMs. o Hardware innovations alone do not have the ability to provide adequate product differentiation and hardware is likely to be commoditised quickly in the current market scenario. Systems integration and supply chain efficiency are likely to become the effective differentiators in the quickly changing market environment. © 2010, Portio Research. All Rights Reserved 33 Hardware innovations alone do not have the ability to provide adequate product differentiation and hardware is likely to be commodotised quickly in the current market scenario
    • Smartphone Futures 2011-2015 • Smartphone Vendors o To increase their shipment share in the highly competitive market, Smartphone vendors are providing more choice to customers by partnering with multiple OS vendors. o The success of Android OS, the launch of the latest OS from Microsoft – Windows 7, and the launch of an updated Apple iOS has indeed helped vendors in expanding their product range. o With the help of these OS partnerships, vendors are focusing on providing more inbuilt applications on their handsets as a key differentiating factor in the highly competitive environment. o Smartphone vendors intend to leverage their expertise in developing handsets and Application Programming Interfaces (API) to provide rich mobile user experiences. o While iPhone has succeeded in providing a new dimension to the mobile web, Android is helping smartphone vendors by offering ‘customisation’ as a differentiating factor. • MNOs o The role of MNOs has become vital in the face of increasing competition in the smartphone market. o Smartphone vendors are trying to strengthen their distribution network by partnering with prominent MNOs across all major geographies. o Some MNOs have expanded their role by introducing more products and services under their brand. They are launching their own app stores, as this arrangement enables them to exercise greater control over the service delivery and management process, and to strike better revenue sharing deals for sales through their networks. o Saturated markets (in terms of mobile penetration) have resulted in MNOs transforming themselves from ‘service providers’ to ‘service enablers’. • • 34 Operating System Vendors o The evolution of OS to ‘open-source’, with Android OS, has removed the barriers for handset vendors, and now they can launch products on multiple operating systems. o To tap the revenue generating potential of applications and services, there is a need for openness when developing operating systems in the mobile space. o The open source approach is already being followed by the LiMo Foundation (supporting Linux-based operating systems for mobile devices), Android and the Symbian Foundation for platform and applications development. o The open-source approach is gaining prominence in the market due to the customisation factor, expected availability of a greater number of apps, and partnerships with vendors to create new revenue models. o The emergence of Android has significantly altered the ecosystem, with more and more handset vendors partnering with Google, for Android OS. o The operating system and user interface components are separating, and the user interface is emerging as a key differentiator for the user experience. Therefore, the importance for developing compelling user interface components is increasing and there is a need for separating it from the operating system. Application Developers and Content Providers o The role of developers is transforming from ‘Contributors’ to ‘Business Partners’, mainly due to the intense competition in the market. o Currently, one of the key differentiators between Apple OS and Android OS has been on the quality of apps. While the market perceives Apple App store to provide high quality apps (due to the stringent filtering rules), Android is yet to attain a similar standing. Though Android is slowly catching up with Apple in terms of total number of applications, it still has a long way to go in terms of gaining popularity as a preferred app store. Developers have a key role to play in this. o With easing restrictions in open source platforms, developers can now submit higher numbers of applications to the OS. © 2010, Portio Research. All Rights Reserved Smartphone vendors are trying to strengthen their distribution network by partnering with prominent MNOs across all major geographies
    • Smartphone Futures 2011-2015 o o o With the increasing success of Android OS, MNOs are directly partnering with OS providers to launch their own brand products and to provide customised app store websites for their customers. The smartphone application market is expected to a play a much bigger role in the future in terms of  Defining new revenue sharing models  Developing new categories of applications according to demand and usage  Providing more customisable features Players in the smartphone value chain—such as Apple, RIM, Google, Nokia, Microsoft, Samsung and HTC—are increasing their efforts for content development and are facilitating development and distribution of applications. They provide software development kits to the developers to develop applications compatible with their platforms. They then make applications available for download through their ‘Application Stores’. Key Players in the Value Chain Table 12: Key Players in the Smartphone Value Chain Smartphone Vendors Operating System (OS) Vendors Applications Stores Nokia Symbian OS Apple App Store Research In Motion (RIM) BlackBerry OS BlackBerry App World Apple Apple iPhone OS Nokia Ovi Store HTC Corporation Microsoft OS Android App Market Motorola Android OS Windows Mobile Market Place Samsung Linux OS Symbian Horizon Sony Ericsson © 2010, Portio Research. All Rights Reserved 35
    • Smartphone Futures 2011-2015 Chapter 4 Smartphone Vendors 36 © 2010, Portio Research. All Rights Reserved
    • Smartphone Futures 2011-2015 Smartphone Vendors Market Share of Smartphone Vendors The phenomenal growth of the smartphone market has been driven by the ever increasing popularity of smartphone devices in the developed markets of the US and Europe, along with increasing penetration in the developing markets of Asia Pacific and Rest of World regions. The market is witnessing intense competition among smartphone vendors, particularly after the arrival of Android-based phones. In order to differentiate themselves from the competition, vendors are focusing on product innovations, to offer attractive and unique features in their devices, along with aggressive marketing to increase device uptake. New smartphone launches from leading vendors including Nokia, Samsung and LG are driving smartphone prices down towards mid-tier price points, further promoting market growth. Nokia, Apple and RIM are the current top-3 vendors in the smartphone market. The market share of smartphone vendors during 2010 is given below. 15 16 Figure 19: Market Share of Smartphone Vendors – Worldwide (In Percent, 2010) , 15.9% 16.3% 8.2% 7.6% 4.4% 33.9% Nokia Apple 13.6% RIM HTC Samsung Motorola Others Source: Portio Research Ltd. 15 16 Note: Market shares of Palm and Sony Ericsson are included in ‘Others’. Note: The total may not add up to 100 percent due to rounding-off errors. © 2010, Portio Research. All Rights Reserved 37
    • Smartphone Futures 2011-2015 The forecast market share of smartphone vendors during 2015 is given in the chart below. Figure 20: Market Share of Smartphone Vendors – Worldwide (In Percent, 2015F) 15.8% 11.0% 10.0% 18.8% 5.9% 4.0% 9.0% 25.5% Nokia Apple RIM HTC Samsung Motorola Sony Ericsson Others Source: Portio Research Ltd. F – Forecasted Regional Market Share of Smartphone Vendors In some cases, the regional market shares of the leading smartphone vendors vary significantly from their worldwide market shares. Regional leadership is dependent on several factors, including consumer purchasing behaviour and purchasing power in a particular geography, distribution agreements between vendors and regional operators, and the range of mobile services available to customers etc. The figures below depict the market share of leading smartphone vendors in North America, Asia Pacific, Europe and Rest of World. 17 18 Figure 21: Smartphone Market Share — North America (In Percent, Q3 2010) , 15.9% 0.9% 24.2% 33.0% 26.2% Apple RIM HTC Nokia Others Source: Portio Research Ltd. 17 Note: The market share for different vendors in the region is calculated by the total shipments in the quarter in the region and shipment data as available for different vendors. This is an estimated market share. 18 Note: The total may not add up to 100 percent due to rounding-off errors. 38 © 2010, Portio Research. All Rights Reserved
    • Smartphone Futures 2011-2015 Figure 22: Smartphone Market Share — Asia Pacific (In Percent, Q3 2010) 12.8% 7.7% 5.1% 10.7% 50.4% 9.0% 4.3% Nokia Apple RIM HTC Sharp Fujitsu Others Source: Portio Research Ltd. 19 20 Figure 23: Smartphone Market Share — Europe (In Percent, Q3 2010) , 14.3% 12.8% 7.1% 53.1% 12.8% Nokia Apple RIM HTC Others Source: Portio Research Ltd. 19 Note: In Figures 22 and 23, the market share for different vendors in the region is calculated by the total shipments in the quarter in the region and shipment data as available for different vendors. This is an estimated market share. 20 Note: The total may not add up to 100 percent due to rounding-off errors. © 2010, Portio Research. All Rights Reserved 39
    • Smartphone Futures 2011-2015 Figure 24: Smartphone Market Share — Rest of World (In Percent, Q3 2010) 14.6% 21 3.4% 14.9% 39.3% 27.8% Nokia Apple RIM HTC Others Source: Portio Research Ltd. 21 Note: The market share for different vendors in the region is calculated by the total shipments in the quarter in the region and shipment data as available for different vendors. This is an estimated market share. 40 © 2010, Portio Research. All Rights Reserved
    • Smartphone Futures 2011-2015 Nokia Company Overview Headquarters: Keilalahdentie 2-4, Nokia Group, Finland Phone: +358-718-008-000 Fax: +358-718-038-226 Website: www.nokia.com st Financial year-end: 31 December Revenue: USD 13.2 billion (Q3 2010) Revenue growth: 3.0 percent (Y-o-Y in USD, Q3 2010); 5.0 percent (Y-o-Y in EUR, Q3 2010) Smartphone Market Share: 32.7 percent (Q3 2010) • • • • • Founded in 1865, Nokia entered the telecom equipment market in 1960. Nokia delivered its first GSM network in 1989. It launched its first GSM handset in 1992. In collaboration with Hewlett Packard, the company launched the Nokia Communicator line in 1996. Nokia is the world’s largest manufacturer of mobile handsets. Through Nokia Siemens Networks, it also provides infrastructure and associated services in conjunction with Siemens. Since its acquisition of Navteq in July 2008, Nokia has provided digital maps. At the end of Q3 2010, the company had around 128,237 employees across 120 countries worldwide. Business Segments Nokia’s business operations are categorised into the three segments as mentioned below: • Devices and Services: The division is responsible for managing the mobile device portfolio of Mobile Phones, Smartphones and Mobile Computers, besides developing a world class suite of internet services under the Ovi brand. • Navteq: Through Navteq, Nokia acquired a strong position in digital map information and location-based services for: o Automotive navigation systems o Mobile navigation devices o Internet-based mapping applications o Government and business solutions • Nokia Siemens Networks: Formed in April 2007, ‘Nokia Siemens Networks’ (NSN) is a business entity that combines Nokia’s network business with Siemens’ carrier-related operations, for both fixed and mobile networks. NSN provides: o Wireless and fixed network infrastructure o Communication and network services platform o Professional services to operators © 2010, Portio Research. All Rights Reserved 41 Through Navteq, Nokia acquired a strong position in digital map information and location based services.
    • Smartphone Futures 2011-2015 Revenue Nokia’s revenues for 2008, 2009 and 9-months 2010 are given in the figure below: Figure 25: Revenue by Business Segments — Nokia (In USD Billion, 2008, 2009 & 9M 2010) Revenues (In USD Billion) 80 0.5 70 22.5 60 0.9 50 17.5 0.9 40 11.5 30 51.6 20 38.7 27.2 10 0 2008 2009 9M 2010 Period Navteq NSN Devices and Services Source: Portio Research Ltd. Worldwide Smartphone Shipments and Smartphone Market Share Table 13: Smartphone Shipments and Smartphone Market Share — Nokia (2009 – 2015F) Smartphone Shipments and Smartphone Market Share (2009-2015F) Nokia 2009 2010 2011F 2012F 2013F 2014F 2015F Shipments (In Million) 67.7 102.5 116.5 139.5 151.7 168.2 177.1 Market Share (In Percent) 39.5 33.9 32.2 31.9 28.9 27.6 25.5 Source: Portio Research Ltd. • In Q3 2010, Nokia shipped a record 26.5 million smartphones worldwide, an increase of 62.6 percent year-on-year. Nokia’s smartphone market share for 2010 is 33.9 percent—a decrease over its market share in 2009. 22 Smartphone shipments are expected to grow at a CAGR of nearly 11.6 percent from 102.5 million in 2010 to 177.1 million in 2015. • • Geographical Presence Nokia had a worldwide smartphone shipment market share of approximately 32.7 percent during Q3 2010, down from 37.8 percent in Q3 2009. 22 Note: In our previous report – “Smartphone Futures 2009-2014”, Nokia’s 2008 market share was mentioned as 36 percent, as this figure was given by one of the data sources we used. However, we have since determined that Nokia’s 2008 smartphone shipments of 60.5 million translated to a 2008 market share of 41.1 percent. 42 © 2010, Portio Research. All Rights Reserved Smartphone shipments are expected to grow at a CAGR of nearly 11.6 percent from 102.5 million in 2010 to 177.1 million in 2015.
    • Smartphone Futures 2011-2015 This market share decline is expected to continue during the forecast period to 2015 primarily because of increasing competition from leading vendors including Apple and RIM, and the rising popularity of Android-based phones across different regions. Nokia continued to dominate the Asia Pacific and Europe smartphone markets during Q3 2010. The figure below provides the shipment break-out for all regions Figure 26: Regional Break-out of Smartphone Shipments — Nokia (In Percent, Q3 2010) 23 39.2% 0.8% 44.5% 15.5% Total Shipments = 26.5 million Asia Pacific Europe North America Rest of World Source: Portio Research Ltd. 23 Note: The regional break-out of shipments for each vendor is calculated on the basis of total shipments in the quarter, the total shipments in the region and other information related to market presence of each of the vendors in different region. This is an estimated market share. © 2010, Portio Research. All Rights Reserved 43
    • Smartphone Futures 2011-2015 Nokia’s Emergence as a Smartphone Vendor and a Service Provider for the Enterprise Segment The figure below depicts Nokia’s business development during 2009-2010, highlighting its efforts to expand its presence at various levels of the smartphone value chain. Figure 27: Nokia’s Business Development during September 2009 – September 2010 FY 2009 (Sept 2009-December 2009) Development of Products and Services  Nokia launches Nokia Messaging in Indonesia (Telkomsel), Poland (Orange), Hungary (T-Mobile)  Nokia partners with SAP and Giesecke & Devrient to establish a new global business providing brand protection services  Nokia launches 5330 Mobile TV edition  New product launches: X6, 7230, 6700 Slide, N900 (US), E72  Nokia launches its first TD-SCDMA mobile handset - 6788 - in China FY 2010 (Jan 2010-Mar 2010)  Completes the acquisition of Novarra  Skype was made available for Nokia Smartphones at Ovi Stores  Nokia launches Nokia Messaging in Turkey (Turkcell),  Nokia forms Wireless Education venture with Pearson in China FY 2010 (Apr 2010-Jun 2010)  Enters into a partnership with Yahoo! to bring integrated web services to customers across the globe  Launches Ovi Life Tools in China  Announces the launch of the N8 smartphone on the new Symbian 3 platform  Acquires Metacarta Inc. FY 2010 (Jul 2010-Sep 2010)  Starts shipment of N8 smartphones  Global alliance with Intuit to create Mobile Marketing services for small businesses  Completes the acquisition of Motally Inc.  Sells Wireless Modem business to Renesas Electronics  Launches “Touch and Type” design with X3 Source: Portio Research Ltd. 44 © 2010, Portio Research. All Rights Reserved
    • Smartphone Futures 2011-2015 SWOT Analysis Figure 28: SWOT Analysis – Nokia Strengths • Strong awareness of the ‘Nokia’ brand worldwide • Market leader in the worldwide smartphone market (33.9 percent for 2010) • Leader in the Asian and European markets; highest market share in handset shipments worldwide • Efficient distribution network, especially in emerging countries Opportunities • The success of N8 can determine the future of the Symbian 3 platform • Growth in emerging countries, where it has an unrivalled presence • Capitalise on brand and market share to establish interactive relationships with consumers Weaknesses • Infrastructure business: merger with Siemens has not produced the expected results • Low influence in the US and Japan • Decreasing popularity of Symbian OS • Facing component constraint from component providers • No plans to partner with Android OS Threats • Fierce competition from Android OS • Vendors dumping Symbian for Android • Carriers constantly lobbying to reduce subsidies in order to stay competitive • Convergence of Mobile and PCs has led to competition from new quarters; prominent players in this segment include Apple, RIM and Dell Source: Portio Research Ltd. Strategies and Future Outlook • • • Nokia has responded to the competition from Android-based devices with the launch of its N8 smartphone, which was developed on the Symbian 3 platform. Nokia is planning to launch more phones based on Symbian 3. To support the expansion of the Ovi Suite, in April 2010, Nokia acquired MetaCarta Inc. (geographical intelligence technology and expertise) and Novarra Inc. (Mobile browser and Services platform). In a significant move to bolster the presence of Ovi on the Web, in May 2010, Nokia entered into an alliance with Yahoo! to leverage Yahoo’s strength in the areas of Email, Instant messaging, Maps and Navigation services. Competitive Landscape • • In addition to fierce competition from Apple and RIM, Nokia is facing serious competition on the operating system (OS) front, with a steady growth in Android-based handsets. Samsung and Sony Ericsson have also announced their plans to end their association with the Symbian platform, to instead support Android. © 2010, Portio Research. All Rights Reserved 45
    • Smartphone Futures 2011-2015 The table below highlights the performance of Nokia across different criteria. Evaluation Parameter Nokia Popularity in enterprise segment Popularity in consumer segment Success in distribution of service and applications 46 © 2010, Portio Research. All Rights Reserved
    • Smartphone Futures 2011-2015 Apple Company Overview Headquarters: 1 Infinite Loop, MS 301-4IR, Cupertino, USA Phone: +1-408-9961010 Fax: +1-408-9960275 Website: www.apple.com th Financial year-end: 27 September Revenue: USD 20.3 billion (Q4 FY 2010) Revenue growth: 66.4 percent (Y-o-Y for Q4 FY 2010) Smartphone Market Share: 17.4 percent (Q3 2010) • • • Apple was established in Cupertino, California in April 1976 and incorporated in January 1977. Apple and its wholly-owned subsidiaries design, manufacture, and market Mac computers, portable digital music players, and mobile communication devices; and sell a variety of related software, services, peripherals, and networking solutions. The company distributes its products worldwide through its online stores, its retail stores, its direct sales force, and third-party wholesalers, resellers, and value added resellers. It sells to consumers and enterprises, educational institutes, and government enterprises. Business Segments Apple’s revenues are generated through sales of its products and services in different consumer categories, such as computers, music devices and smartphones, and related services and software. Its products and services are given below: • Devices o Mac Computers and Accessories – Includes desktop products (iMac, Mac mini, Mac Pro, Power Mac, and Xserve product lines) and portable products (MacBook, iBook, MacBook Air, MacBook Pro, and PowerBook product lines) o iPod – Includes iPod Classic, iPod Nano, iPod Shuffle, and iPod Touch o iPhone – Includes iPhone (launched in June 2007), iPhone 3G (launched in July 2008), iPhone 3GS (launched in June 2009) and iPhone 4 (launched in June 2010) o iPad – Tablet (launched on 27 January 2010) o Apple TV – A set-top video device aimed at pushing sales of content from iTunes to high-definition (HD) TVs • Software: Includes Apple-branded operating system and application software, thirdparty software, AppleCare, and Internet services. • Other content related products and services: This segment focuses on providing content related products and services, such as iTunes and iPod services and Apple App Store. © 2010, Portio Research. All Rights Reserved 47
    • Smartphone Futures 2011-2015 Revenue Apple’s yearly revenues for FY 2008, FY 2009 and FY 2010 are given below. 24 Figure 29: Revenue by Business Segments — Apple (In USD Billion, FY 2008 – FY 2010) 25 Revenues (In USD Billion) 70 9.3 60 5.0 50 40 30 20 10 7.9 0.0 7.2 1.8 9.2 0.0 25.2 6.8 8.3 8.1 14.3 13.9 17.5 FY 2008 FY 2009 FY 2010 0 Period Mac Computer iPod iPhone iPad Other products and services Source: Portio Research Ltd. Worldwide Smartphone Shipments and Smartphone Market Share Table 14: Smartphone Shipments and Smartphone Market Share — Apple (2009 – 2015F) Smartphone Shipments and Smartphone Market Share (2009-2015F) Apple 2009 2010 2011F 2012F 2013F 2014F 2015F Shipments (In Million) 22.4 49.4 61.5 76.1 95.4 113.3 130.7 Market Share (In Percent) 13.1 16.3 17.0 17.4 18.2 18.6 18.8 Source: Portio Research Ltd. • • Apple had shipped 14.1 million smartphones at end-Q3 2010, an increase of 90.5 percent year-on-year. Apple’s smartphone shipments are expected to grow at a CAGR of approximately 21.5 percent during 2010-2015. 24 Note: Financial year for Apple ends on 27 September; FY 2010 denotes the one year period ending on 27 September 2010. 25 Note: Other products and services include: music related products and services, Apple-branded and third-party displays, wireless connectivity and networking solutions, hardware accessories, Apple-branded OS and application software, third-party software, AppleCare, and Internet services. 48 © 2010, Portio Research. All Rights Reserved
    • Smartphone Futures 2011-2015 Uptake for Apple iPhone Worldwide shipments for iPhone since its launch are given in the figure below. Figure 30: iPhone Shipments – Worldwide (In Million, Q2 2007 – Q3 2010) 16 14.1 14 Shipments (In Million) 12 10 8.8 6.9 8 6 4.4 4 2 2.3 1.1 0.3 1.7 8.4 Q1 2010 Q2 2010 7.4 6.0 5.2 3.8 0.7 0 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q3 2010 Quarter Source: Portio Research Ltd. The figure below depicts the growth of Apple iPhone users since its launch in June 2007. Figure 31: Growth in iPhone Users (In Million, Q2 2007 – Q3 2010) 70 Launch of iPhone 4 (Jun-2010) iPhone Users (In Million) 60 40 Launch of iPhone 3G (Jul-2008) 30 10 62.0 50.1 50 20 26 Launch of iPhone (Jun-2007) 0.3 1.4 3.7 14.8 Launch of iPhone 43.0 3GS (Jun-2009) 33.3 28.3 18.6 20.9 10.4 6.1 5.4 0 Q2-07 Q4-07 Q2-08 Q4-08 Q2-09 Q4-09 Q2-10 Quarter Source: Portio Research Ltd. 26 Note: The calculation of the iPhone user base incorporates the factor of replacement of previous versions of the device after the launch of new versions. © 2010, Portio Research. All Rights Reserved 49
    • Smartphone Futures 2011-2015 Geographical Presence North America continues to be the major market for iPhones. Europe, Middle East and Africa are the other major markets in terms of shipments. Apple also made significant strides in Asia Pacific, which has long been a Nokia stronghold. Figure 32: Regional Break-out of Smartphone Shipments — Apple (In Percent, Q3 2010) 27, 28 43.3% 19.9% 15.6% 21.3% Total Shipments = 14.1 million Asia Pacific Europe North America Rest of World Source: Portio Research Ltd. 27 Note: Financial year for Apple ends on 27 September; FY 2010 denotes the one year period ending on 27 September 2010. 28 Note: The total may not add up to 100 percent because of rounding-off errors. 50 © 2010, Portio Research. All Rights Reserved
    • Smartphone Futures 2011-2015 SWOT Analysis Figure 33: SWOT Analysis – Apple 29 Strengths Weaknesses • Ability to integrate complete value chain of design, OS development, hardware, application software, and services to come up with innovative and appealing products • Lack of product diversification and high pricing compared to the competition • Brand loyalty to Apple, and large base of users of other Apple devices, such as Apple iPod, iPad and MacBooks, who might be potential purchasers for iPhone Opportunities • Departure from the single-operator to multi-operator distribution in some countries is expected to increase its market share • Leveraging expertise in the consumer segment to tap the emerging consumer-centric applications market • Reselling refurbished iPhones might be an area of potential opportunity* • Low penetration in the enterprise segment • Delay in product availability across regions, as exclusive partnerships might hamper the growth Threats • Strong growth in Android-based handsets has intensified competition • Expansion of Apple’s direct sales is perceived to be negatively affecting distributors’ business • Patent infringement for the product and features used by iPhone may cause a leakage in revenue flow for Apple Source: Portio Research Ltd. Strategies and Future Outlook • • Focus on retail business: The shift in focus from single operator to multi-operator (in a country) is seen as a significant move to attract more retail customers. Packaging of products and solutions: Apple App store is equipped to offer a wide selection of third-party hardware, software, and various other accessory products and peripherals to complement Apple’s own products. At present, Apple is offering more applications than any of its competitors. In addition to being a differentiator, the App Store is also contributing significantly to Apple’s revenue. Competitive Landscape • • • 29 Apple has been successful in making inroads in to the market share of leaders, such as RIM in North America, and Nokia in Europe and Asia Pacific. With the success of Android-based phones from vendors including Motorola, HTC and Samsung, Apple is witnessing a slight stagnation in sales and the market shares of iPhone. Android-based phones are posing a threat to iPhone in the near to long term. Apple has successfully launched new products from time-to-time, in a bid to cross sell its products and thus strengthen its position in the market. Recent offerings include the iPad, which generated ‘record sales’ after its launch at the beginning of 2010. *Note: Refurbished Apple products are returned to the company for quality testing and are then resold at a lower cost. In China, Reuters notes that prices for major refurbished products range from USD 44 (308 Yuan) for an iPod Shuffle to more than USD 2,047 (14,000 Yuan) for an iMac. © 2010, Portio Research. All Rights Reserved 51 Apple has been successful in making inroads in to the market share of leaders, such as RIM in North America, and Nokia in Europe and Asia Pacific.
