Smartphones Are Still Dominating Handset Sales


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An analyst briefing presentation delivered by Information & Communication Technologies Industry Analyst Todd Day.

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Smartphones Are Still Dominating Handset Sales

  1. 1. Smartphones are Still Dominating Handset Sales – Will Android be the Beginning of the End for Licensed Operating Systems? Todd Day, Industry Analyst Mobile & Wireless December 16, 2010
  2. 2. Today’s Presenters Functional Expertise As an Industry Analyst in Frost & Sullivan’s Mobile & Wireless Communications Group, Mr. Todd Day researches and analyzes emerging, next generation wireless technologies & applications that enable the mobile Internet revolution. The scope of his work deals with all aspects of the mobile value chain; from delivery infrastructure and communication management, to end user content and applications. Industry Expertise Since joining Frost & Sullivan in November 2006, Day has completed numerous consulting projects and research studies on the following: U.S. Mobile Operator Profiles, Next-Generation Wireless Network Technologies, North American Smartphones Market, Optimizing Backhaul for Wireless Carriers, Application Storefronts Market, white papers on Mobile Application Development and Mobile Search, and assisted on several other private consulting projects relating to custom web portals development and database applications.Todd Day What I bring to the TeamIndustry AnalystMobile & Wireless • Mobile & Wireless Expertise & Thought Leadership • Project Management & Strategic Consulting ExperienceFrost & Sullivan • Market Engineering, Competitive Benchmarking, Forecast ModellingNorth America • Network Engineering & Infrastructure Experience Career Highlights Prior to this, Day was a Network Engineer for a triple play provider in Texas where he worked with numerous network technologies including: Fiber, HFC, SS7, RF, ATM, TDM, and VoIP. He brings with him a strong technical background, along with real-world experience of various network technologies. Education BBA from Texas State University – San Marcos, San Marcos, TX, United States 2
  3. 3. Focus PointsDefinition and Market SegmentationSmartphone GrowthSmartphone Economic EcosystemOperating Systems AnalysisSmartphone OS Strengths & Weaknesses 3
  4. 4. Smartphone Definition, MarketSegmentation, Growth, and Ecosystem 4
  5. 5. Definition and Market SegmentationDefinition of a Smartphone:A category of mobile device that provides advanced capabilities beyond a typical mobile phone. Smartphones run complete operatingsystem software that provides a standardized interface and platform for application developers.Smartphone operating systems covered in this study include: iOS, Android, BlackBerry, webOS, Symbian, and Windows Mobile (alsoreferred to as Windows Phone 7). Market SegmentationDevice Manufacturers Operating Systems Operators • Apple • Android • North America • HP • BlackBerry • AT&T • HTC • iOS • Sprint • LG • Symbian • T-Mobile • Motorola • webOS • Verizon Wireless • Nokia • Windows Mobile • Others • RIM • Canada • Samsung • Bell Mobility • Etc. • Rogers • Telus Consumer Segment Enterprise Segment 5
  6. 6. Definition and Market Segmentation (Contd...) Closed Environment Open EnvironmentApple iOS Google Android OS• Apple has a completely closed • Google has an open Device Application environment – they develop the Manufacturer Storefront Operating Application environment – they develop the OS, manufacture the iPhone System Storefront OS, provide their OS to OEM and iOS products, and maintain partners for free, and maintain the Application Storefront Operating System Android Market• iOS applications can only be • Android applications can be sold via the Apple App Store sold via Android Market or third-party/independent application storefrontsRIM BlackBerry OS Microsoft Windows Mobile OS• RIM has a closed environment – • Microsoft has an open they develop the environment – they develop the OS, manufacture BlackBerry OS, license their OS to OEM devices, and maintain App Device Application partners for a fee, and maintain Manufacturer Storefront World Operating Application Marketplace System Storefront• BlackBerry applications can be • Windows Mobile applications sold via App World or third- Operating System can be sold via Marketplace or party/independent application third-party/independent storefronts application storefronts 6