    • Smartphone Futures 2011-2015 • Apple has successfully pushed Apple-branded software and apps, generating new sources of revenue through iPhones. With easing of regulations on developers and following transparent procedures for selecting or rejecting the apps, the iPhone App Store is expected to drive the revenues in the highly competitive market. The table below highlights the performance of Apple across various criteria. Evaluation Parameter Apple Popularity in enterprise segment Popularity in consumer segment Success in distribution of service and applications 52 © 2010, Portio Research. All Rights Reserved
    • Smartphone Futures 2011-2015 Research in Motion Company Overview Headquarters: 295 Phillip Street, Waterloo, Ontario, Canada Phone: +1-519 888-7465 Fax: +1-519 888-7884 Website: www.rim.com Financial year-end: End-February Revenue: USD 4.62 billion (Jun-Aug 2010) Revenue growth: 30.9 percent (Y-o-Y in USD terms, Jun-Aug 2010) Smartphone Market Share: 14.9 percent (Calendar year: Q3 2010) • • • • Research In Motion (RIM) was founded in 1984 and is based in Waterloo, Ontario. It has offices across North America, Europe and Asia Pacific. The company is a leading designer, manufacturer and marketer of wireless solutions for the worldwide mobile market. Its portfolio of products, services and embedded technologies include the BlackBerry wireless platform, BlackBerry smartphones, software development tools, radio-modems and software/hardware licensing agreements. The company leverages its expertise in integrated hardware, software and services— that support multiple wireless network standards—to offer platforms and solutions for seamless access to voice, messaging, e-mail, Internet and intranet-based applications. Business Segments RIM’s business operations are categorised into the three segments given below: • Devices: This segment primarily includes BlackBerry smartphones and enterprise solutions o BlackBerry Smartphones – Includes BlackBerry Storm series, BlackBerry Bold, BlackBerry Curve series, BlackBerry Pearl and Pearl Flip series, BlackBerry 8700 series, Blackberry Torch series, Blackberry Style series o BlackBerry Enterprise Solution – Includes BlackBerry Enterprise Server, BlackBerry Mobile Data System (BlackBerry MDS), BlackBerry Mobile Voice System (BlackBerry MVS), BlackBerry Professional Software, Hosted BlackBerry services • Services: This segment provides infrastructure support for BlackBerry services, to the subscribers of partnering MNOs; monthly access billings are charged from MNO partners. • Software: This segment focuses on the development of software installed at the corporate server level and on PCs. © 2010, Portio Research. All Rights Reserved 53 RIMs portfolio of products, services and embedded technologies include the BlackBerry wireless platform, BlackBerry smartphones, software development tools, radio-modems and software/hardware licensing agreements.
    • Smartphone Futures 2011-2015 Revenue RIM’s yearly revenues for FY 2009 and FY 2010 (March 2009-February 2010) and revenues for the first-half of FY 2011 (March-August 2010) are given in the figure below: Figure 34: Revenue by Business Segments — RIM (In USD Billion, FY 2009 – H1FY 2011) Revenues (In USD Billion) 16 30, 31 0.7 14 2.2 12 0.6 10 1.4 0.4 8 1.5 12.1 6 9.1 4 7.0 2 0 FY 2009 FY 2010 H1FY 2011 Period Devices Services Software and Others Source: Portio Research Ltd. Worldwide Smartphone Shipments and Smartphone Market Share Table 15: Smartphone Shipments and Smartphone Market Share — RIM (2009 – 2015F) Smartphone Shipments and Smartphone Market Share (2009-2015F) RIM 2009 2010 2011F 2012F 2013F 2014F 2015F Shipments (In Million) 32.4 48.1 60.8 70.9 83.9 96.3 109.8 Market Share (In Percent) 18.9 15.9 16.8 16.2 16.0 15.8 15.8 Source: Portio Research Ltd. • • 30 31 54 Intense competition in the smartphone market has resulted in a decline of RIM’s market share from 19 percent in Q3 2009 to 14.9 percent in Q3 2010. RIM’s smartphone shipments are expected to grow at a CAGR of nearly 18 percent during 2010-2015 to reach 109.8 million by end-2015. Note: Financial year for RIM concludes at end-February; FY 2010 denotes the period from March 2009 to February 2010; the first-half of FY 2011 denotes the period March to August 2010. Note: Other revenue includes accessories, non-warranty repairs, non-recurring engineering development contracts and gains and losses on revenue hedge contracts. © 2010, Portio Research. All Rights Reserved
    • Smartphone Futures 2011-2015 Uptake for BlackBerry Growth in the number of BlackBerry subscribers during February 2002-August 2011 is shown in the tables below. Table 16: BlackBerry Subscriber Base Growth (FY 2002 – FY 2006) 32 Period Subscriber Additions (In Millions) Subscriber Base (In Million, End-period) Q1 FY 2002 0.04 0.20 Q2 FY 2002 0.05 0.25 Q3 FY 2002 0.04 0.29 Q4 FY 2002 0.03 0.32 Q1 FY 2003 0.03 0.36* Q2 FY 2003 0.05 0.40* Q3 FY 2003 0.06 0.46 Q4 FY 2003 0.07 0.53 Q1 FY 2004 0.08 0.62* Q2 FY 2004 0.10 0.71* Q3 FY 2004 0.15 0.87* Q4 FY 2004 0.20 1.07 Q1 FY 2005 0.27 1.34 Q2 FY 2005 0.32 1.66 Q3 FY 2005 0.39 2.04* Q4 FY 2005 0.47 2.51 Q1 FY 2006 0.60 3.11 Q2 FY 2006 0.54 3.65 Q3 FY 2006 0.65 4.30 Q4 FY 2006 0.60 4.90 Source: Portio Research Ltd. 32 Note: Financial year for RIM concludes at end-February; FY 2001 denotes the period from March 2000 to February 2001 * Note: Period end subscriber base does not equal the sum of subscriber additions and subscribers from the previous period because of rounding-off errors. © 2010, Portio Research. All Rights Reserved 55
    • Smartphone Futures 2011-2015 Table 17: BlackBerry Subscriber Base Growth (FY 2007 – Q2FY 2011) 33 Period Subscriber Additions (In Millions) Subscriber Base (In Million, End-period) Q1FY 2007 0.60 5.50 Q2FY 2007 0.70 6.20 Q3FY 2007 0.80 7.00 Q4FY 2007 1.00 8.00 Q1FY 2008 1.00 9.00 Q2FY 2008 1.50 10.50 Q3FY 2008 1.50 12.00 Q4FY 2008 2.00 14.00 Q1FY 2009 2.00 16.00 Q2FY 2009 3.00 19.00 Q3FY 2009 2.00 21.00 Q4FY 2009 4.00 25.00 Q1FY 2010 3.50 28.50 Q2FY 2010 3.50 32.00 Q3FY 2010 4.40 36.40 Q4FY 2010 4.90 41.30 Q1FY 2011 4.90 46.20 Q2FY 2011 4.50 50.70 Source: Portio Research Ltd. The following figure depicts the growth of BlackBerry users since its launch in January 1999. 33 Note: Financial year for RIM concludes at end-February; FY 2007 denotes the period from March 2006 to February 2007 56 © 2010, Portio Research. All Rights Reserved
    • Smartphone Futures 2011-2015 Figure 35: Growth in BlackBerry User-Base Jan 1999 Launched BlackBerry wireless e-mail solution Dec 2002 Launched first BlackBerry Wireless Handheld for CDMA2000 1X Networks Feb 2004 BlackBerry user base reached 1 million Nov 2004 BlackBerry user base reached 2 million May 2005 BlackBerry user base reached 3 million Feb 2008 BlackBerry user base reached 14 million Feb 2009 BlackBerry user base reached 25 million Aug 2009 BlackBerry user base reached 32 million Aug 2010 BlackBerry user base reached 50 million Source: Portio Research Ltd. © 2010, Portio Research. All Rights Reserved 57
    • Smartphone Futures 2011-2015 Geographical Presence North America continues to be the largest contributor to RIM’s revenues, accounting for 46.6 percent of its total smartphone shipments in Q3 2010 (calendar year). The dependence of RIM on North America is clear from the regional shipment data provided in the figure below. RIM’s shipment base outside of North America is 53.4 percent, with Asia Pacific and the UK contributing 14.9 and 20.7 percent to the total smartphone shipments. Figure 36: Regional Break-out of Smartphone Shipments — RIM (In Percent, Q3 2010) 34 46.6% 20.7% 17.9% 14.9% Total Shipments = 12.1 million Asia Pacific The UK North America Rest of World Source: Portio Research Ltd. RIM’s Business Development Efforts The figure below depicts RIM’s product and business development during March 2006September 2010. 34 Note: Q3 2010 -calendar year; the total may not add up to 100 percent because of rounding-off errors. Rounding errors also affect RIM’s shipment base outside of North America . 58 © 2010, Portio Research. All Rights Reserved
    • Smartphone Futures 2011-2015 Figure 37: RIM’s Business Development During March 2006 – September 2010 FY 2007 (Mar 2006-Feb 2007)  Launches: o Pearl, 8800, 8703e o BlackBerry Enterprise Server solutions for SMEs, Mobile Data System Applications o Yahoo! Go for Mobile 2.0  Acquisitions: o Ascendent Systems, to enable PBX integration in instant messaging and unified communications platforms o ‘SlipStream Data’ to enhance device capabilities related to internet browsing, email and attachment downloads speeds, battery life and bandwidth efficiency Development of Products and Services FY 2008 (Mar 2007-Feb 2008)  Launches: o BlackBerry Connect service on 5 new devices with over 20 MNOs worldwide o BlackBerry Professional software for SMEs and ‘BlackBerry Unite!’ for PCs o BlackBerry Enterprise Server enhancements for v4.1.5 o BlackBerry devices (8820, 8320 and 8120) with Wi-Fi FY 2009 (Mar 2008-Feb 2009)  Launches: o Bold 9000, Storm 9500 and 9530, Pearl Flip 8220 and 8230, and Curve 8350i and 8900  Announces ‘BlackBerry App World’ facilitating the purchase and download of BlackBerry compatible applications  Conversion of trial MVS programs (converging office phones with BlackBerry devices enabling call control features) at major customers into deployments FY 2010 (Mar 2009-Feb 2010)  Launches: o Software development kit platform enabling developers to create applications for its (BlackBerry OS 5.0 and above) devices o Latest version of BlackBerry-to-BlackBerry IM service with improved personalisation, social networking site connectivity, addition of avatars o BlackBerry Enterprise Server Express FY 2011 (Mar 2010-Sep 2010)  Launches: o Pearl 3G, Curve 3G, Bold 9650 o BlackBerry Podcasts o Next Generation BlackBerry Web Application Platform o BlackBerry Advertising services  Announces BlackBerry Mobile Voice System 5 with voice over Wi-Fi calling  Latest version of OS, ‘BlackBerry 6’ launched Source: Portio Research Ltd. © 2010, Portio Research. All Rights Reserved 59
    • Smartphone Futures 2011-2015 SWOT Analysis Figure 38: SWOT Analysis – RIM Strengths • Robust business model with integrated solutions (combining hardware, software and services) • Ease of deployment; easy upgrade due to flexible architecture • 50 million subscribers (Aug 2010); brand recognition and popularity in enterprise segment • Relationships with over 500 MNOs and distributors in 170 countries Opportunities • Growing need of mobile access to enterprise intranets and applications • Continued emergence of mobile IM as a popular communications tool • Lower data pricing plans offered by MNOs is expected to boost the uptake of BlackBerry services • Further development and uptake of consumer-centric applications, such as social networking and third partygenerated applications Weaknesses • More reliance on a small number of significant customer MNOs • Restrictions on use of RIM’s products in some countries due to encryption of the products and services • Market perception of the product as a high-end product which is not cost effective for large-scale deployment in enterprises • Limited penetration in the consumer segment Threats • Key enterprise services posing security issues in markets including UAE, Saudi and India • Verizon’s decision to include Androidbased devices in its portfolio might become a potential threat in the longterm, as the MNO has contributed substantially to RIM’s revenues in the past • The support of carriers for the upcoming Windows Phone 7 also poses a threat to RIM’s market share Source: Portio Research Ltd., Wall Street Journal Strategies and Future Outlook • • • • 60 Because of the growing popularity of BlackBerry products and services, RIM is experiencing a significant increase in demand from other markets, other than North America. RIM’s current strategy is focused on expanding to broader market segments by launching entry-level BlackBerry phones at lower ASPs (Average Selling Prices). The company is focusing on strategic alliances with firms operating or providing products and services in following areas: o Enterprise Application Development and Web Application Platforms o BlackBerry Analytics services o Advertising services With the increasing appeal of BlackBerry in the consumer segment, RIM is penetrating more into the consumer segment through partnerships with portal and application firms such as Google, Yahoo and Facebook, and launching devices with popular features. © 2010, Portio Research. All Rights Reserved
    • Smartphone Futures 2011-2015 Competitive Landscape • • • RIM is facing severe competition from Apple, particularly in North America, which has traditionally been its stronghold. The emergence of Android OS has intensified competition among leading players, including RIM, HTC, Motorola, Samsung and Sony Ericsson. Outside of North America, RIM is facing competition from the market leader Nokia, particularly in Europe and Asia Pacific. The table below highlights the performance of RIM across various criteria. Evaluation Parameter RIM Popularity in enterprise segment Popularity in consumer segment Success in distribution of service and applications © 2010, Portio Research. All Rights Reserved 61 The emergence of Android OS has intensified competition among leading players, including RIM, HTC, Motorola, Samsung and Sony Ericsson.
    • Smartphone Futures 2011-2015 HTC Corporation Company Overview Headquarters: 23 Hsin Hua Road, Taoyuan 330, Taiwan Phone: +886-3-3753252 Fax: +886-3-3753251 Website: www.htc.com st Financial year-end: 31 December Revenue: USD 5.5 billion (Q3 2010) Revenue growth: 70.7 percent (Y-o-Y in USD, Q3 2010); 65.9 percent (Y-o-Y in TWD, Q3 2010) Smartphone Market Share: 8.4 percent (Q3 2010) • • • • Founded in 1997 as an original design manufacturer (ODM), High Tech Computer (HTC) Corporation started manufacturing HTC branded smartphones after June 2006. HTC is the largest smartphone ODM worldwide, manufacturing devices for MNOs and OEMs. It also owns Dopod as a subsidiary company. HTC has formed strategic partnerships with chip manufacturers (Intel, Texas Instruments and Qualcomm), OS providers (Microsoft and Android) and MNOs (CSL, China Telecom, Optus, Tata DoCoMo, Bharti Airtel, Telstra, Orange, O2, T-Mobile, Vodafone, Cingular, Verizon, Sprint and NTT DoCoMo). It is the largest producer of Windows Mobile devices. The company has also developed a proprietary user interface, Sense UI. This interface incorporates pushed content, such as twitter feeds, e-mail, social networking, weather, calendar, and world times, etc., customised according to user requirements. Product Segments HTC manufactures personal digital assistants (PDA), smartphones, and related components, and conducts research and development related to technologies for the same. HTC’s focus area is working with Google’s Android and Microsoft’s Windows Mobile platform, incorporating user interface software, operating systems and application software. The company is looking to push device sales through its flagship Diamond line of products and is expecting positive results from the launch of mobile phones designed around the Android operating system (HTC Hero, HTC Tattoo, HTC Magic, HTC Touch Diamond, etc.). 62 © 2010, Portio Research. All Rights Reserved HTC’s focus area is working with Google’s Android and Microsoft’s Windows Mobile platform, incorporating user interface software, operating systems and application software.
    • Smartphone Futures 2011-2015 Revenue HTC’s revenues for 2008, 2009 and the first nine months of 2010 are given in the figure below Figure 39: Revenue — HTC (In USD Billion, 2008 – 9M 2010) Revenues (In USD Billion) 6 5 4 3 5.5 4.8 4.4 2 1 0 2008 2009 9M 2010 Period Source: Portio Research Ltd. HTC’s device sales consist of two categories of handsets: ODM and non-ODM (HTC branded). The contribution of ODM handsets as a percentage of total handset sales has been decreasing because of the company’s strategy of pushing HTC branded handsets. Worldwide Smartphone Shipments and Smartphone Market Share Table 18: Smartphone Shipments and Smartphone Market Share — HTC (2009 – 2015F) Smartphone Shipments and Smartphone Market Share (2009-2015F) HTC 2009 2010 2011F 2012F 2013F 2014F 2015F Shipments (In Million) 8.1 24.9 30.7 42.6 55.1 68.2 76.5 Market Share (In Percent) 4.7 8.2 8.5 9.7 10.5 11.2 11.0 Source: Portio Research Ltd. • • There has been a steep increase of 233 percent in the total smartphone shipments from Q3 2009 - Q3 2010, mainly due to the increasing popularity of HTC’s Androidbased handsets. HTC’s shipments are expected to grow at a CAGR of nearly 25.2 percent during 20102015. © 2010, Portio Research. All Rights Reserved 63
    • Smartphone Futures 2011-2015 Geographical Presence With a shift in focus from ODM to OEM, HTC has seen a significant increase in sales, particularly the Android-based handsets. With a share of 54.4 percent, North America constituted more than half of HTC’s total shipments in Q3 2010. Europe and Asia Pacific respectively accounted for nearly 20.6 percent and 17.6 percent of shipments during this period. While the company experienced a dip in sales in Asia Pacific and Europe, there has been a significant jump in sales from North America. Figure 40: Regional Break-out of Smartphone Shipments — HTC (In Percent, Q3 2010) 35,36 54.4% 20.6% 17.6% 7.4% Total Shipments = 6.8 million Asia Pacific Europe North America Rest of World Source: Portio Research Ltd. 35 36 Note: HTC’s shipments include handsets owned by HTC and not operator-owned handsets. Note: The regional break-out of shipments for each vendor is calculated on the basis of total shipments in the quarter, the total shipments in the region and other information related to market presence of each of the vendors in different region. This is an estimated market share. 64 © 2010, Portio Research. All Rights Reserved
    • Smartphone Futures 2011-2015 HTC’s Emergence as a Smartphone Vendor The figure below depicts the product and business development for HTC and important shifts in HTC’s strategies during the past couple of years. Figure 41: HTC’s Evolution from ODM to OEM 37 Founded in May 1997 as an outsourcing company (ODM) Three major realignments propelling HTC’s emergence as a smartphone OEM Becoming PDA Designer • Received authorisation from Microsoft to develop products using Windows CE in 1997 under HTC-Microsoft partnership • Organisation of an HTC R&D team for developing and launching handheld PDAs and establishing itself as a player in the global PDA market Manufacturer of Converged Devices • In 2002, HTC launched two mobile wireless devices, the O2 XDA and Orange SPV, in partnership with O2 (UK) and Orange (France) • Maintaining active partnerships with customers to develop test devices Rollout of the Global HTC Brand • Launched HTC-branded devices in June 2006 • Acquired a controlling stake in a smartphone distributor Dopod International in May 2007 to benefit from Dopod’s marketing, sales, and customer services resources, and to push own-brand sales • HTC founded a subsidiary, HTC Asia Pacific Pte. Ltd., to manage its marketing and sales in the Asia Pacific region and to augment its global marketing capabilities HTC’s current dual role A manufacturer of its own HTC self-branded products and a partner for OEMs and MNOs (operator-branded products) Product development for HTC’s smartphones • Pioneered launch of Android OS-based smartphones in North America in Oct 2008 with T-Mobile and in Asia Pacific in Feb 2009 with SingTel and Optus Australia • Acquired One & Company in December 2008 to enhance its core design strengths for transforming external designs of HTC’s smartphones; the acquisition is also expected to help in the development of HTC’s TouchFLO UI, used in the WinMo-based Touch Diamond series, Touch Cruise, and Touch HD • Launched prominent Android-based handsets including Aria, Desire, Droid, Legend and Wildfire in 2010 ; plans to expand the product portfolio in line with the Android upgrades • • HTC’s Future Strategies Partnership with multiple OS providers (Android, Microsoft Windows 7) Plans to open up an HTC App Store Source: Portio Research Ltd. 37 Note: Original Design Manufacturer (ODM) to Original Equipment Manufacturer (OEM) © 2010, Portio Research. All Rights Reserved 65
    • Smartphone Futures 2011-2015 SWOT Analysis Figure 42: SWOT Analysis – HTC Strengths • The capabilities as an ODM has helped the company in establishing itself as a prominent vendor for Android-based handsets • Though the current share in smartphone shipments is small, it is anticipated to pick-up on the back of significant subscriber growth in its home territory Asia Pacific Opportunities • Early move to adopt Android OS and Microsoft Windows 7 provides an opportunity to benefit from the growth prospects of the respective OS • HTC’s shipment growth, against a backdrop of economic slowdown, indicates the increase in popularity of HTC’s handsets and shipments may see significant increases with the economic recovery Weaknesses • Slow at product launch as dependent on Microsoft and Google’s underlying platforms, applications and tools; may lead to a lag in innovation compared to competition • The company is still in the brandbuilding phase, may take time to gain mass appeal Threats • Intensifying competition may reduce profit margins • Affected by the Euro’s (EUR) depreciation against the New Taiwan Dollar (TWD) • Risk of revenue leakage through ongoing intellectual property rights litigation Source: Portio Research Ltd. Strategies and Future Outlook • • 66 Strengthening Product Distribution Partnerships: In June 2010, HTC partnered with Synnex to expand the product distribution network in Australia and New Zealand. o The addition of Synnex will expand the distribution support of HTC’s smartphones and wireless solutions to Australian and New Zealand retailers, including credit facilities and account management, enabling them to offer improved levels of fulfillment and stock management New Product Launches on Multiple platforms: o HTC has actively been launching new handsets on the Windows 7 OS in key Asian markets including Singapore (Mozart, Trophy, HD7) and Malaysia (Mozart and HD7) o HTC is involved in strengthening its Asia Pacific smartphone portfolio with the release of Desire HD and HTC Desire Z in Taiwan, Japan, Hong Kong, Australia, Korea, Singapore, Malaysia, India and Vietnam. o Continuing its focus on the Asia Pacific market, HTC launched new Androidbased handsets: HTC Aria in Australia and Hong Kong; and HTC WildFire in Australia. © 2010, Portio Research. All Rights Reserved
    • Smartphone Futures 2011-2015 • Acquisitions: o In June 2010, HTC acquired Abaxia, a leading player in custom software for mobile operators and handset manufacturers across the globe. Competitive Landscape • • With an increasing number of vendors releasing Android-based handsets, the competition is expected to be stiff in the segment; the key differentiating factors can be in the form of: o new product launches o availability of a vast number of customisable applications o product distribution agreements with multiple MNOs across geographies HTC has a unique business model of assuming a dual role of an OEM and ODM. While sales of own-branded devices help in branding, the provision of operator-owned devices helps it to cater to a larger market. Its unique positioning is expected to help it gain market share even in the current competitive market. The table below highlights the performance of HTC across various criteria. Evaluation Parameter HTC Popularity in enterprise segment Popularity in consumer segment Success in distribution of service and applications © 2010, Portio Research. All Rights Reserved 67
    • Smartphone Futures 2011-2015 Samsung Company Overview Headquarters: 1320-10, Seocho 2-dong, Seocho-gu, Seoul 137-857, Korea Phone: +82-2-2255-0114 Fax: +82-2-2255-0117 Website: www.samsung.com st Financial year-end: 31 December Revenue: USD 34.6 billion (Q3 2010) Revenue growth: 25.2 percent (Y-o-Y in USD, Q3 2010); 12 percent (Y-o-Y in KRW, Q3 2010) Smartphone Market Share: 8.9 percent (Q3 2010) • • • • • From its inception as a small export business in Taegu, Korea in 1938, Samsung has become one of the world’s leading electronics companies Samsung’s prominent business lines include TVs, Mobile handsets, Memory Chips and LCDs. At the end of 2010, Samsung held a market share of 21.2 percent of worldwide mobile handset shipments. The company is currently focusing on strengthening its presence in the smartphone segment, where it recorded a smartphone shipment market share of 7.6 percent during the same period. Samsung currently rolls out handsets on multiple OS platforms including Symbian, Android , Windows and Bada (an open-source OS developed by Samsung) Prominent handset models in the Samsung Portfolio include Galaxy, Wave and Omnia Business Segments Samsung’s business operations are categorised into the four segments given below: • • • • 68 Semiconductor: Includes Semiconductor chips, Smart cards, Mobile Application Processors, Mobile TV receivers, RF transceivers, Storage devices such as optical disc drives and hard disk drives. LCD: Involved in production of TFT-LCD and Organic light-emitting diode (OLED) panels for laptops, desktop monitors, and televisions. Telecom: This division is involved in manufacturing and selling DSLAMs (Digital Subscriber Line Access Multiplexer), Fax machines, Mobile phones Digital Media: This division is composed of consumer electronics and appliances including TV, Monitor, Printer, Computer and Home Appliances such as refrigerators, air conditioners, air purifiers, washers, microwave ovens and vacuum cleaners. © 2010, Portio Research. All Rights Reserved
    • Smartphone Futures 2011-2015 Revenue Samsung’s revenues for 2008, 2009 and the first nine months of 2010 are given in the figure below. Figure 43: Revenue by Business Segments — Samsung (In USD Billion, 2008 – 9M 2010) 38 Revenues (In USD Billion) 120 100 39.2 38.6 32.2 33.3 25.0 20.0 17.6 19.5 20.8 21.2 24.4 2009 9M 2010 35.5 80 60 40 20 0 2008 Period Semiconductor LCD Telecom Digital Media Source: Portio Research Ltd. The Telecom division has registered impressive growth in 2010 due to the popularity of its handsets, including Galaxy and Wave. The Telecom division is among the most profitable businesses at Samsung with a 16 percent increase in year-on-year sales 39. Worldwide Smartphone Shipments and Smartphone Market Share Table 19: Smartphone Shipments and Smartphone Market Share — Samsung (2009 – 2015F) Smartphone Shipments and Smartphone Market Share (2009-2015F) Samsung 2009 2010 2011F 2012F 2013F 2014F 2015F Shipments (In Million) 6.0 23.1 29.1 39.9 48.2 57.9 69.2 Market Share (In Percent) 3.5 7.6 8.0 9.1 9.2 9.5 10.0 Source: Portio Research Ltd. • • • By end-2010, Samsung shipped 23.1 million handsets, and held a market share of 7.6 percent Smartphone shipments are expected to grow at a CAGR of nearly 24.5 percent during 2010-2015, to reach 69.2 million by end-2015 The Android-based Galaxy S is now available with 210 MNOs in more than 90 countries. Wave, the first phone to be built on the “Bada” OS platform, sold over 2 million units in 80 countries 40 38 Note: Revenues by Business Segments is available in the annual reports of 2008 and 2009. Similar break-up for 2010 will be available only with the Q4 results. In order to maintain consistency, the four major business portfolios were listed for comparison 39 http://www.gsmarena.com/samsung_q3_results_are_out_market_share_and_profit_increase-news-2041.php 40 http://www.i4u.com/41715/samsung-reveals-q3-2010-data © 2010, Portio Research. All Rights Reserved 69
    • Smartphone Futures 2011-2015 • Samsung continues to strengthen its product portfolio through: o Increasing the channel competitiveness of affordable models o Strengthening cooperation with network operators o Launching an online Application Store to provide a range of services and content Key Developments • • • As of November 2010, the company’s app store – Samsung Apps – is available in 109 countries The store registered more than 14 million Bada OS application downloads by “Wave” users. This signifies the growing popularity of the new OS platform 41 Samsung has decided to end its association with the Symbian OS platform by closing all Symbian forums and developer sites, and by removing all Symbian-related documentation from its servers by the end of 2010. The main reasons include: o Increasing popularity of Android-based devices o New product launches on the Windows Mobile 7 platform o Gaining prominence of Bada OS SWOT Analysis Figure 44: SWOT Analysis – Samsung Strengths • Popular brand in the electronics industry with strong manufacturing capabilities • Increasing popularity in the American # Market • Leveraging on multiple OS platforms (Windows, Bada, Android) provides a differential advantage in the market Opportunities Weaknesses • The focus on mass-market, low-end smartphones has resulted in lower smartphone ASPs • Low penetration in the Enterprise segment Threats • Expanding the product portfolio by launching handsets on the Windows Mobile and Android platform • Large number of vendors opting for Android OS has intensified the competition in the smartphone space • Leveraging on the success of Wave, Samsung can further strengthen the “Bada” OS platform by introducing more handsets based on Bada OS • The Verizon-Apple iPhone deal might have a negative impact on the sales of Galaxy in the US market Source: Portio Research Ltd. 41 Source: http://www.gsmarena.com/samsung_apps_turns_one_14m_apps_downloaded_by_wave_users-news1931.php # Source: http://www.foxbusiness.com/markets/2010/10/06/comscore-samsung-remains-mobile-phone-users/ 70 © 2010, Portio Research. All Rights Reserved
    • Smartphone Futures 2011-2015 Strategies and Future Outlook • Increase market shares by enhancing product mix, including smartphones and tablets: o Strategies for Developed Markets:  Focusing on the holiday season demand with Galaxy S, Wave 2 and Galaxy Tab  Targeting mass market smartphone demand with the help of new phone launches in Q3 2010 o Strategies for Emerging Markets:  Strengthening mass market smartphones and full-touch phones  Enhancing distribution channel networks through further tie-ups Outlook: o The WP7-running Samsung Omnia 7 is one of several devices carrying high expectations • Competitive Landscape • • The increasing popularity of Android-based devices has prompted the entry of a growing number of vendors in to the market The major competitors to Samsung in the Android segment include Motorola, HTC and Sony Ericsson. Beyond Android, the company faces increased competition from the top three players in the smartphone industry (Nokia, Apple and RIM) The table below highlights the performance of Samsung. Evaluation Parameter Samsung Popularity in enterprise segment Popularity in consumer segment Success in distribution of services and applications © 2010, Portio Research. All Rights Reserved 71
    • Smartphone Futures 2011-2015 Motorola Company Overview Headquarters: 1303 East Algonquin Road, Schaumburg, Illinois, USA Phone: +1- 847- 576-5000 Fax: +1-847-576-5372 Website: www.motorola.com st Financial year-end: 31 December Revenue: USD 4.9 billion (Q3 2010) Revenue growth: 12.8 percent (Y-o-Y, Q3 2010) Smartphone Market Share: 4.7 percent (Q3 2010) • • • • • Started in Chicago, Illinois as Galvin Manufacturing Corporation in 1928, Motorola was the pioneer in mobile communications and launched car radios and public safety networks in the 1930s. Introduced the world's first commercial mobile handset, the Motorola DynaTAC phone, in September 1983. Motorola’s first smartphone, the Motorola A760, was launched in 2003 and was the first smartphone to merge a Linux operating system and Java technology with full PDA functionality. It acquired Symbol Technologies in 2007 to offer products and systems for enterprise mobility solutions, including rugged mobile computing, advanced data capture and radio frequency identification (RFID). Its portfolio of products, solutions and services includes mobile handsets, wireless accessories, digital entertainment devices, wireless access systems, voice and data communications systems, and enterprise mobility products. Business Segments Motorola’s business operations are categorised into the three segments given below: • Enterprise Mobility Solutions: Converged enterprise communications and productivity enhancing solutions, wireless voice and broadband systems for building private networks and public safety communications systems • Home & Networks Mobility: Set-top boxes, digital video recorders, network equipment used to enable video broadcasting, computer telephony, high-definition television, digital entertainment devices for cable and IPTV deployments, fully integrated and customsable media solutions • Mobile Devices: Mobile handsets and wireless network infrastructure equipment 72 © 2010, Portio Research. All Rights Reserved
    • Smartphone Futures 2011-2015 Revenue Motorola’s revenues for 2008, 2009 and the first nine months of 2010 are given in the figure below. Figure 45: Revenue by Business Segments — Motorola (In USD Billion, 2008 – 9M 2010) 42 Revenues (In USD Billion) 35 30 8.1 25 20 7.0 10.1 15 8.0 5.6 7.1 5.4 2009 9M 2010 10 12.1 5 2.6 0 2008 Period Enterprise Mobility Solutions Home and Networks Mobility Mobile Devices Source: Portio Research Ltd. The Mobile Devices division has seen a decrease in revenues over the years, mainly due to the lack of prominent models since the Moto Razr. Motorola is expecting a revival of sales in this segment by introducing more Android-based phones in addition to the popular ‘Droid’ in the US market. Worldwide Smartphone Shipments and Smartphone Market Share Table 20: Smartphone Shipments and Smartphone Market Share — Motorola (2009 – 2015F) Smartphone Shipments and Smartphone Market Share (2009-2015F) Motorola 2009 2010 2011F 2012F 2013F 2014F 2015F Shipments (In Million) 3.2 13.4 16.0 23.2 28.3 30.5 41.3 Market Share (In Percent) 1.9 4.4 4.4 5.3 5.4 5.0 5.9 Source: Portio Research Ltd. • • • 42 At end-2010, Motorola had a market share of 4.4 percent of total worldwide smartphone shipments. Its smartphone shipments are expected to grow at a CAGR of nearly 25.3 percent during 2010-2015. Smartphone shipments are now forecast to reach 41.3 million by end-2015. Riding on the success of Android-based devices, Motorola registered a 41 percent growth quarter-on-quarter in Q3 2010. The growth is driven by handsets including Droid X, MileStone, i1, Devour, etc. Note: On 19 July 2010, Motorola entered into an agreement with Nokia Siemens Networks (NSN) to sell certain assets and liabilities of its ‘Network’ business. Beginning Q3 2010, results of operations from the ‘Network’ business that are included in the agreement are reported under ‘Discontinued Operations’. © 2010, Portio Research. All Rights Reserved 73
    • Smartphone Futures 2011-2015 • Motorola continues to focus on its Android-based smartphone portfolio through: o Differentiating products through their applications and services suite, MOTOBLUR o Enhancing the ecosystem using the Motorola Developer network ‘MotoDev’ application development program o Building a smartphone portfolio across multiple price points through a network of MNOs, distributors and retailers Key Developments • • To appeal to the next generation of smartphone users, Motorola has been expanding its Android lineup, offering consumers a range of designs and features that meets their on-the-go lifestyle. o New product launches include Droid X, i1, Flip-Out, Charm, Citrus, Spice, Bravo and FlipSide. Motorola announced SHOP4APPS stores in the key markets of Argentina, Brazil and Mexico. SWOT Analysis Figure 46: SWOT Analysis – Motorola Strengths Weaknesses • Technological expertise in the telecom domain • Complexity of product platforms and system architecture • Success of its Android devices led to the revival of its Mobile Device business, that has been registering losses over the years • Dependent on development of OS and software applications by third parties to compete with other smartphone vendors • New Android-based smartphone models catering to different segments of the market Opportunities Threats • Strengthening the smartphone platform and building up flagship products • Large number of vendors opting for Android OS has intensified the competition in the smartphone space • Experience in catering to enterprises and expertise in manufacturing mobile computing devices can be leveraged to push its smartphones • Absence of flagship products apart from Droid might see market share erosion in the near-to-long term Source: Portio Research Ltd. 74 © 2010, Portio Research. All Rights Reserved
    • Smartphone Futures 2011-2015 Strategies and Future Outlook • Expanding Product portfolio: o Includes launch of Citrus and Grasp in the US; BackFlip, Milestone XT in Malaysia; i897 Special Ferrari Edition in Mexico; MING line of smartphones for China; and others • Acquisitions: In a move to enhance the features of MOTOBLUR, in September 2010, Motorola acquired Aloqz GmbH, a developer of location-based software and technologies that are designed to enable the discovery of relevant web content by smartphones. Competitive Landscape • • • The launch of Android-based devices helped in the revival of the Motorola’s Mobile Devices business segment that has seen consistent erosion in market share. Motorola has been facing stiff competition from leading players in the wider market, and HTC, Samsung, and Sony Ericsson in the Android space. There is a need to create differentiation in the product portfolio to succeed in the market. Apart from the Android-based devices, there have been innovative product launches from RIM, Apple and Nokia on new platforms including Symbian 3, Blackberry 6 and others that have pushed smartphone sales. The table below highlights the performance of Motorola. Evaluation Parameter Motorola Popularity in enterprise segment Popularity in consumer segment Success in distribution of service and applications © 2010, Portio Research. All Rights Reserved 75
    • Smartphone Futures 2011-2015 Sony Ericsson Company Overview Headquarters: Sony Ericsson House, 202 Hammersmith Road, London, UK Phone: +44-208-762-5800 Fax: +44-208-762-5887 Website: www.sonyericsson.com st Financial year-end: 31 December Revenue: USD 2.07 billion (Q3 2010) Revenue growth: -10 percent (Y-o-Y in USD, Q3 2010); -8.8 percent (Y-o-Y in EUR, Q3 2010) Smartphone Market Share: 2.3 percent (Q3 2010) • • • • • • Established in October 2001, Sony Ericsson is a 50-50 joint venture of Sony—a Japanese consumer electronics company—and Ericsson—a Swedish telecoms firm. Sales of products increased largely due to the reinvention of Sony's popular Walkman and Cyber-shot series. Sony Ericsson's strategy was to release new models capable of digital photography as well as other multimedia capabilities. In June 2002, Sony Ericsson announced its shift of focus from CDMA-based handsets to GSM-based handsets. The company joined the Open Handset Alliance in December 2008 and is developing new phones using Android Open Source software. It has enjoyed successful rollouts of Xperia X1, Cyber-shot C905 phones and the PlayNow plus music service, and more recently Cedar, Xperia X10, Spiro, and Zylo. Product Segments Sony Ericsson manufactures a range of mobile handsets including entry-level and mid-range handsets, feature phones and smartphones. Its smartphone portfolio includes Yendo, Cedar, Xperia X10, Spiro, Zylo, Aspen, Satio, G900, G700, W960 and P1. Sony Ericson’s smartphones are based on various operating systems (OS) including Symbian, Microsoft Windows Mobile and Android. 76 © 2010, Portio Research. All Rights Reserved