  7. 7. Smartphone Growth Forecast Mobile Device Connections Forecast (North America), 2009-2015Device growth remains steady. 350 Device growth in North America remains at a steady 1.9% Compound Annual Growth Rate 67.1% 300 (CAGR) in a saturated market. 23.9%Smartphones are expected to grow rapidly 250 Mobile Subscribers (Millions)through 2015. Smartphones With the recent success of the 76.1% 200 iPhone, Android, and BlackBerry products in the North American market, smartphones are expected to grow at an annual rate of 21.0% - 21.1% in the United States, and 19.9% in Canada. At this growth 150 rate, smartphones are expected to surpass feature phones between 2012 and 2013. 100 32.9%North American market is likely to exceed 320 Feature Phonesmillion connections by 2015. 50 By 2015, the North American market should grow to over 320 connected feature and smartphones. However, this number does not include the 0 2009 2010 2011 2012 2013 2014 2015 M2M, notebooks, tablets, and other connected Smartphones 68.9 89.1 117.3 144.3 171.2 193.5 216.6 devices. Feature Phones 218.9 202.1 177.9 157.3 136.3 120.7 106.3 Note: All figures are rounded; the base year is 2009. Source: Frost & Sullivan 7
  8. 8. Smartphones Economic Ecosystem 3G/4G Infrastructure Vendors Mobile Device Operators Manufacturers Smartphones Mobile Advertisers & OS Vendors Developers Application Stores 8
  9. 9. Smartphone Operating Systems Analysis 9
  10. 10. Android – Google Inc.Developed by Google, the Android Operating System is completely open, allowing developers to use any of the phones core functionalityfrom an application, including placing calls, sending SMS or MMS messages, capturing pictures or video, and utilizing GPS coordinates forLocation Based Services (LBS). While the license is free for the OS, Google plans to drive advertising through the platform via mobilesearch.Pros: Notes: Cost – Android is distributed under an open source There are approximately 100 different Android phones available license, meaning that the cost to use it is free. globally from 15 different manufacturers. HTC, Motorola, Samsung are currently the top Android OEM Application performance – Android was built to allow equal partners with 19, 17, and 11 different devices available access and performance to any and all applications for a device. respectively. Android is currently the fastest growing operating system;Cons: growing its market share from 2% in 2009 to 17.8% after Q3 2010. This growth launched Android into the third largest Security – Because Android is an open source operating market share behind only BlackBerry and Symbian. system, unlocking, hacking, and viruses could pose more of a threat than it would to a closed operating system. 10
  11. 11. Android Global Market Share by Manufacturer (August,2010) Android Manufacturer Phone Count Manufacturer Available Coming Soon Total HTC 18 1 19 Samsung 17 3 20 Motorola 14 3 17 Huawei 8 2 10 LG 6 1 7 Acer 5 2 7 Dell 3 0 3 Sony Ericsson 3 1 4 Garmin-Asus 2 1 3 i-Mobile 2 0 2 Alcatel 1 0 1 Gigabyte 1 0 1 Pantech 1 0 1 Philips 1 1 2 Vodafone 1 0 1 ZTE 1 0 1 Total 84 15 99 11
  12. 12. Android – Google Inc. (Contd...)Android Availability – by Region and Operator (World), August 2010 Android Smartphones by Region Region Operator Count Viva 1 Africa/ME Total 1 China Mobile 10 China Telecom 3 Chungha Telecom 1 APAC i-Mobile 2 SKT 5 Total 21 O2 5 Orange 7 T-Mobile 7 Tre 2 Europe Virgin Mobile 13 Vodafone 13 Yoigo 1 Total 48 Claro 1 Latin America Telcel 3 Total 4 AT&T 8 Boost Mobile 1 Cincinnati Bell 1 Sprint 7 North America T-Mobile, USA 14 U.S. Cellular 2 Verizon Wireless 7 Total 40 Note: Operator list is likely to increase with time and does not include all operators that are selling Android devices. It does include most of the Tier 1 Operators. Source: Frost & Sullivan 12