    • Smartphone Futures 2011-2015 Revenue Sony Ericsson’s revenues for 2008, 2009 and the first nine months of 2010 are shown in the figure below: Figure 47: Revenue — Sony Ericsson (In USD Billion, 2008 – 9M 2010) Revenues (In USD Billion) 20 15 10 16.5 5 9.5 6.3 0 2008 2009 9M 2010 Period Source: Portio Research Ltd. Sony Ericsson experienced a decline in overall revenue during 2010, primarily due to slackening demand caused by the economic slowdown. However, the success of its Androidbased phones Xperia and its variants are expected to increase its share in the smartphone market. In Q3 2010, smartphones comprised more than 50 percent of its total handset sales. Worldwide Smartphone Shipments and Smartphone Market Share Table 21: Smartphone Shipments and Smartphone Market Share —Sony Ericsson (2009 – 2015F) Smartphone Shipments and Smartphone Market Share (2009-2015F) Sony Ericsson 2009 2010 2011F 2012F 2013F 2014F 2015F Shipments (In Million) 2.7 7.6 8.8 12.0 16.8 21.3 27.8 Market Share (In Percent) 1.6 2.5 2.4 2.8 3.2 3.5 4.0 Source: Portio Research Ltd. • • • Sony Ericsson is expected to account for nearly 4 percent of worldwide smartphone shipments by 2015 Its smartphone shipments are expected to grow at a CAGR of nearly 29.7 percent during 2010-2015 to 27.8 million units in 2015 The vendor’s forecasts have been revised upwards (from the projections published last year) due to the following reasons: o Key strategic decision to shift from Symbian to Android OS o Successful Android-based phone launches including Xperia X10 and Xperia X10 mini, and the planned launch of Xperia X8 © 2010, Portio Research. All Rights Reserved 77
    • Smartphone Futures 2011-2015 Key Developments • • • The Android-based Xperia model was launched in key markets – including the US and China – in a move to consolidate its position on the Android platform. Though total handsets shipped reduced by 26 percent year-on-year, Sony Ericsson reported an increase in its profits mainly due to the high ASP (Average Selling prices) of its smartphones. Sony Ericsson launched ‘LiveView’ that enables customers get the best mobile phone experience through the Android Platform. o LiveView uses Bluetooth connectivity to wirelessly pair up to a compatible handset and allows consumers to control the phone without taking it out of their pocket or handbag. SWOT Analysis Figure 48: SWOT Analysis – Sony Ericsson Strengths • Growth in smartphone shipments in the Asia Pacific region • Expertise in providing multimedia capabilities and positioning as a premium feature phone vendor • Leveraging on multiple OS including Android, Symbian and Windows Opportunities • Growth trend in the smartphone markets • Strengthening of the smartphone portfolio by leveraging on the success of smartphones including Xperia • Higher ASPs of smartphones can push up revenues Weaknesses • Lacking its own smartphone OS and weak integration with core phone functionality • Flat market shares over the quarters indicates lack of flagship products • Decline in revenues over the years Threats • Growing competition in Asia Pacific • Aggressive promotions by leading vendors including Apple, RIM and HTC through MNO tie-ups. The deals in China, Japan and India are expected to have the largest impact • Too many players entering the Android space Source: Portio Research Ltd. Strategies and Future Outlook • • 78 Entering New markets: In order to strengthen its presence in the Asia Pacific region, Sony Ericsson launched its first smartphone on the TD-SCDMA network through its tieup with China Mobile. Smartphone Portfolio Upgrades: In a move aimed at strengthening flagship products, Sony Ericsson will be providing software upgrades to the Xperia range of smartphones; these upgrades are aimed at improving the overall performance and adding new communication and entertainment tools to existing phones. © 2010, Portio Research. All Rights Reserved
    • Smartphone Futures 2011-2015 Competitive Landscape • • The increasing popularity of Android OS resulted in key vendors releasing new smartphones based on this platform. Apart from the competition from leading players in the industry including Nokia, RIM and Apple, Sony Ericsson is also competing with Android-based device vendors such as Motorola, HTC and Samsung. o To survive in this market space, Sony Ericsson needs to build a portfolio of flagship products and continuously innovate and differentiate from other players. The table below highlights the performance of Sony Ericsson. Evaluation Parameter Sony Ericsson Popularity in enterprise segment Popularity in consumer segment Success in distribution of service and applications © 2010, Portio Research. All Rights Reserved 79
    • Smartphone Futures 2011-2015 Chapter 5 Operating Systems 80 © 2010, Portio Research. All Rights Reserved
    • Smartphone Futures 2011-2015 Operating Systems Market Share of Operating System Vendors Operating Systems (OS) for smartphones started to gain more focus in 2010 because of the sharp rise in the adoptability of Google’s open source Android platform. The popularity of an OS depends on a lot of factors including performance of the hardware, availability of applications, and the number of OEM partnerships, etc. With the arrival of Android OS, there has been a significant change in market dynamics. From a negligible market share at end2008, the Android platform has become the fourth most prominent OS with 14.1 percent share of the worldwide OS shipments at end-2010. Figure 49: Market Share of OS by Shipments – Worldwide (In Percent, 2010) 16.3% 15.9% 14.1% 6.8% 40.1% 6.8% Symbian Apple iOS BlackBerry Android Windows Mobile Others Source: Portio Research Ltd. The forecast market share of operating systems in 2015 is given in the figure below. Figure 50: Market Share of OS by Shipments – Worldwide (In Percent, 2015F) 15.8% 18.8% 26.0% 4.5% 30.2% Symbian Apple iOS 4.7% BlackBerry Android Windows Mobile Others Source: Portio Research Ltd. F – Forecasted © 2010, Portio Research. All Rights Reserved 81
    • Smartphone Futures 2011-2015 Regional Market Share of Operating System Vendors The regional market shares for operating system vendors are derived from smartphone shipments data. The figures below depict the market share for leading OS providers in North America, Asia Pacific, Europe, and Rest of World during Q3 2010. Figure 51: Market Share of OS by Shipments — North America (In Percent, Q3 2010) 43.6% 24.2% 26.2% Symbian 43,44 Apple iOS 1.4% BlackBerry 1.4% 3.0% Android Windows Mobile Others Source: Portio Research Ltd. 43,44 Figure 52: Market Share of OS by Shipments — Asia Pacific (In Percent, Q3 2010) 12.8% 7.7% 57.3% 10.7% 4.3% 7.3% Symbian Apple iOS BlackBerry Android Windows Mobile Others Source: Portio Research Ltd. 43 Note: The market share for different OS vendors in the region is calculated by the total shipments in the quarter in the region and shipment data as available for different vendors. This is an estimated market share. 44 Note: The total may not add up to 100 percent because of rounding-off errors. 82 © 2010, Portio Research. All Rights Reserved
    • Smartphone Futures 2011-2015 Figure 53: Market Share of OS by Shipments — Europe (In Percent, Q3 2010) 45,46 14.3% 12.8% 57.1% 11.7% 2.0% Symbian Apple iOS BlackBerry 2.0% Android Windows Mobile Others Source: Portio Research Ltd. 45,46 Figure 54: Market Share of OS by Shipments — Rest of World (In Percent, Q3 2010) 14.6% 14.8% 37.2% 30.8% Symbian Apple iOS 2.0% BlackBerry 0.7% Android Windows Mobile Others Source: Portio Research Ltd. 45 Note: The market share for different OS vendors in the region is calculated by the total shipments in the quarter in the region and shipment data as available for different vendors. This is an estimated market share. 46 Note: The total may not add up to 100 percent because of rounding-off errors © 2010, Portio Research. All Rights Reserved 83
    • Smartphone Futures 2011-2015 Symbian OS Company Overview Headquarters: 1 Boundary Row, Southwark, London SE1 8HP, United Kingdom Phone: +44-207-401-1150 Fax: +44-207-183-6100 Website: www.symbian.org Symbian-enabled Smartphone Shipments: 29.5 million (Q3 2010) Operating System Market Share: 36.4 percent (Q3 2010) • • • Symbian came into existence in 1998, as the result of a joint venture between Psion, Nokia, Ericsson and Motorola. In 2008, Nokia acquired Symbian and formed the Symbian Foundation, making Symbian open source in October 2009. Manufacturers who have installed Symbian OS in their devices include: o Fujitsu o Mitsubishi o Motorola o Nokia o Samsung o Sendo o Sharp o Siemens o Sony Ericsson Worldwide Smartphone Shipments with Symbian OS and their Market Share Table 22: OS Shipments and OS Market Share — Symbian (2009 – 2015F) OS Shipments and OS Market Share (2009-2015F) Symbian 2009 2010 2011F 2012F 2013F 2014F 2015F Shipments (In Million) 80.9 121.3 135.6 154.0 178.8 200.4 209.9 Market Share (In Percent) 47.2 40.1 37.5 35.2 34.1 32.9 30.2 Source: Portio Research Ltd. • • 84 Symbian smartphone shipments are expected to grow from 121.3 million in 2010 to 209.9 million by the end of 2015, indicating a CAGR of 11.6 percent. Despite stable growth of total shipments, the market share of Symbian OS is projected to decrease from 40.1 percent in 2010 to 30.2 percent by 2015. The primary reasons for this decline include: o The growing popularity of Android-based devices. Recently, Samsung and Sony Ericsson decided to discontinue their association with Symbian. o The increasing demand for iPhone and Blackberry, particularly in the Asia Pacific and European markets, which have traditionally been the strong-hold of Symbian OS. © 2010, Portio Research. All Rights Reserved
    • Smartphone Futures 2011-2015 Geographical Presence Asia Pacific has been the major contributor to Symbian OS, with total shipments of 13.4 million smartphones for the period ending Q3 2010. Strong distribution networks and a wide product portfolio are the major contributing factors for increased smartphone shipments here. Europe shipped a total of 11.2 million Symbian-enabled smartphones in Q3 2010, making it the second largest regional market for Symbian OS, while the OS continued to struggle in North America with the increasing popularity of Apple, RIM and Android. Figure 55: Regional Break-out of Symbian OS Shipments (In Percent, Q3 2010) 47 38.0% 1.1% 45.4% 15.5% Total Shipments = 29.5 million Asia Pacific Europe North America Rest of World Source: Portio Research Ltd. Key Developments • • • • 47 In June 2010, Symbian and Monotype Imaging Holdings Inc. announced an open source font for the Symbian platform. The Monotype Yuppy™ or MYuppy Chinese font is expected to benefit the worldwide Symbian community, particularly device manufacturers and application developers targeting China, the largest mobile market in the world. In June 2010, Baidu, the Chinese search engine provider, and the Symbian Foundation announced they would co-establish a joint laboratory to stimulate the development and launch of wireless ‘box computing’ that will be tightly integrated with the Symbian platform. o This will enable application and web developers to incorporate robust search functionality into their applications and leverage this ‘platform within a platform’ to expand the Symbian/Baidu ecosystem, bringing new applications and user experiences to Symbian devices and extending the reach of Baidu in the mobile marketplace. In July 2010, Symbian and Nitobi announced an open source collaboration designed to simplify mobile application development o By integrating Symbian’s web application creation tools and Nitobi’s PhoneGap 'write once, run anywhere' platform, mobile developers can now easily make app store ready applications for all major mobile platforms. In September 2010, Symbian announced the new Symbian 3 platform for mobile phones that come with a host of added features, including HDMI support, multiple personalised home screens, multi-point touch, multi tasking and advanced graphics. Nokia N8 is the first handset to be launched on this platform. Note: The regional break-out of OS shipments for each vendor is calculated on the basis of total shipments in the quarter, the total shipments in the region and other information related to market presence of each of the vendors in different region. This is an estimated market share. © 2010, Portio Research. All Rights Reserved 85 In September 2010, Symbian announced the new Symbian 3 platform for mobile phones that come with a host of added features, including HDMI support, multiple personalised home screens, and multi-point touch, multitasking and advanced graphics.
    • Smartphone Futures 2011-2015 • • In October 2010, Symbian and Smaato announced the ‘Smaato Open Mobile Advertising (SOMA)’ SDK (Software Development Kit) for Symbian that includes support for Qt, Web Runtime and native Symbian C++ development environments. With the help of SOMA SDK, developers can maximise their ad inventory and improve their return on investment by running ads globally in more than 220 countries. In November 2010, Nokia reaffirmed its commitment to the Symbian platform, commenting that it planned to continue to invest its own resources in developing Symbian and expects to deliver a strong portfolio of Symbian-based smartphones to people around the world 48. The table below highlights the performance of Symbian OS according to performance across various criteria. Evaluation Parameter Symbian OS Compatibility with several vendors’ handsets Presence in high growth markets User-friendly interface 48 Source: http://www.nokia.com/press/press-releases/showpressrelease?newsid=1460185 86 © 2010, Portio Research. All Rights Reserved
    • Smartphone Futures 2011-2015 Apple iPhone OS Company Overview Headquarters: 1 Infinite Loop, Cupertino, California, USA Phone: +1-408-996-1010 Fax: +1-408-974-2113 Website: www.apple.com Apple iPhone OS-enabled Smartphone Shipments: 14.1 million (Q3 2010) Operating System Market Share: 17.4 percent (Q3 2010) • • • • • • Apple came into existence in 1976 and is headquartered in California. In 2007, Apple entered the mobile handset market by launching the iPhone. iOS is Apple’s operating system used in Apple’s iPhone, iPod Touch and iPad. It is based on ‘Mac OS X’ and has four abstraction layers— the Core OS layer, the Core Services layer, the Media layer, and the Cocoa Touch layer. In Q3 2010, North America was the largest market for Apple iPhone OS accounting for 43.3 percent of the company’s worldwide shipments; Asia Pacific secured second place with 21.3 percent, followed by Europe with 19.9 percent. Apple has strengthened its position in the smartphone market with the launch of iPhone 3G, iPhone 3GS and iPhone4. In Q3 2010 Apple handsets were more popular in the advanced markets of North America and Asia Pacific than in the markets of Europe, Latin America, and Africa and Middle East. Worldwide Smartphone Shipments with Apple iPhone OS and their Market Share Table 23: OS Shipments and OS Market Share — Apple iPhone (2009- 2015F) OS Shipments and OS Market Share (2009-2015F) Apple 2009 2010 2011F 2012F 2013F 2014F 2015F Shipments (In Million) 22.4 49.4 61.5 76.1 95.4 113.3 130.7 Market Share (In Percent) 13.1 16.3 17.0 17.4 18.2 18.6 18.8 Source: Portio Research Ltd. • • • Apple iPhone OS shipments reached 49.4 million by the end of 2010, recording a y-o-y growth rate of 120 percent. Market share is expected to increase from 16.3 percent at end-2010 to 18.8 percent by the end of 2015. OS shipments are forecast to reach 130.7 million by end-2015, indicating a CAGR of 21.5 percent during the period 2010-2015. © 2010, Portio Research. All Rights Reserved 87
    • Smartphone Futures 2011-2015 Geographical Presence North America continues to be the biggest market for Apple iPhone OS, accounting for 43.3 percent of total OS shipments during Q3 2010. The ease of product availability, attractive features of Apple iPhone OS and an array of applications available, customer and technical support, a vast distribution network, a higher replacement rate, and repeat purchases are some of the other factors that have fuelled sales in the region. Asia Pacific is the second biggest market with a share of close to 21.3 percent of OS shipments in Q3 2010. The Asia Pacific market has seen a significant rise in handset/OS shipments mainly due to • Increase in product availability • Growing distribution network – tie-ups with multiple MNOs across regions, subsidies from MNOs, etc. • Introduction of 3G and above network services in key markets, such as China Figure 56: Regional Break-out of Apple iPhone OS Shipments (In Percent, Q3 2010) 49 43.3% 19.9% 15.6% 21.3% Total Shipments = 14.1 million Asia Pacific Europe North America Rest of World Source: Portio Research Ltd. Key Developments • • 49 In May 2010, Apple released iPhone OS 4 beta version that includes an updated Software Development Kit (SDK) with over 1,500 new Application Programming Interfaces (APIs) and over 100 new features that will be available to iPhone and iPod Touch users. New features include: o Multitasking for third party apps o Folders to better organise and access apps o Improved mail with a unified inbox, fast inbox switching o Enhanced enterprise support, mobile device management, wireless app distribution o iAd mobile advertising platform o iBooks – the new e-book reader, and o Online bookstore recently debuted on the iPad In September 2010, Apple announced the beta version of AirPrint wireless printing for iPad, iPhone and iPod Touch to members of Apple’s iOS developer program. o AirPrint is included in the free iOS 4.2 software update o AirPrint automatically finds printers on local networks and can print text, photos and graphics without the need to install drivers or download software. HP’s existing and upcoming ePrint enabled printers will be the first to support printing direct from iOS devices. Note: The total may not add up to 100 percent because of rounding-off errors. 88 © 2010, Portio Research. All Rights Reserved
    • Smartphone Futures 2011-2015 • Apple recorded 341,997 applications by the end of October 2010 o Total active applications: 283,855 o Number of active developers: 58,908 o Average Price of Paid Application, The US: USD 4.31 50 The table below highlights the performance of Apple iPhone OS according to performance across various criteria. Evaluation Parameter Apple iPhone OS Popularity among consumers Expertise in consumer electronics Presence in emerging markets 50 Source: Distimo Report, October 2010 © 2010, Portio Research. All Rights Reserved 89 Apple recorded 341,997 applications by the end of October 2010
    • Smartphone Futures 2011-2015 BlackBerry OS Company Overview Headquarters: 295 Phillip Street, Waterloo, Ontario, Canada Phone: +1-519- 888-7465 Fax: +1-519 888-7884 Website: www.rim.com BlackBerry OS-enabled Smartphone Shipments: 12.1 million (Q3 2010) Operating System Market Share: 14.9 percent (Q3 2010) • • • • • • Research in Motion (RIM) was founded in 1984 and is based in Waterloo, Ontario. It has offices in North America, Europe and Asia Pacific. The company is a leading designer, manufacturer and marketer of wireless solutions for the worldwide mobile market. Its portfolio of products, services and embedded technologies include the BlackBerry wireless platform, BlackBerry smartphones, software development tools, radio-modems and software/hardware licensing agreements. The company leverages its expertise in integrated hardware, software and services— that support multiple wireless network standards—to offer platforms and solutions for seamless access to voice, messaging, e-mail, Internet and intranet-based applications. BlackBerry OS has been designed to integrate with the corporate Microsoft Exchange, Lotus Domino, and Novell GroupWise setups, which makes it popular among the enterprise segment. BlackBerry devices are capable of downloading new applications from BlackBerry App World and receiving over-the-air push e-mail from personal e-mail with Web-based providers. Worldwide Smartphone Shipments with BlackBerry OS and their Market Share Table 24: OS Shipments and OS Market Share – BlackBerry (2009 – 2015F) OS Shipments and OS Market Share (2009-2015F) BlackBerry 2009 2010 2011F 2012F 2013F 2014F 2015F Shipments (In Million) 32.4 48.1 60.8 70.9 83.9 96.3 109.8 Market Share (In Percent) 18.9 15.9 16.8 16.2 16.0 15.8 15.8 Source: Portio Research Ltd. • • • 90 RIM shipped 48.1 million units in 2010, achieving a market share of 15.9 percent. BlackBerry OS is expected to ultimately lose market share by end-2015, due in part to the immense success of Android-based handsets. BlackBerry shipments are expected to grow at a CAGR of nearly 18 percent during 2010-2015. © 2010, Portio Research. All Rights Reserved
    • Smartphone Futures 2011-2015 Geographical Presence North America is the largest market for BlackBerry OS, with approximately 46.6 percent of shipments attributed to this region in Q3 2010. Europe and Asia Pacific contributed 20.7 percent and 14.9 percent respectively to OS shipments during this quarter. Figure 57: Regional Break-out of BlackBerry OS Shipments (In Percent, Q3 2010) 51 46.6% 20.7% 17.9% 14.9% Total Shipments = 12.1 million Asia Pacific UK North America Rest of World Source: Portio Research Ltd. Key Developments • • • • • • 51 In July 2010, BlackBerry updated its application store ‘App World’ with new features including new payment options, enhanced discovery and search features, useridentification system, ‘BlackBerry ID’ etc. In August 2010, BlackBerry launched ‘BlackBerry OS 6’ featuring a redesigned interface that seamlessly works with a touch screen and trackpad, expanded messaging capabilities that simplify managing social media and RSS feeds, an advanced multimedia experience, a new Universal Search tool, and a Web Kit-based browser that renders Web pages quickly for a great browsing experience. In September 2010, BlackBerry announced its next-generation web-based development platform, BlackBerry WebWorks, which enables web developers to build full-featured applications for BlackBerry smartphones in HTML-5, CSS and JavaScript. In September 2010, Kobo, a global e-reading service, announced plans to preload its application on the BlackBerry tablet ‘PlayBook’. This gives users access to Kobo’s store of more than 2.2 million titles. The application comes with added features including customised reading options, search functionality, Library view, etc. In September 2010, BlackBerry launched a new ‘Enterprise Application Development’ platform that will enable commercial enterprise and corporate developers to build enterprise applications and services for BlackBerry smartphones. o These applications can access instant data push and alerts, transfer files within enterprise applications, and query a user’s device for geo-location, presence, calendar availability, etc. In October 2010, RIM introduced a new Software Development Kit (SDK) that allows developers to quickly and easily create AIR applications for the BlackBerry PlayBook tablet using Adobe's development tools. This SDK supports hardware-accelerated playback of video and graphics-intensive content, both in the browser and within AIR applications, enabling a smooth, high fidelity viewing experience on the tablet. Note: The total may not add up to 100 percent because of rounding-off errors. © 2010, Portio Research. All Rights Reserved 91 In August 2010, BlackBerry launched ‘BlackBerry OS 6’featuring a redesigned interface that seamlessly works with a touch screen and trackpad, expanded messaging capabilities that simplify managing social media and RSS feeds etc.
    • Smartphone Futures 2011-2015 The table below highlights the performance of BlackBerry OS according to performance across various criteria. Evaluation Parameter BlackBerry OS Popularity in enterprise segment Existing relationships with MNOs Continuous innovation to remain ahead of the competition 92 © 2010, Portio Research. All Rights Reserved
    • Smartphone Futures 2011-2015 Microsoft OS Company Overview Headquarters: 1 Microsoft Way, Redmond, WA 98052-6399, USA Phone: +1-425-882-8080 Fax: +1-425-936-7329 Website: www.microsoft.com Microsoft OS-enabled Smartphone Shipments: 2.2 million (Q3 2010) Operating System Market Share: 2.7 percent (Q3 2010) • • • • • • • Microsoft came into existence in 1975. The company is headquartered in Redmond, USA and has offices worldwide. Windows OS is the flagship product; the latest version of the OS is Windows 7 It has ventured into other fields including computer hardware, gaming, mobile, and cloud computing. In Q3 2010, Asia Pacific was the largest market for Microsoft Mobile OS, with it accounting for 45.5 percent of the company’s Mobile OS worldwide shipments The vendor offers several services for Microsoft Mobile on its websites including games, ringtones, Windows Live Messenger and Facebook. Smartphones with the latest version of Windows 7 OS are available with leading vendors including Dell, HTC, LG and Samsung. Worldwide Smartphone Shipments with Microsoft OS and their Market Share Table 25: OS Shipments and OS Market Share — Microsoft (2009 – 2015F) OS Shipments and OS Market Share (2009-2015F) Microsoft 2009 2010 2011F 2012F 2013F 2014F 2015F Shipments (In Million) 15.1 20.6 22.4 23.6 27.3 29.2 31.3 Market Share (In Percent) 8.8 6.8 6.2 5.4 5.2 4.8 4.5 Source: Portio Research Ltd. • • • The launch of the new Windows Mobile OS is expected to boost OS shipments as more vendors release handsets based on Windows 7. OS shipments are forecast to increase from 20.6 million in 2010 to 31.3 million by the end of 2015, indicating a CAGR of 8.7 percent during the period. However, increased shipments might not equate to increased market share due to intense competition from other OS including Android, Symbian, BlackBerry and Apple iOS. © 2010, Portio Research. All Rights Reserved 93
    • Smartphone Futures 2011-2015 Geographical Presence Asia Pacific recorded the highest number of Microsoft Mobile OS shipments in Q3 2010 with a share of 45.5 percent. Though the shipments of Microsoft Mobile OS increased in North America and Asia Pacific, there has been a sharp decline of shipments in the European region. This is mainly due to the increasing popularity of competing OS including Android, iOS and BlackBerry OS. Figure 58: Regional Break-out of Microsoft OS Shipments (In Percent, Q3 2010) 52 18.2% 31.8% 45.5% 4.5% Total Shipments = 2.2 million Asia Pacific Europe North America Rest of World Source: Portio Research Ltd. Key Developments • • • • • 52 In April 2010, Microsoft announced KIN, a new Windows Phone designed specifically for people who are actively navigating their online social networks. Microsoft entered into partnerships with Verizon Wireless, Vodafone and Sharp Corporation to release KIN. KIN will be available from Verizon Wireless (U.S) and Vodafone across Germany, Italy, Spain and the United Kingdom. In May 2010, Microsoft and Nokia launched the Microsoft Communicator Mobile for Nokia devices. This new unified communications client connects directly with a company’s communication systems to streamline mobile collaboration. Owners of Symbian-based Nokia E-series smartphones can download the Communicator from Nokia’s Ovi Store. In August 2010, Microsoft announced the first wave of Xbox LIVE games that would be available on Windows Phone 7. It plans to add more games and applications in the future, thereby ensuring its customers are connected to friends through the power of Xbox Live Avatars. In October 2010, Microsoft and EA Mobile unveiled the first wave of EA games coming to the new platform by end-2010. As part of Microsoft’s managed portfolio of Xbox Live titles, EA’s games for Windows Phone 7 will be Xbox Live-enabled, featuring the ability to track and share scores with leaderboards, unlock Xbox LIVE Achievements, and communicate with Xbox Live friends across Xbox 360, Windows-based PC and Windows Phone 7. Windows Phone 7 is available in a variety of sleek form factors from device-makers such as Dell, HTC, LG and Samsung, and through mobile operators including América Móvil, AT&T, Deutsche Telekom AG, Movistar, O2, Orange, SFR, SingTel, Telstra, TELUS, T-Mobile USA and Vodafone. All Windows Phone 7 phones will include the Snapdragon processor from Qualcomm. Note: The regional break-out of shipments for each vendor is calculated on the basis of total shipments in the quarter, the total shipments in the region and other information related to market presence of each of the vendors in different region. This is an estimated market share. 94 © 2010, Portio Research. All Rights Reserved In May 2010, Microsoft and Nokia launched the Microsoft Communicator Mobile for Nokia devices. This new unified communications client connects directly with a company’s communication systems to streamline mobile collaboration.
    • Smartphone Futures 2011-2015 The table below highlights the performance of Microsoft OS. Evaluation Parameter Microsoft OS Expertise in OS market Global presence Aggressive marketing © 2010, Portio Research. All Rights Reserved 95
    • Smartphone Futures 2011-2015 Android OS Company Overview Headquarters: 1600 Amphitheatre Parkway, Mountain View, California, USA Phone: +1 650-253-0000 Fax: +1 650-253-0001 Website: www.Android.com Android OS-enabled Smartphone Shipments: 20.5 million (Q3 2010) Operating System Market Share: 25.3 percent (Q3 2010) • • • • • Founded in 1998, Google is a leading web property worldwide. Google, in collaboration with the Open Handset Alliance, developed Android—an opensource mobile platform—which mobile developers and hardware manufacturers can use in their devices. Android OS has been highly successful in the US market since its launch in 2008; the popularity of the OS is also increasing in Asia Pacific. Google’s Android OS pricing offers cost advantages over licensed operating systems such as Microsoft. The manufacturers installing Android OS on their devices include: o HTC o Samsung o Motorola o LG Electronics o Sony Ericsson o Acer o Dell Worldwide Smartphone Shipments with Android OS and their Market Share Table 26: OS Shipments and OS Market Share — Android (2009 – 2015F) OS Shipments and OS Market Share (2009-2015F) Android 2009 2010 2011F 2012F 2013F 2014F 2015F Shipments (In Million) 8.1 42.7 65.1 91.9 115.3 143.2 180.7 Market Share (In Percent) 4.7 14.1 18.0 21.0 22.0 23.5 26.0 Source: Portio Research Ltd. • • • 96 With the increasing number of OEMs launching Android-based smartphones, shipments are now forecast to increase from 42.7 million in 2010 to 180.7 million by the end of 2015, achieving a CAGR of 33.5 percent during this period. Android-based smartphones are expected to grow at a much faster pace at the expense of established OS including Symbian, BlackBerry OS and Apple iOS. Globally, Android is the fourth largest OS at the end of 2010. © 2010, Portio Research. All Rights Reserved
    • Smartphone Futures 2011-2015 Geographical Presence In Q3 2010, Android became the largest OS in North America, in terms of smartphone shipments. The region constituted nearly half of the total Android OS shipments in Q3 2010. The share of the Asia Pacific market is expected to grow at a rapid pace in the coming years with an increase in the number of OS shipments in key countries including China and India. At the end of Q3 2010, Asia Pacific contributed 12.2 percent to global Android OS shipments. 53 54 Figure 59: Regional Break-out of Android OS Shipments (In Percent, Q3 2010) , 49.6% 26.9% 11.2% 12.2% Total Shipments = 20.5 million Asia Pacific Europe North America Rest of World Source: Portio Research Ltd. Key Developments Smartphone vendors have launched a wide range of handsets based on Android OS during 2010. Product launches from vendors including HTC, LG, Motorola, Sony Ericsson and Samsung reflect the success of Android-based devices in the market place. The table on the next page provides a list of Android-based smartphones from prominent vendors released during 2010 along with the details of the MNOs. 53 Note: The regional break-out of shipments for each vendor is calculated on the basis of total shipments in the quarter, the total shipments in the region and other information related to market presence of each of the vendors in different region. This is an estimated market share. 54 Note: The total may not add up to 100 percent because of rounding-off errors. © 2010, Portio Research. All Rights Reserved 97 Product launches from vendors including HTC. LG, Motorola, Sony Ericsson and Samsung reflect the success of Android-based devices in the market place.
    • Smartphone Futures 2011-2015 Table 27: Android OS-based Smartphone Releases in 2010 (As of October 2010) Vendor 55 Smartphone MNO HTC Aria AT&T (USA) US Cellular (USA), Vodafone, T-Mobile UK, Virgin, Telus Mobility (Canada), O2, Orange, Three, Telstra (Australia), Mobitel (Slovenia), PlayMobile, Softbank (Japan), Meteor (Ireland), SK Telecom (South Korea), SFR (France) HTC Desire Droid Incredible HTC Legend HTC HTC Evo 4G Verizon Wireless (USA) Vodafone, SFR (France), Bell (Canada), Mobitel (Slovenia), Meteor (Ireland) Sprint Nextel (USA) Google Nexus One myTouch 3G Slide Orange (UK), O2 (UK) KH 5200 Andro-1 KTF (South Korea) LU 2300 Optimus Q LG Telecom (South Korea) Quench, CLIQ XT, Motorola MB501 T-Mobile, Rogers Wireless (Canada), Optus (Australia) Droid X, Droid 2, Milestone 2, Devour Verizon Wireless (USA) Motorola i1 Boost Mobile, Sprint Nextel (USA) Backflip, Motorola MB300 AT&T (USA), Telus (Canada), Optus (Australia) XT720, Motoroi SK Telecom (South Korea) , T-Mobile (USA), Wind Mobile (Canada) Galaxy A SK Telecom (South Korea) i9000 Galaxy S, AT&T Captivate, TMobile Vibrant, Verizon Fascinate, Sprint Epic 4G Vodafone (UK), SK Telecom (South Korea), Movistar, Optus (Australia), AT&T (USA),T-Mobile, Bell (Canada), Verizon Wireless (USA), Sprint Nextel (USA) Samsung Acclaim U.S. Cellular (USA) M910 Intercept, Samsung Moment II Sprint Nextel (USA) Xperia X10 Mini Rogers Wireless (Canada) Xperia X10 Samsung T-Mobile (UK), 3 (UK), Vodafone (U.K), Virgin Mobile (UK), O2 Mobile (UK) GT 540 Optimus, GT 540 Swift Motorola T-Mobile (USA) HTC Wildfire LG T-Mobile (USA), Wind Mobile (Canada), AT&T (USA), Rogers (Canada), Bell (Canada), Telus (Canada), Videotron (Canada), Vodafone, Orange (France), KTF (South Korea) NTT DoCoMo (Japan), Rogers Wireless (Canada), AT&T (USA) Link Bouygues Telecom (France) SE ZTE Source: Portio Research Ltd. 55 Note: In the case of a global launch, individual country names have not been specified. 98 © 2010, Portio Research. All Rights Reserved
    • Smartphone Futures 2011-2015 Upcoming Android OS-based smartphone launches from vendors are listed below: 56 • • • • • • • Acer- beTouch E400, E110, Liquid Metal Dell- Aero, Thunder, Smoke and Flash (through tie-up with AT&T) HTC- Merge/Lexicon, MyTouch HD, Desire Z, Desire HD and Scorpion LG- Optimus One and Optimus Chic Motorola- Droid Pro (tie-up with Verizon) Samsung- i8520 Beam, i9100 Galaxy S Pro Sony Ericsson- Xperia X8 The table below highlights the performance of Android OS across different criteria. Evaluation Parameter Android OS Cost advantages for OEMs Vibrant developer and mobile application ecosystem Integration with Google’s cloud services 56 Note: The planned launches are as of November 2010 © 2010, Portio Research. All Rights Reserved 99
    • Smartphone Futures 2011-2015 Chapter 6 Applications and Content Market 100 © 2010, Portio Research. All Rights Reserved
    • Smartphone Futures 2011-2015 Applications and Content Market Mobile applications are triggering a fundamental shift in the way people use their mobile phones. With competition in the smartphone market growing more intense with the entry of Android-based phones, mobile applications and content are major differentiators for vendors who are looking to increase their market share. Apart from an increase in customer base, vendors are able to generate new revenue streams through these applications. The major application stores providing applications over smartphone platforms are as follows: • Apple App Store • BlackBerry App World • Nokia Ovi Store • Google Android App Market • Symbian Horizon • Windows Marketplace On the basis of popularity, applications across the app stores can be broadly classified under the following types: • Games • Entertainment • Utilities • Books • Themes • Lifestyle • Others Games have been the most popular application type in the mobile applications market, todate. Smartphone and OS vendors are working on innovative ways to improve the user experience by providing interactive user interfaces, improved audio and graphics, and larger screen sizes and resolution for a more intense gaming experience. With increasing demand for applications, there is growing pressure on vendors and application developers to come up with new applications suited to users’ needs. The revenue split between application developers and application hosting firms—such as Apple, RIM, Android and Symbian—is approximately 70:30. 57 The success of app stores can be measured by the number of applications downloaded and revenue generated. The data for major app stores is given in the following pages: 57 Source: http://www.gizmodo.com.au/2010/10/iappalooza-mobile-app-stores-comparison-chart-october-2010/ © 2010, Portio Research. All Rights Reserved 101 With increasing demand for applications, there is growing pressure on vendors and application developers to come up with new applications suited to users’ needs.
    • Smartphone Futures 2011-2015 Apple App Store Apple App Store was launched in July 2008, and since then it has been a market leader by offering apps for iPhone, iPad and iPod. As of end-October 2010, it had an active developer base of 58,908 58, helping it to maintain a large portfolio of applications. The number of downloads on the App Store reached 7 billion as of end-October 2010. 59 The growth of Apple’s App Store is depicted in the figure below. Figure 60: Apple’s App Store Growth (July 2008 – October 2010) Jul 2008  Launch of Apple’s App Store  Device advantages for iPhone enhancing user experience include: large display, multi-touch user interface, fast hardware-accelerated 3D graphics, built-in accelerometer and location-based technology Sep 2008 Growth of Apple’s App Store  Over 100 million apps downloaded to date  Portfolio of over 3,000 applications  Over 90 percent of apps priced at less than USD 10; more than 600 offered free-ofcharge Apr 2009  Over 1 billion applications downloaded to date  Portfolio of over 35,000 applications Jul 2009  Over 1.5 billion applications downloaded to date  Portfolio now stands at over 65,000 applications  Over 100,000 developers in the iPhone Developer Program Sep 2009  Over 2 billion applications downloaded to date  Portfolio of over 85,000 apps  Over 125,000 developers in Apple’s iPhone Developer Program August 2010  6.5 billion applications downloaded to date  Portfolio of over 250,000 applications Oct 2010  Over 7 billion applications downloaded to date  Portfolio of 341,997 apps  58,908 active developers in Apple’s iPhone Developer Program Source: Portio Research Ltd. 58 59 Source: http://148apps.biz/app-store-metrics/ Source: http://techcrunch.com/2010/10/20/app-store-hits-7-billion-downloads/ 102 © 2010, Portio Research. All Rights Reserved
    • Smartphone Futures 2011-2015 As of October 2010, Apple’s App Store had 341,997 applications available for download, with the average app price for a paid application in the US being USD 4.31. Apple’s available apps can be divided into five major types: Games, Entertainment, Books, Lifestyle, and Education. The figure below provides the break-out of Apple App Store’s available applications by type. Figure 61: Break-out of Available Applications by Type – Apple App Store (In Percent, October 60 2010) 7.8% 6.6% 11.1% 42.8% 14.4% 17.3% Books Games Entertainment Education Lifestyle Others Source: Portio Research Ltd. The most popular iPhone apps on Apple’s App Store during October 2010 are given below: Table 28: Most Popular Paid and Free Applications, Apple App Store (The US, October 2010) Rank Paid Applications- Apple iPhone 61 Free Applications- Apple iPhone 1 Angry Birds (Games; Price USD 0.99) Type and Talk (Entertainment) 2 Doodle Jump- Be Warned (Games; Price USD 0.99) Facebook (Social Networking) 3 Fruit Ninja (Games; Price USD 0.99) NetFlix (Entertainment) The Oregon Trail (Games; Price USD 4.99) FatBooth (Entertainment; Price USD 0.99) iBooks (Books) 4 5 Talking Tom Cat (Entertainment, Games) Source: Distimo, Portio Research Ltd. As of September 2010, 28 percent of all apps available at the Apple App Store are offered for ‘Free’ to its users. 62 60 Source: http://148apps.biz/app-store-metrics/?mpage=catcount Source: http://www.independent.co.uk/life-style/gadgets-and-tech/the-most-popular-paid-and-free-smartphoneapplications-2098308.html 62 Source: http://www.gizmodo.com.au/2010/10/iappalooza-mobile-app-stores-comparison-chart-october-2010/ 61 © 2010, Portio Research. All Rights Reserved 103
    • Smartphone Futures 2011-2015 BlackBerry App World BlackBerry App World was launched in April 2009 and is now available in over 73 countries 63. The number of available apps was 13,692 as of October 2010 64, with the major app types being Themes, Reference and E-Books, Games, Utilities, Music and Audio. ‘Themes’ forms nearly 23.4 percent of the available App World apps. Figure 62: Break-out of Available Applications by Type – BlackBerry App World (In Percent, October 2010) 12.0% 6.0% 4.2% 21.9% 32.5% 23.4% Themes Reference and E-Books Games Utilities Music and Audio Others Source: Portio Research Ltd. Table 29: Most Popular Paid and Free Applications, BlackBerry App World (The US, October 65 2010) Rank 1 2 3 4 5 Paid Applications Chat for FaceBook (Social Networking, Price USD 2.99) Shazam Encore (Music and Audio, Price USD 4.99) Bubble Burst (Games, Price USD 0.99) One Touch Flashlight (Utilities, Price USD 2.99) Bejeweled (Games, Price USD 2.99) Free Applications BlackBerry Messenger (IM and Social Networking) FaceBook (Social Networking) Pandora (Music and Audio) ColorID (Tools) Dictionary and Thesaurus (Tools) Source: Distimo, Portio Research Ltd. 63 Source: http://www.blackberry.com/app_includes/devicesoftware/appworld/appworld_availability_en.html Source: http://appworld.blackberry.com/webstore/category/0?lang=en 65 Note: As listed in the BlackBerry App website on 02 November 2010 64 104 © 2010, Portio Research. All Rights Reserved BlackBerry App World was launched in April 2009 and is now available in over 73 countries.