  13. 13. iPhone OS (iOS) – Apple, Inc.Developed by Apple, the iPhone Operating System is a proprietary operating system only used on Apple’s own iPhone and iPod Touchdevices. Although early on, the iPhone OS was closed to developers, it is now open to registered iPhone developers.Pros: Notes: Applications – The iPhone store has approximately 285,000 The iPhone OS, or iOS, runs on four abstract layers: Core OS iPhone applications available for download on its application layer, Core Services layer, Media layer, and Cocoa Touch layer. store. These layers allow the iPhone to handle multiple tasks simultaneously, providing a better user experience. Performance – Equipped with a full web browser, rich media, fast processor, and plenty of memory, the iPhone is one iOS is only manufactured on Apple devices which reduces the of the top phones in the industry. speed at which it can be adopted, however, it also helps to keep the quality of the applications and the user experience high. Up Ease of Use – One of the biggest contributing factors in the to this point, consumers have chosen the quality of the iPhone. success of the iPhone is that consumers have been able to use the device easily.Cons: Availability – Currently, the iPhone is available in the U.S. only on AT&T’s network. This is limiting the adoption rate of the product. 13
  14. 14. iPhone OS (iOS) – Apple Inc. (Contd...)• iPhone sales have continued to grow since first released in the second quarter of 2007, growing from just over 1.1 million iPhones sold during its first full quarter to 14.1 million iPhones sold during its most recent quarter. iPhone 4 June 24, 2010• Each new iPhone model that has been released has seen immediate success. iPhone 3GS June 19, 2009• A CDMA version of the iPhone is highly anticipated, and expected iPhone 3G June 11, 2008 to be available on Verizon iPhone launch Wireless sometime during June 29, 2007 the first quarter of 2011. This may possibly vault iOS into the second largest market share. Source: Frost & Sullivan 14
  15. 15. BlackBerry OS – Research In Motion (RIM)Developed by Research In Motion (RIM), the BlackBerry Operating System is a proprietary operating system only used on RIM’s ownBlackBerry devices. RIM became the kings of email when their first BlackBerry products came out. Their OS provides security andenterprise integration that has helped make BlackBerry the most widely used Enterprise mobility product on the planet.Pros: Notes: Security – The BlackBerry OS was designed for security in an The BlackBerry OS is only manufactured on RIM devices which enterprise environment. Although today, that same security is reduces the variety of the available products, however, it also nice to have for consumers as well. helps to keep the quality of the applications and performance high. Enterprise Connectivity – Email, Mobile Web, Mobile Resource Management (MRM), and Location Based Services (LBS) all work RIM has seen a successful launch of the BlackBerry 6.0 OS in very well with the BlackBerry OS. 2010, however, future devices will likely be migrated to the QNX operating system as it offers more capabilities for a smartphone or tablet device.Cons: Variety – Although RIM has recently been more focused on providing more variety in the product lines, most of the BlackBerry products have a similar look and feel. 15
  16. 16. Symbian OS – Symbian Ltd.Symbian OS has the largest market share worldwide. Much of this is attributed to the connection between Symbian Ltd. and Nokia.Although, Symbian is also used by companies such as LG, Motorola, Samsung, and Sony Ericsson.Pros: Notes: Economies of Scale – Because of the large number of devices Nokia, once Symbian’s largest customer bought Symbian in running Symbian OS, it reduces the costs significantly to use it. 2008. However, Nokia turned over the intellectual property to Although licensing costs don’t come into play much, the the Symbian Foundation in order to ensure the further research & development costs associated with manufacturing a development of the OS. new device on a new OS can increase. It is expected that Nokia will begin to replace the Symbian OS with MeeGo in their higher end smartphones. Symbian will still maintain a large market share from the high volume sales ofCons: lower end/less expensive smartphones from Enterprise Support – Applications that run on a mobile phone Nokia, however, their market share is expected to decrease powered by the Symbian OS have to be signed. through 2015. Furthermore, Nokia has been unsuccessful in the Enterprise area in the past. As a result, Symbian has been unable to become a widely spread OS in North America due to the limitations in functionality for Enterprise Applications. 16