    • Smartphone Futures 2011-2015 Nokia Ovi Store Nokia launched Ovi Store worldwide in May 2009 to provide content and applications, such as e-mail, music, games, social networking, and photo sharing services, for its smartphone users. The Ovi Store is currently available in over 190 countries and in 30 languages. 66 The active number of users as of October 2010 was 140 million. 67 Games continue to be the most popular paid download, while free apps continue to be downloaded in greater numbers than paid apps. Figure 63: Break-out of Available Applications by Type – Nokia Ovi Store (In Percent, October 2010) 14.0% 3.0% 15.0% 38.0% 30.0% Personalisation Games Audio and Video Utilities Others Source: Distimo, Portio Research Ltd. As of October 2010, the store offered 28,000 apps, of which nearly 74 percent were paid applications. The share of free applications has doubled from 13 percent to 26 percent during the period 2009-2010. Table 30: Most Popular Paid and Free Applications, Nokia Ovi Store (The US, October 2010) Rank 1 2 3 4 5 Paid Applications ToonWarz (Games, Price USD 0.99) Armageddon Squadron (Games, Price USD 0.99) Animated Theme, Street Fever (Themes, Price USD 2.99) Shopping List 2.1 (Utilities, Price USD 0.99) Hip Hop All Star (Games, Price USD 0.99) 68 Free Applications ZumZum (Games) Tune Wiki- Lyrics with Music (Music) The Flashlight+ SOS (Utilities) NetFlix Queue Manager (Entertainment) Hi-Speed 3D Free (Games) Source: Distimo, Portio Research Ltd. 66 Source: http://www.forum.nokia.com/Distribute/Ovi_Store_statistics.xhtml Source: http://conversations.nokia.com/2010/10/01/ovis-global-explosion/ 68 Source: http://www.independent.co.uk/life-style/gadgets-and-tech/the-most-popular-paid-and-free-smartphoneapplications-2098308.html 67 © 2010, Portio Research. All Rights Reserved 105
    • Smartphone Futures 2011-2015 Google Android Market Google launched Android Market commercially in October 2008. It is an online software store for Android-based devices that can be accessed through an app called "Market" which is preinstalled on all Android-based smartphones. There were nearly 109,415 applications available for download in October 2010. 69 As of October 2010, free apps were available for distribution in 46 countries, and paid apps in 32 countries 70. Games are the most popular content from Android Market. At the end of October 2010, Android had the highest percentage of free apps – 57 percent. 71 The average price of a paid app in the US was USD 3.23 as of August 2010. Figure 64: Break-out of Available Applications by Type – Google Android Market (In Percent, October 2010) 8.7% 6.6% 10.8% 14.1% 38.3% 21.5% Entertainment Games Themes Tools Reference Others Source: Portio Research Ltd. Android Market provides separate lists of popular content for Games and Other Applications. This is shown in the following two tables. Table 31: Most Popular Paid and Free Applications, Google Android Market (The US, October 72 2010) Rank 1 2 3 4 5 Paid Applications Beautiful Widgets (News and Weather, Price USD 1.92) WeatherBug Elite (News and Weather, Price USD 1.99) DocumentsToGo Full Version Key (Productivity, Price USD 14.99) MyBackup Pro (Tools, Price USD 4.99) PicSay Pro Photo Editor (Multimedia, Price USD 3.85) Free Applications Pandora Radio (Category-Multimedia) Google Maps (Category-Travel) Advanced Task Killer (Productivity) Facebook for Android (Social) T-Mobile My Account (Tools) Source: Distimo, Portio Research Ltd. 69 Source: http://www.gomonews.com/global-Android-smartphone-shipment-volume-forecast-to-reach-3180-millionunits-in-2013-says-mic/, http://www.androlib.com/Android.category.applications-j.aspx 70 Source: http://Androidfeeder.com/ 71 Source: http://www.gizmodo.com.au/2010/10/iappalooza-mobile-app-stores-comparison-chart-october-2010/ 72 Source: http://www.independent.co.uk/life-style/gadgets-and-tech/the-most-popular-paid-and-free-smartphoneapplications-2098308.html 106 © 2010, Portio Research. All Rights Reserved Google launched Android Market commercially in October 2008. There were nearly 109,415 applications available for download in October 2010.
    • Smartphone Futures 2011-2015 Table 32: Most Popular Paid and Free Games, Google Android Market (The US, October 73 2010) Rank Paid Games Free Games 1 RoboDefense (Price USD 2.99) Solitaire 2 Armored Strike Online (Price USD 3.99) Jewels 3 JewelLust (Price USD 2.95) Paper Toss 4 GameBoid (Price USD 3.99) Toss It 5 Abduction! World Attack (Price USD 2.09) Sudoku Symbian Horizon Symbian Horizon acts as a facilitator and provides applications through other stores such as Nokia Ovi or through app developers themselves. The most popular app categories on Symbian Horizon include Tools, Utilities, Productivity and Social Networking Table 33: Most Popular Paid and Free Applications, Symbian Horizon (Worldwide, October 2010) Rank 1 2 3 4 5 Paid Applications Predator- The Duel 3D (Games, Price 74 USD 13.28 ) Quick Office Premier 6 (Business/ Productivity, Price USD 39.95) Farm Frenzy (Games, Price USD 75 1.11 ) Thread SMS (Business/ Productivity, Price USD 14.95) Journey Centre Earth (Games, Price USD 3.85) Free Applications Mobile Info (Utilities) Handy Shell (Games) Windows Live Messenger (Social Networking) Best Call Recorder (Utilities) Light Meter (Utilities) Source: Distimo, Portio Research Ltd. 73 Source: http://www.independent.co.uk/life-style/gadgets-and-tech/the-most-popular-paid-and-free-smartphoneapplications-2098308.html 74 Note: Conversion rate 1 USD = 0.752 Euros 75 Note: Conversion rate 1 USD = 44.93 INR (Indian rupees) © 2010, Portio Research. All Rights Reserved 107
    • Smartphone Futures 2011-2015 Windows Marketplace Microsoft launched its mobile application store ‘Windows Marketplace’ in October 2009, and the store is now available in 30 countries. Windows Marketplace offers credit card and operator billing payment options to users. Users are required to create ‘Windows Live IDs’ to download or buy apps. Windows Marketplace provides a ‘No Regrets’ option to users, which allows them to return the application if they do not like it – within 24 hours of purchase – and get their money refunded as per Windows Marketplace’s mobile refund policy. Figure 65: Break-out of Available Applications by Type – Windows Marketplace (In Percent, 76 October 2010) 8.3% 7.7% 14.6% 6.4% 31.3% 31.7% Games Tools Entertainment Lifestyle Reference Others Source: Portio Research Ltd. The table below provides the details of the most popular paid and free applications on Windows Marketplace during October 2010. Table 34: Most Popular Paid and Free Applications, Windows Marketplace (The US, October 77 2010) Rank 1 2 3 4 5 Paid Applications Meon (Games, Price USD 2.99) SPB Mobile Shell (Tools, Price USD 29.99) Touch Twit (Social Networks, Price USD 2.99) No Calls (Communication, Price USD 0.99) ReBoot (Tools, Price USD 0.99) Free Applications Microsoft MyPhone (Tools) AP Mobile (News and Weather) MeonLite (Games) Mobile Manager for NetFlix (Entertainment) WeatherBug (News and Weather) Source: Distimo, Portio Research Ltd. 76 Source: http://marketplace.windowsphone.com/ Source: http://www.independent.co.uk/life-style/gadgets-and-tech/the-most-popular-paid-and-free-smartphoneapplications-2098308.html 77 108 © 2010, Portio Research. All Rights Reserved
    • Smartphone Futures 2011-2015 Positioning of Applications Stores The table below depicts the applications portfolio of some major Application Stores. Table 35: Application Downloads for Major Application Stores Feature Apple iOS App Store Google Android Market BlackBerry App World Nokia Ovi Store Windows Marketplace Launch Date July 2008 October 2008 April 2009 May 2009 October 2009 Total Number of Applications (Worldwide, October 2010) 341,997 109,415 13,692 28,000 Percentage of Free Apps (The US, July 2010) 21% 59% 25% 26% 21% Average Price of Paid Apps (The US, July 2010) USD 4.31 USD 3.23 USD 6.68 USD 2.68 USD 5.72 Billing System iTunes Google CheckOut Credit Card, Paypal, Operator Billing Credit Card, Operator Billing Credit card, Operator Billing Return Policy None 24 hours No No 24 hours Developer Share of Revenues (In Percent) 70 70 70 60 Developer Fee USD 99 per annum USD 25 USD 200 USD 67 79 1,381 78 70 80 USD 99 per annum Source: Portio Research Ltd. 78 Source: http://marketplace.windowsphone.com/Default.aspx Source: http://www.mobile-ent.biz/news/38639/Nokias-Ovi-Store-now-doing-2m-downloads-a-day 80 Note: Developer fee is Euro 50. Conversion rate: 1 Euro= 1.337 USD 79 © 2010, Portio Research. All Rights Reserved 109
    • Smartphone Futures 2011-2015 The figure below depicts the break-out of the available applications and content into free-ofcharge and paid categories. Figure 66: Break-out of Available Mobile Applications by Free and Paid Application Type – The US (In Percent, July 2010) 100 Break-out (In Percent) 80 26.0 29.0 59.0 60 40 74.0 71.0 41.0 20 0 Apple App Store Paid Applications Google Android Market Nokia Ovi Store Free Applications Source: Portio Research Ltd. Key Developments • • • • The battle for store prominence between platform owners, operators and handset makers is swinging into gear, with HTC reportedly set to join the fray. HTC has reportedly been recruiting content editors for apps and e-books for its store. 81 Due to intense competition in the OS market and reduced funding from Board members, the Symbian platform is transforming from a “non-profit” organization to a “licensing body”; this means that Nokia will take on Symbian development in-house though it will be available to other OEMs. 82 Continuing with the trend of MNOs setting up their own app stores 83, Verizon announced the launch of VCAST App Store for Android. 84 According to reports, mobile app publishers are upbeat about the revenue forecasts for 2011. While Android is expected to drive the bulk of the revenues, Apple OS might still remain the platform of choice for app developers. 81 Source: http://www.mobile-ent.biz/news/39367/Coming-soon-an-HTC-app-store Source: http://www.mobile-ent.biz/news/39380/Major-SymbianNokia-announcement-expected-this-afternoon 83 Note: China Mobile teamed up with Symbian to run its own store (previous report) 84 Source: http://www.mobile-ent.biz/news/39354/Verizon-launching-V-CAST-Apps-store-for-Android-next-week 82 110 © 2010, Portio Research. All Rights Reserved
    • Smartphone Futures 2011-2015 Chapter 7 Summary and Conclusions © 2010, Portio Research. All Rights Reserved 111
    • Smartphone Futures 2011-2015 Summary and Conclusions The recessionary period has had little impact on the smartphone market, and smartphone shipments are now poised to grow at a healthy CAGR of 18.1 percent during the period 20102015. The main reasons associated with the growth include: • Rising disposable income of customers • Increase in the penetration rate of new technologies (3G and above) in the key markets of Europe, North America and Asia Pacific • Increasing number of smartphone vendors, which in turn results in a wider range of devices. Apart from the prominent vendors, the market has seen the emergence of a new breed of vendor (involving equipment manufacturers and regional players) • Android OS: The new OS has been highly successful with a growing number of vendors launching Android-based handsets The table below highlights the strengths of the top three smartphone vendors with the details of their product positioning strategies. Table 36: Strategies of the top smartphone vendors Vendor Market Positioning Wide range of handsets at various price points Nokia Major focus is low and mid price-range handsets that drive volumes Geography Focus Leading player in the markets of Asia Pacific and Europe "Apple" Brand image Apple Highly successful in the premium consumer segment Product positioned for the executive who is always "on the move" RIM Very successful in the enterprise segment Distribution Strategy Robust distribution channel for product portfolio Leading player in the North American region Distribution is mainly through Direct sales and App stores located across geographies One of the leading players in the North American region Tie-ups with multiple MNOs across geographies Source: Portio Research Ltd. Although market growth can be attributed to a combination of the above factors, the most prominent parameter has arguably been the rise of Android OS. The growth of Android has clearly benefitted key members in the Smartphone Value Chain including smartphone vendors, developers and end users. The table below summarizes some of the key weaknesses being faced by the top smartphone vendors. This is followed by a quick summary of how Android OS has successfully differentiated itself. 112 © 2010, Portio Research. All Rights Reserved Smartphone shipments are now poised to grow at a healthy CAGR of 18.1 percent during the period 2010-2015.
    • Smartphone Futures 2011-2015 Table 37: Key Weaknesses to Top Smartphone Vendors Smartphones Developer Community Nokia Ovi: Lack of Flagship model after N97 Nokia Insignificant presence in North American region Reduced developer revenue share (60%) Fewer applications (compared to competition) End users Handsets and OperatorsForced to stick to a particular operator/ handset vendor due to lack of choice Apple iOS: Apple Lack of product diversification Apple App Store: Lack of transparency in new application screening Subscribers may not prefer to download Applications shortlisted by an OS provider Stringent rules for developers Lack of Touch-screen handset portfolio RIM Low popularity in the consumer segment BlackBerry OS: Popularity restricted to the enterprise segment Security concerns in certain geographies Handsets and OperatorsForced to stick to a particular operator/ handset vendor due to lack of choice Source: Portio Research Ltd. Android OS has gained a competitive advantage by offering more customization and choice to the end customer. The points below summarize Android’s offerings to the smartphone vendors, developers and end users. • Smartphone Vendors o Wide range of product portfolio across vendors including HTC, Motorola, Samsung, Sony Ericsson, LG. More vendors are expected to release Android-based handsets in the future. o Flagship models across vendors (Droid for Motorola, XPeria for Sony Ericsson, Galaxy for Samsung) o Available across geographies depending on vendor presence • Developer Community o No restrictions (in terms of stringent filtering rules) in terms of submitting applications to the application store o Developer share of 70% in revenue (Nokia recently reduced this share to 60%) • End users o Wide range of Android-based products across vendors Positioning of Smartphone Vendors Vendor positioning is based on the following parameters: • • • Diversity in the product portfolio: A wide range of products at varying price points helps in offering greater choice to the customer Number of available smartphones (excluding discontinued phones): Customers might select a phone through a combination of factors including features (touchscreen, availability of key pad, camera, compatibility with 3G and above networks etc.) and OS. CAGR forecasts for the period 2010-2015 © 2010, Portio Research. All Rights Reserved 113 Android OS has gained a competitive advantage by offering more customization and choice to the end customer.
    • Smartphone Futures 2011-2015 Number of Available Smartphones (As of Nov 2010) Figure 67: Positioning of Smartphone Vendors 33.9 80 8.2 70 7.6 60 50 4.4 15.9 40 30 2.5 20 16.3 10 0 -10 0 5 10 15 20 25 30 35 CAGR (In Percent, 2010-2015F) Nokia RIM Apple HTC Motorola Samsung Sony Ericsson Source: Portio Research Ltd. F – Forecasted The next figure depicts the positioning of smartphone vendors on the basis of the above parameters. The size of the bubble in the figure denotes the estimated market share (by shipments) for the respective smartphone vendors during 2010; market share values are depicted above the bubbles. Samsung surpassed Nokia in terms of number of available smartphones. This is primarily attributed to Android OS. Of the 65 smartphones in Samsung portfolio, 20 are based on Android OS. The table below summarizes the Android and non-Android smartphones available in the market among the leading players, as of November 2010. Table 38: Total Number of Smartphones by Vendor Android-based Smartphones Non-Android Smartphones Total Nokia NA 64 64 RIM NA 29 29 Apple NA 2 2 HTC 15 40 55 Motorola 23 25 48 Samsung 20 45 65 Sony Ericsson 4 11 15 Total 62 216 278 Source: Portio Research Ltd., GSM Arena 114 © 2010, Portio Research. All Rights Reserved
    • Smartphone Futures 2011-2015 Positioning of Operating System Vendors OS vendors can be positioned according to their original equipment manufacturer (OEM) customers and expected growth rates during 2010-2015. The figure below depicts the positioning of OS providers according to their number of OEM customers in November 2010 and the CAGR forecasts for OS-enabled smartphone shipments during 2010-2015. Number of Available Smartphones (As of Nov 2010) Figure 68: Positioning of OS Vendors 25 4.4 20 33.9 15 15.9 10 5 16.3 8.2 0 0 5 10 15 20 25 30 35 40 -5 -10 CAGR (In Percent, 2010-2015F) Symbian Microsoft Apple iOS BlackBerry OS Google Android Source: Portio Research Ltd. F – Forecasted The size of the bubble in the figure denotes the estimated market share for the respective OS during 2010; market share values appear above the bubbles. Android OS registered the largest number of OEM tie-ups (20) among the OS providers. The increasing number of partnerships indicates the prominence of the OS in the market. Symbian currently has 11 tie-ups and these will decrease as Samsung and Sony Ericsson have announced their decision to discontinue their association with Symbian. Microsoft’s partnerships (6) might increase due to the launch of their flagship Windows 7 OS. Apple iPhone and BlackBerry operating systems are developed for internal consumption by Apple and RIM. 85 Key Observations There are some observations regarding developments in the smartphone market which merit discussion. Some of these developments are: • The growth of Android • Apple’s shift in distribution strategy and its impact • Declining dominance of Nokia and RIM • Increasing bandwidth requirements due to the surge in smartphone users • Resurgence of Motorola, Samsung and Sony Ericsson • Increasing prominence of application stores 85 Note: The number of major OEM customers is based on the customers mentioned on company websites. © 2010, Portio Research. All Rights Reserved 115
    • Smartphone Futures 2011-2015 Growth of Android As mentioned throughout this report, the emergence of Android OS has considerably changed the market dynamics. In summary: • The “open-source” nature of Android OS has proved to be a huge success among smartphone vendors, MNOs and Original Equipment Manufacturers (OEMs) • Android became the fourth largest OS (in 2010) within just two years of its launch. It is projected to have the largest OS market share by end-2015. • Symbian has been the biggest casualty since the arrival of Android, as OEMs are increasingly partnering with Android for new product launches • Android has partnered with 20 vendors (as of November 2010), the highest among OS providers. This number is expected to increase with more OEMs, ODMs and MNOs looking to link with Android • The rising number of vendor tie-ups has resulted in an increased choice of handsets for end users (in terms of price ranges, features) across vendors • The recent decision by Samsung and Sony Ericsson to use the Android platform is expected to further fuel sales of Android devices. • Android’s application store, Google Android Market, has the second highest number of available applications (after Apple’s AppStore). This is projected to grow with more developers teaming up with Android. Apple’s shift in Distribution Strategy and its Impact • • • • • • Apple started distributing iPhones on an “exclusivity” basis. The distribution strategy used to focus on tying up with just one MNO in a particular geography. Due to intense competition in the industry from RIM and Android-based devices, the focus has shifted towards multi-operator tie-ups. As part of this realigned distribution strategy, iPhone will be available with Verizon Wireless in the USA from January 2011. The shift in strategy for the American market is due to a combination of the following factors: o Launch of Windows7 OS by Microsoft o Revival of Motorola with the launch of Motorola Droid o Increasing popularity of Android devices from HTC and Samsung o Launch of BlackBerry Torch, the first touch screen device from BlackBerry This shows that Apple is making iPhones available to a wider audience before competitors make in-roads into its stronghold Impact of Shift o Verizon is the prominent BlackBerry carrier in the US. The availability of iPhone will further reduce the share of RIM in the North American market. o Verizon has been hugely successful with Motorola Droid. The availability of the iPhone might shift the customer preference towards iPhone and, at the same time, have a negative impact on Motorola’s sales. o Microsoft has partnered with AT&T and T-Mobile to promote Windows 7 phones. Microsoft needs to be more aggressive in their distribution strategy before iPhone becomes available on the Verizon network. o In 2010, Apple beat out RIM to become the second largest smartphone and OS vendor. Declining dominance of Nokia and RIM • Nokia’s market share of worldwide smartphone shipments continued to decline due to a lack of flagship products in the smartphone category 116 © 2010, Portio Research. All Rights Reserved Android became the fourth largest OS (in 2010) within just two years of its launch. It is projected to have the largest OS market share by end 2015.
    • Smartphone Futures 2011-2015 • Nokia has been unable to penetrate the North American market due to the increasing competition from Apple and RIM. In addition, the success of Android devices from Motorola and HTC has steadily diminished Nokia’s regional presence. • In the Asia Pacific market, traditionally a Nokia stronghold, the vendor has been losing market share to new entrants. The increasing number of Android-based phones in the region will pose a growing threat in the coming years. • The decline of RIM’s market share is attributed to a previous lack of a touchscreen device portfolio (Torch is the only device in this section), security threats in key geographies in Asia Pacific, and intense competition from the Apple iPhone. • The comparatively low number of applications in their apps stores is also hurting both Nokia and RIM Increasing bandwidth requirements due to the surge in smartphone users With the advent of new technologies (3G and above) in the market, the mobile industry is seeing high-speed networks being used to take advantage of a variety of non-voice services. Advanced data services are gaining consumer acceptance as numerous smartphones capable of providing rich user-experiences are being released. The growing demand for smartphones, and the availability of unlimited data use packages, has already resulted in sharp spikes in data traffic, to levels originally unplanned for. Deployed 3G networks may be unable to cope with increasing data traffic arising from such a surge in Internet use and other data-centric services like video downloads. As written previously, this may result in a capacity crunch in a couple of years – if not sooner – if MNOs do not deploy capable networks and network optimising solutions in the interim. Smartphone users expect high quality of service from MNOs, especially while using datacentric services like video streaming, e-mail, online gaming, and photo sharing. Development and network upgrades will thus be crucial to meet consumer expectations, and shortcomings in service levels will likely hamper smartphone uptake. To restate, for smartphone uptake to remain sustainable, network support will be vital in addition to smartphone vendors and operating system providers delivering rich userexperiences. Resurgence of Motorola, Samsung and Sony Ericsson The emergence of Android OS has benefitted major smartphone vendors including Motorola, Samsung and Sony Ericsson. The three players, who have been seeing declining smartphone market shares, have had a change in fortunes after shifting their focus towards Android. Droid from Motorola and Galaxy from Samsung became the best selling handsets in their portfolio. Sony Ericsson is hoping for similar success with the introduction of its Xperia range of handsets, and also plans to introduce a number of high-end handsets due to the higher ASPs they can command. Although the market shares of these players is relatively low compared to the top three, their smartphone sales are being driven by the increasing popularity of Android OS and the introduction of new handsets across geographies. Increasing prominence of App Stores Apart from smartphones, vendors are focusing on their application stores, to both bolster their relationship with customers and have a positive effect on revenues. Apple has been highly successful with its App Store due to its product range – including iPad, iPhone, iPod and Mac – and the ease at which apps can be downloaded. Although Nokia and RIM also started their own app stores, they were unable to compete with Apple in terms of the number of available applications. © 2010, Portio Research. All Rights Reserved 117
    • Smartphone Futures 2011-2015 With the increasing popularity of Android, the number of applications on their app store has risen steadily over the last year. Although Google Android Market is comparatively less popular than Apple App Store at present, the trend might very well change in the future. Comparison of Smartphone Vendors The following table provides a comparison of leading smartphone vendors based on several parameters. Table 39: Comparison of Smartphone Vendors based on Selected Parameters Parameters Nokia RIM Apple HTC 86 Motorola Sony Ericsson Samsung Range of devices Popularity in consumer segment Popularity in enterprise segment Brand strength MNO relationships Multi-platform availability Popularity of OS Availability of applications Worldwide availability Total Market Impact Score (Out of 36) 26 24 26 23 19 21 22 Source: Portio Research Ltd. Nokia and Apple emerge as the top players among smartphone vendors, closely followed by RIM and HTC. The increasing popularity of HTC is attributed to the success of Android OS in the market. 86 Note: Total Market Impact Score for a smartphone vendor has been calculated by summing up the scores indicated by the number of orange-colored quarters for all parameters. For example, Apple scores one in the ‘range of devices’ parameter and four in the ‘popularity in consumer segment’ parameter. 118 © 2010, Portio Research. All Rights Reserved
    • Smartphone Futures 2011-2015 Market conditions have changed rapidly over the last year (2009-2010) and are expected to alter further with the availability of upgraded versions of Android, the market entry of new smartphone vendors, new product launches from vendors, and the expected launch of “MeeGo” from Nokia in Q1 2011. With increasing obsolescence among new technologies, members of the smartphone value chain need to evolve themselves over the coming years to keep up with the pace of market evolution. © 2010, Portio Research. All Rights Reserved 119
    • Smartphone Futures 2011-2015 Chapter 8 Appendices 120 © 2010, Portio Research. All Rights Reserved
    • Smartphone Futures 2011-2015 Appendices This market study has been written in a way that avoids excessive use of market acronyms (except where appropriate) and industry technical talk, as we have tried to keep the text open to all readers, not just those with in-depth knowledge of the world’s mobile markets. Because this study covers all geographical regions and many emerging markets, a great deal of the data contained within this study will potentially be of interest to investors, financial analysts, consultants, venture capitalists and others all around the world who do not work within the mobile industry itself every day of their lives. To many of these people, some of the industry technical talk and acronyms may be confusing, so we have attempted to write this study in a self explanatory way that assumes little prior knowledge, but in doing this, some of the speech chosen may seem somewhat "obvious" to our more knowledgeable readers. We hope this offers the best possible solution to everyone, and we hope this does not cause any confusion or inconvenience. Where we have used technical terms or acronyms, we offer an explanation of those expressions below. © 2010, Portio Research. All Rights Reserved 121
    • Smartphone Futures 2011-2015 Glossary 2G or Second Generation Packet Data Networks The second-generation packet networks recently introduced consist of combined voice and packet data networks based on global standards. 2.5G 2.5G describes the state of wireless technology and capability usually associated with General Packet Radio Services (GPRS) - that is, between the second and third generations of wireless technology. The second generation or 2G-level of wireless is usually identified as Global System for Mobile (GSM) service and the third generation or 3G-level is usually identified as Universal Mobile Telecommunication Service (UMTS). Each generation provides a higher data rate and additional capabilities. There is also a fourth generation (4G) of technology in the planning and research stages. 2.5G protocols extend 2G systems to provide additional features such as packet-switched connection (GPRS) and enhanced data rates (HSCSD, EDGE). 3G or third generation 3G is an International Telecommunication Union (ITU) specification for the third generation (analog cellular was the first generation and digital PCS 87 was the second generation) of mobile communication technology. Third generation Wireless Wide Area Networks (WWAN) communication systems are characterised by high-speed data rates (144 Kbps 88 to 2+ Mbps 89) suitable for multimedia content. 3G technologies typically are packet-switched and use Code Division Multiple Access (CDMA) technology to communicate. Examples of 3G include EDGE 90, 1xRTT, HDR and W-CDMA. 91 3G protocols in mobile telephony support higher data transmission rates, measured in Mbps, intended for applications other than voice. 3G support broadband and bandwidth applications, such as full-motion video, video conferencing and Internet access. 3G as a Percentage 3G as a percentage refers to 3G subscribers as a percentage of total active mobile subscribers in a country. This represents the proportion of 3G subscribers in the total mobile subscriber base of a country. 3G Penetration 3G penetration refers to 3G subscribers as a percentage of total population of the country. This is similar to the term ‘mobile penetration’, which means total number of active mobile subscribers in a country as a percentage of total population of the country. 4G or fourth generation 4G or fourth generation WWAN communication systems are characterised by high-speed data rates at 20+ Mbps, suitable for high-resolution movies and television. The initial deployment of 4G communication systems is expected in 2006-2010. The proposed features of these systems include 100 Mbps speed, location sensing and self-tailoring to user needs. A2P Application-to-Peer: In the mobile messaging world A2P messages are defined as messages generated by an application and sent to subscribers, for example, the advertisements sent through SMS/MMS on subscribers’ handsets. 87 Personal Communications Service (PCS) Kilobits per second (Kbps) 89 Megabits per second (Mbps) 90 Enhanced Data for Global Evolution (EDGE) 91 Wideband Code Division Multiple Access (W-CDMA) 88 122 © 2010, Portio Research. All Rights Reserved
    • Smartphone Futures 2011-2015 AAC Advance Audio Coding: It is an advanced audio compression algorithm used for downloading music files, streaming video, audio and satellite-radio applications. Application Programming Interface (API) It is an interface implemented by a software program to communicate with other software. Operating systems and applications use API to determine the way to call or send requests to other software. Augmented Reality (AR) Augmented reality is the superimposition of virtual content over the real time environment. Virtual content includes digital graphics, audio and other sense enhancements, which are augmented to the real world by an AR device. Average Revenue per User (ARPU) Measures the average monthly revenue generated for each customer unit, such as a handset or pager that an operator has in operation. Backhaul It refers to the process of transmitting voice and data traffic from a remote site to a central site. BREW Binary Runtime Environment for Wireless: It is an application development platform developed by Qualcomm. It enables wireless users to download and run applications, such as enhanced e-mail, location positioning, games, etc., to BREW-enabled handset. BREW was first introduced and developed for CDMA handsets, but it now supports GSM/GPRS and UMTS handsets as well. BTS Base Transceiver Station: It is the equipment that facilitates the wireless communication between user equipment such as mobile handsets, computers etc., and the mobile network. Broadcast Technologies for Mobile TV Some of the broadcast technologies for mobile TV worldwide are: DVB-H 92 (Digital Video Broadcast – Handheld): DVB-H technology allows simultaneous broadcast of television, video and radio channels on mobile, and helps operators to preserve network bandwidth for other data and voice services. It has been accepted as the standard by the European Telecommunications Standards Institute (ETSI). ISDB-T (Integrated Services Digital Broadcast – Terrestrial): It is the transmission standard that has been developed in Japan to help the radio and television stations support digital content. DMB (Digital Media Broadcast): It is a transmission standard, which transmits video feed via satellite (S-DMB) or terrestrial (T-DMB) mode. The standard is currently deployed in Korea and is being increasingly used in other parts of Asia as well as Europe. MBMS (Multimedia Broadcast/Multicast Service): This standard allows the transmission of multimedia content over the UMTS and GSM network. 92 Source: http://www.strategiy.com/inews.asp?id=20041127000355 © 2010, Portio Research. All Rights Reserved 123
    • Smartphone Futures 2011-2015 BWA Broadband Wireless Access: It is a form of fixed wireless access system. Byte Byte is a collection of bits in which each bit can take a value of either 1 or 0. Kbps, Mbps and Gbps denote the number of bytes transferred per second; Kbps, Mbps and Gbps translate to 103, 106 and 109 bytes per second respectively. CAPEX Capital Expenditure: It refers to the cost of developing a product or system. CDMA Code Division Multiple Access: In a CDMA system, each voice circuit is labelled with a unique code and transmitted on a single channel simultaneously along with many other coded voice circuits. The receiver uses the same code to recover the signal from the noise. CDMA2000 1x CDMA2000 1x: This is regarded as the first phase of CDMA2000 technology used for providing voice and data services over mobile networks. Data speeds of 307kbps are using a single channel while with two channels speeds of 614kbps are possible. Churn Rate It is the rate at which the subscribers cancel their subscription with the existing operator and sign up with another operator. Cloud Computing Cloud computing is a technology involved in delivering hosted services on the Internet. It is based on client-server architecture, which includes user device with applications (such as Web browsers) to access the back end (various components, such as data storage devices, servers, etc.). The back end components perform specific tasks and interact with each other through standard application programming interfaces. Dongle Dongle is a portable device which is connected to a laptop or desktop and resembles a USB flash drive. It is widely used as a wireless broadband adapter. DRM Digital Rights Management: It refers to a set of technologies used for the administration of digital content. It authorises the nature and restricts the frequency of the usage based on the administrative policy settings. It sustains the revenue of the mobile network operator by regulating the usage of content at end user. DSL Digital Subscriber Loop: It is a technology that provides digital data transmission over the copper lines of a PSTN network. Dumb Pipes Dumb pipe refers to a mobile operator’s wireless network being used only to transfer data/bytes between the Internet and the user’s device. For an operator being a dumb pipe, there is a potential loss of revenue for the operator, since the operator is generating revenue only for the network data access and is not receiving any significant share in data/content service revenue. EDGE Enhanced Data rates for Global Evolution: An enhanced modulation technique designed to increase network capacity and data rates in GSM networks. EDGE should provide data 124 © 2010, Portio Research. All Rights Reserved
    • Smartphone Futures 2011-2015 rates up to 384 Kbps. EDGE will let operators without a 3G license compete with 3G networks offering similar data services. EV-DO Evolution Data Only, Evolution Data Optimised: It is a wireless radio broadband data protocol being adopted by many CDMA operators. It is being used as a part of CDMA2000 networks in Japan, Korea, the United States and Canada. It provides better data speeds in comparison to GSM technologies such as GPRS and EDGE. FDMA Frequency Division Multiple Access is a channel access protocol that allows a user dedicated allocation to single or multiple frequency bands. Feature Phone Feature phones are handsets with browsers (primarily based on embedded J2ME and BREW platforms) to enable access to web based e-mail, and sometimes have embedded applications for social networking, instant messaging (IM) and mobile banking. These phones often come with high resolution cameras, GPS and innovative multimedia features. The major differentiating factor between a smartphone and a feature phone is that feature phones do not have an open Operating System (OS). The OS present in smartphones, through its Application Programming Interface (API), enables subscribers to install and remove third-party applications. Smartphones are better integrated with the handset's User Interface than Java applications. Freemium Freemium is a strategy adopted by application stores in which trial or lite versions of premium apps are offered for free or for a small charge; and users have an option to upgrade the apps with additional features by paying additional charges. Gbps Please see “Byte”. GPRS General Packet Radio Service (GPRS) is a packet-based standard for mobile communication, which runs at speeds up to 115 kilobits per second, compared with GSM systems' 9.6 kilobits per second. GPRS supports a wide range of bandwidths and makes efficient use of limited bandwidth. It is particularly suited for sending and receiving small bursts of data, such as e-mail and web browsing, as well as large volumes of data. Applications for GPRS may include any of the following: chat, text and visual information, still images, moving images, web browsing, document sharing/collaborative working, audio, job dispatch, corporate e-mail, Internet e-mail, vehicle positioning, remote Local Area Network (LAN) access, file transfer or home automation. GSM Global System for Mobile communications, the most widely used digital mobile phone system and the mobile telephone standard in Europe. It was originally defined as a panEuropean open standard for a digital cellular telephone network to support voice, data, text messaging and cross-border roaming. GSM is now one of the world's main 2G digital wireless standards. GSM is present in more than 160 countries and according to the GSM Association, accounts for approximately 70 percent of the total digital cellular wireless market. GSM is a time division multiplex (TDM) system. Implemented on 800, 900, 1800 and 1900 MHz frequency bands. © 2010, Portio Research. All Rights Reserved 125
    • Smartphone Futures 2011-2015 GUI Graphical User Interface (GUI) is the front-end interface and navigation design of an application. This includes standard formats for representing text and graphics. GUIs have become the standard ways for interaction between users and digital devices. HARQ Hybrid Automatic Repeat Request is a process of ensuring data transmission even in poor signal conditions with an adverse effect of lowering the throughput in better signal conditions. It does so by error-correction in addition to error detection in the transmitting bits. HSPA High Speed Packet Access comprises two mobile protocols: High Speed Downlink Packet Access (HSDPA) and High Speed Uplink Packet Access (HSUPA). These protocols enhance the performance of WCDMA protocols. HTML Hyper Text Mark-up Language: It is a syntax based language used for designing web pages. The content of HTML, written in standard syntax, when opened in a web browser takes the form of Web page. The nascent version of HTML was used with easy syntax rules in comparison to existing HTML and MHTML versions of it. In recent times, the official standards of World Wide Web recommend Web developers to use XHTML 1.1, XHTML 1.0 and HTML 4.01 versions. i-mode i-mode is a proprietary packet-based information service for mobile handsets. It delivers information (such as mobile banking, and train timetable) to handsets and enables exchange of e-mail from mobile handsets on the PDC-P network. Launched in 1999 by NTT DOCOMO, i-mode is very popular in Japan (especially for e-mail and transfer of icons). IMPS IMPS (Instant Messaging and Presence Service) is an instant messaging system designed for mobile environments. Presence refers to the availability of a user for communication. IMS IMS IP Multimedia Subsystem is an extension of the GSM / 3GPP GPRS core Network. It uses SIP (Session Initiation Protocol) to set up, maintain and terminate packet-switched voice and multimedia sessions. Interoperability This is defined as the ability of a network to operate with other networks, such as two systems based on different protocols or technologies. In-app Payment In-app payment is the payment made by mobile user to get privileged features, services or digital goods while using mobile apps. The privileged feature may be moving from a free or lite version of an app to the full version. Instant Messaging (IM) Instant Messaging is an Internet-based service that alerts users when their friends or colleagues are online and allows them to communicate with each other in real-time through private online chat areas. With instant messaging, users create a list of other users with whom they want to communicate. When a user from their list is online, the service alerts them and enables an immediate contact with the other user. While instant messaging has primarily been a proprietary service offered by Internet service providers such as AOL and MSN, businesses are starting to employ instant messaging to increase employee efficiency and make expertise more readily available to employees. 126 © 2010, Portio Research. All Rights Reserved
    • Smartphone Futures 2011-2015 Integrated Mobile Broadcast (IMB) It is a 3GPP Release 8 Standard that empowers MNOs to offer Multimedia Broadcast Multicast Services in a spectrally efficient manner in the 3G TDD bands. It is deployed existing 3G FDD unicast technology. Intranet The intranet is a private network inside a company or an organisation, and uses software similar to that used on the Internet. Companies use intranets to manage projects, provide employee information, distribute data and information, etc. J2ME Java2, Micro edition: The Micro Edition of the Java 2 Platform provides an application environment that specifically addresses the needs of commodities in the vast and rapidly growing consumer and embedded space, including mobile handsets, pagers, personal digital assistants, set-top boxes, and vehicle telematics systems. Java A simple platform-independent object-oriented programming language used for writing applets that are downloaded from the World Wide Web by a client and run on the client's machine. Kbps Please see “Byte”. KPI Key Performance Indicator (KPI) is a term used to indicate the key indicators to measure the business and operational performance of the companies in order to evaluate success and competitive position in the market. In the case of mobile companies, we use commonly used KPIs, such as Subscriber Addition, Market Share, ARPU, Churn Rate, etc. In addition, Revenue, Operating Profit and Number of Employees are other KPIs generally used to benchmark different companies. LTE Long-Term Evolution (LTE) is the standard being developed by 3GPP to achieve download rates of 100Mbps, and upload rates of 50Mbps for every 20MHz of spectrum and is termed as a 4G standard. LTE has support for bandwidths ranging from 1.25MHz to 20MHz. LTE Commitments LTE commitments cover announcements from service providers about conducting trials and deployments for LTE networks. LTE Deployments LTE deployments refer to the successful launch of LTE services in a market by a service provider. LTE Engagements LTE engagements refer to the collaborations between service providers and infrastructure vendors to conduct LTE trials and deployments. An LTE trial or deployment may consist of more than one engagement. For example, TeliaSonera selected Ericsson and Nokia Siemens Networks for its LTE roll-out in Norway. In this case, one LTE deployment accounted for two LTE engagements. LTE Subscriber Base as a Percentage of Total Mobile Subscribers LTE subscriber base includes the subscribers using LTE services through dongles and handsets. LTE subscriber base as a percentage of total mobile subscribers refers to the percentage of mobile subscribers who use LTE services. © 2010, Portio Research. All Rights Reserved 127