  17. 17. webOS – HPThe webOS developed by Palm was released in 2009 along side Palm’s new Palm Pre smartphone. The webOS is a closed sourceoperating system with some components of it open source. The webOS was designed to make use of web technologies like CSS, HTML5, JavaScript, etc. In 2010, Palm was purchased by HP for $1.2 billion. Pros: Notes: Usability – The webOS was designed to function efficiently Palm stood firm to the idea of continuing to develop its webOS and yet effectively. The OS interacts with the web and future products internally. Ultimately, this didn’t turn out directly, allowing the web servers to handle the transactions to be the best strategy. However, with HP’s market capital and and thus requiring less processing power. This in turn always device manufacturing muscle, webOS may see a resurgence in saves on battery life (the holy grail of the wireless industry). 2011. Synergy – This feature integrates data from multiple web HP may decide to invest heavily with webOS into a turnkey sources into one screen or application area in order to create cloud-based interface for enterprise and consumer markets a very sophisticated user experience. alike. Cons: Undecided Future – After being purchased by HP, the webOS has had little attention. To date, developers and consumers are unsure as to the level of support they will receive in the near future. 17
  18. 18. Windows Mobile – MicrosoftWindows Mobile is currently up to Windows Mobile 7, or rather the newly coined “Windows Phone 7.” The Windows mobile operatingsystem developed by Microsoft was long thought to be the future of the smartphone OS. However, licensing fees and performanceproblems have caused Windows Mobile to have a decreased market share in recent years.Pros: Notes: Microsoft Connectivity – With many enterprises using Microsoft Windows Mobile has been passed by both Android and iOS over products like Windows, Outlook, Exchange Server, Windows the past year, dropping it down to the 5th largest market share – Server, etc., there is a Microsoft connectivity advantage built leading only webOS. Although Windows Phone 7 is expected to into OS that many enterprise customers find advantageous. make a big splash during the last quarter of 2010, and all of 2011, it is unlikely that Windows Mobile will pass Android, Symbian, Apple, or BlackBerry due to licensing feesCons: associated with the OS. Licensing Fees – Sticking with the classic Microsoft licensing fee model has proven troublesome for the adoption rate of Windows Mobile. Unless this model is changed, Windows Mobile is expected to continue to see a loss in market share. 18
  19. 19. Smartphone OS Strengths & Weaknesses 19
  20. 20. Smartphone OS Strengths and Weaknesses RatingsNorth American Smartphone Apple Google RIM Symbian Palm MicrosoftMarket:OS Strengths & WeaknessesAnalysis (North America), 2010 Weighted Weakness Strength Value 1 5 10OS/Device Ecosystem 10% 10 10 8 3 4 6 Cosmetics 15% 9 8 6 6 7 7 Ease of Use 10% 9 8 7 7 7 9 Enterprise Support 5% 5 4 10 3 4 8 Applications 10% 10 8 6 7 4 5 Operator Availability 10% 3 9 9 4 6 7 Brand Recognition 10% 10 9 10 4 5 9 Licensing Model 5% 8 10 8 8 5 3 Multitasking 5% 4 7 4 4 9 7Quality/Performance 10% 9 9 9 6 7 6 Security 5% 6 5 10 7 6 8 OS Fragmentation 5% 10 4 10 7 8 5 Average Score 100% 8.2 8.0 7.9 5.5 6.0 6.8Note: Scores are based on analyst opinion in the context of the North America smartphone market. Source: Frost & Sullivan 20
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  24. 24. For Additional InformationJake Wengroff Craig HaysCorporate Communications Sales ManagerICT ICT(210) 247-3806 (210) Craig.hays@frost.comBrent Iadarola Todd DayGlobal Director – Mobile & Wireless Industry Analyst – Mobile & WirelessICT ICT(210) 481-0752 (956) 24