    • Smartphone Futures 2011-2015 M2M Machine-to-Machine: M2M generally means the communication between machines. However, in the mobile world, it is sometimes defined as Mobile-to-Mobile, which basically refers to communication that involves only mobiles and not landlines. MAN Metropolitan Area Network is a computer network that normally encompasses a city or a big premise. It is formed by connecting several local area networks. Mbps Please see “Byte”. MiFi MiFi is a collection of wireless routers that are used as mobile Wi-Fi hotspots. The technology is developed by Novatel Wireless. MIMO Multiple-Input and Multiple-Output refers to the use of more than one antenna at the transmitter and receiver end to enhance the communication process. Mobile Broadband Users as a Percentage A mobile broadband user as a percentage refers to mobile broadband users as a percentage of total active mobile subscribers in a country. This represents the proportion of mobile broadband users in the total mobile subscriber base of a country. MNO Mobile Network Operator. MNO market penetration It is the mobile subscriber base of an MNO expressed as a percentage of total population of the country of operation. Mobile penetration It is the mobile subscriber base in a country expressed as a percentage of its total population. Modem A modem is a device which modulates and demodulates analogue and digital signals for the transmission of signals over different carriers. MVNO Mobile Virtual Network Operator: Term used for a mobile operator who does not own its own spectrum and usually does not have its own network infrastructure. Instead, MVNOs have business arrangements with traditional mobile operators to buy minutes of use (MOU) for sale to their own customers. Native Apps Native apps are mobile applications developed specifically to run on a particular operating system or device. Near Field Communication Near Field Communication (NFC) is a wireless communication technology which uses shortrange high frequency to enable the exchange of data between devices in proximity with each other. The distance between the communicating devices has to be less than 10 centimetres. NFC-capable devices can communicate with smartcard readers as well as other NFC-capable devices. 128 © 2010, Portio Research. All Rights Reserved
    • Smartphone Futures 2011-2015 Node - B It is a term used in Universal Mobile Telecommunications System (UMTS) to refer to the Base Transceiver Station (BTS). ODM An original design manufacturer (ODM) is a firm involved in designing and manufacturing a product according to specifications provided by another firm. The products are sold under the brand of the firm which gives the manufacturing contract to the ODM. OEM An original equipment manufacturer (OEM) is a firm which acquires a product (or a component) for reuse or incorporation into the products branded under its name. OFDMA Orthogonal Frequency Division Multiple Access is an advancement of Orthogonal Frequency Division Multiplexing to support mobile networks with more flexibility. Subsets of the subcarriers are assigned to individual users to facilitate multiple access. OMA-IMPS Open Mobile Alliance-Instant Messaging and Presence Service: It is an open mobile alliance enabler for instant messaging and presence. The first cut of this specification was developed by the Wireless Village consortium. OPEX Operating Expenditure: It refers to the ongoing costs for running or operating a product or system. OPhone OPhone is a mobile operating system developed by China Mobile. It runs on Linux kernel and is based on Google Android’s Open Mobile System (OMS) operating system. Over-the-Top Services Over-the-top services refer to those services which are available to users over mobile networks without MNOs being involved in planning, provisioning and selling them. Packet Data Packet data is a method of transmitting information in small packets each containing a certain amount of the information. Packet data networks allow transmission of high-speed data to and from devices connected to the network. Packet Data is similar to dial-up Internet access available in homes or in businesses with cable modems, ADSL 93 lines, etc. P2P Peer-to-Peer: In the mobile messaging world, P2P messages are defined as messages exchanged between subscribers. These messages originate from and terminate to mobile subscribers’ handsets. PDA Personal Digital Assistant: A portable computing device capable of transmitting data. This device makes possible services such as paging, data messaging, electronic mail, computing, facsimile, date book and other information handling capabilities. PIM Personal Information Manager: Also known as a "contact manager," is a form of software that logs personal and business information, such as contacts, appointments, lists, notes, occasions, etc. 93 Asymmetric Digital Subscriber Line (ADSL) © 2010, Portio Research. All Rights Reserved 129
    • Smartphone Futures 2011-2015 QoS QoS stands for quality of service. RAN Radio Access Network: It is a component that exists between the mobile handset and the core network. It performs the radio functionality of the network and provides connection to the core network. RFID Radio frequency identification (RFID) denotes a system employed to convey a unique serial number using radio waves. It does not require contact or line of sight for communication. An example of the deployment of this technology is in electronic toll collection using RFID tags. SC-FDMA Single-carrier frequency-division multiple access (SC-FDMA) facilitates multiple access schemes and is used for assigning multiple users to a shared communication resource. While in OFDMA, subsets of the subcarriers are assigned to individual users to assist multiple access schemes, SC-FDMA enables a single-carrier transmission scheme. SDK Software Development Kit is a set of tools used for the development of an application for a software package. Service Revenue Service revenues are the revenues earned by MNOs through the provision of services only, i.e. revenues after deducting revenues earned from sales of equipment/products. SIM card It is a smart card that gives GSM handset its user identity. The card is inserted into a GSM/TDMA or GSM-only mobile handset containing subscriber-related data. The card contains 18 digits code for GSM markets and 20 digits code for TDMA markets. SIM Toolkit Subscriber Identity Module Application Toolkit: It is used by network operators to provide a user friendly interface on a subscribers’ handset to access value-added services provided by them. These applications also provide a mechanism for storing and using any service specific parameters. These applications are built within a SIM card by mobile network operators. SIMPLE SIMPLE (Session Initiation Protocol for Instant Messaging and Presence Leveraging Extensions) is an open standard instant messaging (IM) protocol. SIP Session Initiation Protocol or SIP is a standard multimedia and telephony protocol for initiating an interactive user session over mobile networks. The services under SIP may include call forwarding, number delivery, authentication and other telecoms applications. Smartphone A smartphone is a mobile handset which runs on operating system (OS) software and offers some of the capabilities of a PC. It provides a standardised interface and platform for application developers and is enabled with advanced features, such as e-mail, Internet and an e-book reader. Some of the other features expected from a smartphone include built-in full keyboard/external USB keyboard, powerful microprocessors, memory, built-in modem and large screens. The major differentiating factor between a smartphone and a feature phone is that an open Operating System (OS) is present in a smartphone. The OS, through its Application Programming Interface (API), enables subscribers to install and remove third- 130 © 2010, Portio Research. All Rights Reserved
    • Smartphone Futures 2011-2015 party applications. Smartphones are better integrated with the handset's User Interface than Java applications. SMS TV This is defined as the use of SMS for variety of applications, such as voting, teletext chat for TV programmes. SMSC Short Message Service Centre (SMSC) provides the routing of all SMS or text messages in any mobile network. Similar to e-mail server, the SMSC handles large volumes of messages sent between two mobile handsets or a mobile handset and a software application. Spectrum Allocation The use of radio frequency electromagnetic spectrum in a country is regulated by government bodies who then allocate spectrum to telecom companies. The license for using a particular spectrum is typically awarded following a bidding process. There are certain guidelines for using the allocated spectrum which service providers must adhere to — including a minimum quality of service, and roll-out timelines for the services for which the license has been issued. SS7 SS7 is a global standard for telecommunications defined by ITU Telecommunication Standardisation Sector (ITU-T). The standard defines the procedures and protocol by which network elements in the public switched telephone network (PSTN) exchange information over a digital signalling network to effect mobile (cellular) and wire-line call setup, routing and control. TDD Time Division Multiplex: This is a scheme for allowing simultaneous transmission and receiving of data at the same frequency, but with the different time slots allocated to them. TDMA Time Division Multiple Access: A TDMA channel is a single FDMA channel divided up in time into multiple time slots. TDMA system is able to transmit multiple voice circuits per channel. Three users can take it in turn to share one radio channel. The channels can vary in bandwidth and depending on the type of system, the time slots can transmit all or part of a voice circuit. Each user's speech is stored, compressed and transmitted as a quick packet, using controlled time slots to distinguish them-hence the phrase 'time division'. It uses 30 KHz channels and a vocoder rate of 8 Kbits/sec. At the receiver, the packet is decompressed. TD-SCDMA Time Division Synchronous Code Division Multiple Access: It is an air interface used in UMTS mobile telecommunications networks. It has been deployed in China to replace WCDMA technology. Thin Client Thin Client refers to a client computer or client software in client-server architecture networks. The primary purpose of Thin Client is to convey input and output between the user and the remote server. UMTS Universal Mobile Telecommunications System: This is the future transmission network for third generation mobile telephones, as defined by the International Telecommunications Union (ITU). In time, UMTS could reach transmission capacities of 2 Mbits/sec. (compared to 9.6 Kbits/sec. for GSM). Initially UMTS will offer rates of 144 to 384 Kbits/sec. This © 2010, Portio Research. All Rights Reserved 131
    • Smartphone Futures 2011-2015 standard will make the development of new multimedia services having very wide bands and new uses, notably in the transmission of video, images and sound possible. UMTS FDD Universal Mobile Telecommunication System (UMTS) Frequency Division Duplex (FDD): It is designed to generate typical data transfer rates of up to 384 Kbps and is suitable for wide area coverage due to potentially high reach. UMTS TDD Universal Mobile Telecommunication System (UMTS) Time-Division-Depleting (TDD): UMTS TDD Mobile Broadband technology is a packet data implementation of the international 3GPP UMTS standard and is designed to work in a single unpaired frequency band. It is designed to generate typical data transfer rates of up to 2 Mbps. USB Universal Serial Bus is a specification used to initiate data transfer between devices and a host controller. USSD Unstructured Supplementary Service Data (USSD) is a standard for transmitting information over GSM networks. It is primarily used to access the information on prepaid balances and similar details. UTRA-FDD Universal terrestrial radio access–frequency division duplex (FDD) refers to paired frequencies in which the transmitter and receiver operate simultaneously but at different frequencies UTRA-TDD Time division duplex (TDD) refers to unpaired frequency which is shared between uplink and downlink data rates VAS Mobile operators offer various services which are not part of the basic voice offer. These services are availed off separately by the mobile subscribers. It includes services such as SMS, MMS, mobile e-mail, mobile games, mobile music etc. These also include services such as WAP, voicemail, call diversion, etc. Vertical Devices Vertical devices are smartphones optimised to run mobile enterprise applications and are particularly useful for a mobile work fleet. These devices are designed to provide highbandwidth data collection and enable employees to access and update enterprise databases in a real-time environment. Aside from powerful processors, vertical devices are often enabled with capabilities such as a bar code scanner, digital camera, and two-way radio. WAP Wireless Advance Protocol: WAP is a specification for a set of communication protocols to standardise the way mobile devices, such as handsets and radio transceivers, can be used for Internet access. The WAP standard is based on Internet standards (HTML, XML and TCP/IP). It consists of a Wireless Markup Language (WML) specification, a WMLScript specification, and a Wireless Telephony Application Interface (WTAI) specification. The WAP protocol is the leading standard for information services on wireless terminals such as digital handsets. Some examples of WAP for accessing information include the following: checking train timings, purchasing tickets, flight check-in, viewing traffic information, checking weather 132 © 2010, Portio Research. All Rights Reserved
    • Smartphone Futures 2011-2015 conditions, looking up stock values, looking up phone numbers, looking up addresses or looking up sport results, and there are countless more. W-CDMA Wideband Code Division Multiple Access: The third generation standard offered to the International Telecommunication Union by GSM proponents. This is a 3G technology that increases data transmission rates in GSM systems by using CDMA instead of TDMA. W-CDMA has become the Direct Sequence mode in the ITU's 3G specification which includes the 1x Multi-Carrier mode (1x MC) and 3x Multi-Carrier mode (3x MC). 1x MC (formerly known as cdma2000) and 3x MC comprise the 3G upgrade paths for operators already using CDMA. WiBro Wireless Broadband: The technology was formulated by South Korean telecom industry as an equivalent to mobile WiMAX international standard. Wi-Fi Wireless Fidelity: It is used to provide wireless local area network through enhanced interoperability of the network. Services such as Internet, VoIP phone access, and gaming, etc., can be provided using Wi-Fi. WiMAX Worldwide Interoperability for Microwave Access: It is a telecommunication technology used for wireless data transfer over long distances through point-to-point links as well as mobile cellular type access. It is based on standards that are useful in wireless broadband access. Wireless MAN Wireless Metropolitan Area Network: The technology is used to provide wireless network over a larger area as compared to local area network. WLL Wireless Local Loop: It refers to the wireless devices that are situated in fixed locations. The signal transmissions occur through the air and it provides connectivity to the users in remote and isolated areas without the need for laying new cables. © 2010, Portio Research. All Rights Reserved 133
    • Smartphone Futures 2011-2015 Portio Research Classifications Geographical Regions: There is sometimes a difference in the way research firms classify the major geographical territories. At Portio Research, we follow 'obvious' geographical lines, but for the record, here are the regional definitions we follow, unless otherwise stated in the report: Western Europe: Standard classification includes Iceland and various islands Central and Eastern Europe: Includes standard list of Central and Eastern European countries, and the Baltic states, Balkans, Russia, Greece and Turkey Asia Pacific: Includes Australasia, the Indian Sub-Continent, Pakistan, Afghanistan, Sri Lanka, Maldives and the Former Soviet Union Central Asian republics North America: Standard classification, including Hawaii and islands to the North Latin America: Includes all South and Central American countries including Mexico, The Caribbean and The West Indies Middle East: Includes Israel and all Middle Eastern countries East of Egypt, South of Turkey and West of Afghanistan Africa: Standard classification includes territories in Western Indian Ocean Mobile Subscribers Generally, we count active SIMs, and we consider active as being used within 3 months, but, of course there is some room for variance, depending on what figures operators themselves publish or report to us when we interview them. When running spot-checks on operator numbers, we are governed by the figures they give us, and as we are all aware, many individuals and companies around the world count their subscribers/subscriptions by a number of different criteria. We refer to "total subscribers" for a network/country or globally, as a count of the total number of active subscriptions those networks have, and as such this can cause a slight distortion of any country-penetration rate. Currency and Monetary Values All monetary values quoted in this report are in US Dollars as the most widely recognised benchmark internationally. The currency conversion has been done on the year average basis. Whilst researching global mobile markets, we use http://www.oanda.com/ for all currency conversion calculations. 134 © 2010, Portio Research. All Rights Reserved
    • Smartphone Futures 2011-2015 Companies Mentioned in this Report Company Website Acer www.acer.com Adobe www.adobe.com America Movil www.americamovil.com Android www.android.com Apple www.apple.com AT&T www.att.com Baidu www.baidu.com Bell South www.bellsouth.com BlackBerry www.blackberry.com Boost Mobile www.boostmobile.com Bouygues Telecom www.bouyguestelecom.fr Dell www.dell.com Deutsche Telekom www.telekom.com EA Mobile www.eamobile.com Facebook www.facebook.com Fido Mobile www.fido.ca Fujitsu www.fujitsu.com Giesecke & Devrient www.gi-de.com Google www.google.com HP www.hp.com HTC www.htc.com Huawei www.huawei.com IBM www.ibm.com Intuit www.intuit.com Kobo www.kobobooks.com KTF Korea www.kt.com Kyocera global.kyocera.com © 2010, Portio Research. All Rights Reserved 135
    • Smartphone Futures 2011-2015 Company Website LG Telecom www.lgtelecom.com Linux www.linux.org Meteor www.meteor.ie Microsoft www.microsoft.com Mitsubishi www.mitsubishi-telecom.com Mobitel www.mobitel.si Monotype Imaging Holdings www.monotypeimaging.com Motorola www.motorola.com Movistar www.movistar.com Nitobi www.nitobi.com Nokia www.nokia.com NSN www.nokiasiemensnetworks.com NTT Docomo www.nttdocomo.com O2 www.o2.co.uk Optus www.optus.com.au Orange www.orange.co.uk Palm www.palm.com Pearson www.pearson.com PlayMobil Psion www.psionteklogix.com Qualcomm www.qualcomm.com Renesas Electronics www.renesas.eu Reuters www.reuters.com RIM www.rim.com Rogers Communications www.rogers.com Samsung www.samsung.com SAP www.sap.com Sendo 136 www.playmobilusa.com www.sendosmartphones.com © 2010, Portio Research. All Rights Reserved
    • Smartphone Futures 2011-2015 Company Website SFR www.sfr.fr Sharp www.sharp.co.jp Singtel www.singtel.com SK Telecom www.sktelecom.com Smaato www.smaato.com Softbank www.softbank.co.jp Sony Ericsson www.sonyericsson.com Sprint www.sprint.com Swisscom en.swisscom.ch/residential Symbian www.symbian.org Telecom Italia www.telecomitalia.com Telkomsel www.telkomsel.com Telstra www.telstra.com.au Telus Mobility www.telus.com Three www.three.co.uk T-Mobile www.t-mobile.com TurkCell www.turkcell.com.tr US Cellular www.uscellular.com Verizon Wireless www.verizonwireless.com Videotron www.videotron.com Vodafone www.vodafone.co.uk Wind Mobile www.windmobile.ca Yahoo www.yahoo.com ZTE www.ZTE.com.cn © 2010, Portio Research. All Rights Reserved 137
    • Smartphone Futures 2011-2015 About the Authors Purnadeep Chakraborty Purnadeep Chakraborty is working as a Manager with Portio Research and Evalueserve. Over the past six years, he has worked on various projects in the telecom domain. He graduated from Gauhati University, Guwahati, India. He has been working with Portio Research and Evalueserve since December 2004. Sudhir Kumar Sudhir Kumar is working as a Senior Business Analyst with Portio Research and Evalueserve. He graduated from NIT Jalandhar, India. He has been working with Portio Research and Evalueserve since April 2010. Radhika Goel Radhika Goel is working as a Senior Business Analyst with Portio Research and Evalueserve. She post-graduated in Business Management from IMI, India. She has been working with Portio Research and Evalueserve since April 2010. Venu Gopal Venu Gopal is working as a Senior Business Analyst with Portio Research and Evalueserve. He graduated from ICTM, India. He has been working with Portio Research and Evalueserve since September 2010. John White John White has been Editor and contributing author for this report. John is Business Development Director for Portio Research and has over 18 years experience in the technical publishing industry. Working in the IT sector previously and in the telecoms industry for the last 11 years, John has extensive experience in the mobile sector. 138 © 2010, Portio Research. All Rights Reserved
    • Smartphone Futures 2011-2015 Also available from Portio Research Limited Portio Research Ltd is a UK-based research company focussing on the mobile space, providing reports, handbooks, directories and database products. New and Best Selling Reports in 2010 include: Worldwide Mobile Industry Handbook 2011-2015: Serving as an invaluable guide for those in and outside the mobile space to enable better understanding of the worldwide mobile market, this detailed and comprehensively updated new handbook offers you all the essential market data required for business strategy and planning purposes, including: in-depth subscriber growth forecasts for leading countries, subscriber figures for key network operators across all major geographies, market share data, quarterly handset shipment figures, handset and infrastructure vendor profiles, analysis of popular handsets/smartphones, ARPU data, churn figures and so much more. This essential 187-page market report will act as a touchstone to refer back to again and again for meetings, presentations and business plans. Please click here for more details. Mobile Applications Futures 2010-2015: Without doubt one of the hottest topics within the mobile space, the exciting worldwide mobile applications market is comprehensively assessed in this new market study. With detailed analysis and growth forecasts for mobile application users, downloads and revenues, this 121-page report examines the evolution, current state and future potential of mobile applications, and much more. This research also includes: key strategies adopted by app stores and associated business models to monetise the apps market; drivers and inhibitors in the uptake of mobile apps; supporting case studies and profiles of successful mobile apps and application stores; embedded adverts, in-app payments, the various types of mobile apps and their popularity, the value chain of mobile apps, and the important role of smartphones in the uptake of mobile apps. Looking beyond the hype surrounding mobile apps, this report reveals a worldwide market with legitimately huge potential for its various stakeholders to exploit, and which will generate revenues in excess of USD 23 billion by end-2015. Please click here for more details. LTE and the Road to 4G 2010-2015: With analysis and growth forecasts, this essential new 82-page study covers the current state of Long Term Evolution (LTE) at worldwide and regional levels, discusses the drivers and inhibitors for LTE growth, reviews the LTE network infrastructure vendor landscape, and examines the future outlook for this highly-promising 4G enabling technology. The report also includes analysis of the expected trends in technology adoption, the planned trials and deployments by MNOs worldwide, draws comparisons between LTE and WiMAX on several fronts, and much more. Please click here for more details. If you have any questions or if we can be of any assistance to you, please contact us by e-mail: info@portioresearch.com Copyright 2010. Portio Research Limited 2010 www.portioresearch.com © 2010, Portio Research. All Rights Reserved 139