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Behind the Smartphone Craze: redrawing the map of mobile platforms

[Thought Android and iPhone are taking over the world? Think again. The device platforms map is more fragmented than ever, while the media hype distorts the commercial reality. Guest blogger, Guy Agin goes behind the Smartphone craze to redraw the landscape of mobile platforms]

The Smartphone Craze
The other day I was reading some of the usual hype-induced reports on the Smartphone revolution. Wanting to put things into perspective I pulled out some old Smartphone forecasts from 2004-2005 by the likes of IDC, Informa and Ovum.

In those pre-historic days the main Smartphone contenders were Symbian and Windows. Blackberry was still an insignificant niche, and touch screen devices were still clunky stylus based UIQ phones and iPAQs. Yet surprisingly, the average Smartphone share of shipments that was forecast for 2010 was …about 30%. So even without the Apple & Google revolution fanning the flames, many analysts believed in the mass migration to Smartphones.

Reality check: by looking at the numbers for the first three quarters of 2009, it appears that last year there have shipped no more than 170-180 million devices considered to be Open OS Smartphones. Indeed Symbian, Windows, iPhone, Blackberry, Android, WebOS, LiMO and Maemo taken all together still only constitute about 15-17% of shipments. This percentage is in fact much lower than the 2009 Smartphone share predicted a few years ago by many research companies.

Why is this interesting?  It shows that hype can cause people to overlook the simple facts.  Despite the hype, Smartphone penetration seems to be following a gradual path which will eventually, in the long run, see Smartphones dominate shipments, revenues and installed base, but Smartphones are far from being an overnight revolution. In this light, mobile operators and software providers planning device platform strategies need to look at the opportunities going forward in a balanced, realistic way and not base it on hype.

Reports of death of the mid-range may have been a bit too early…
The analysis de-jour is that OEMs that relied on mid-range proprietary platforms and did not have a high-end Smartphone/Open OS offering suffered badly.  “Collapse of the mid range feature phone market” they claim.  Sony Ericsson and Motorola are given as the prime examples of that collapse, both having significantly lower shipments in 2008 and 2009 and both banking on Android to lift them back up. Yet the interesting data is that the two OEMs that gained the most market share at the expense of Sony Ericsson and Motorola and grew their revenues and profits in 2008-2009 were Samsung and LG, who together make up about 30% of the market- around 330M handsets shipped in 2009.

What’s both interesting and counter-intuitive is that these two Korean vendors achieved this phenomenal performance in the face of a recession with virtually no reliance on Smartphone platforms. A Telecoms Korea article estimated that in 2009 Samsung and LG have jointly shipped about 10 Million Open OS handsets, including their newly launched Android phones. That is only 10 million out of 330M (a paltry 3%!). It comes in stark contrast to the hyped picture that emerges from the Smartphone speak.  According to same article, 2010 will see almost tripling of Samsung and LG’s Smartphone shipments to about 25 million. Assuming Samsung and LG will maintain or increase their volumes in 2010, this growth, while impressive, is still very far from Smartphone domination. Unless Sony-Ericsson and Motorola achieve miracles with Android, the Google OS will not yet conquer the market in 2010. How can this seemingly counter-intuitive phenomenon be explained?

Touch Screen Phone Does NOT equal Smartphone
Despite the supposedly obvious linkage some seem to make between Smartphone /Open OS and touch screens, the reality is quite different. When Apple’s iPhone was introduced in 2007, rivals all rushed to come up with iPhone killers. The major benchmark set by the iPhone was not the Open OS and 3rd party applications – the App Store did not open until mid 2008. Rather it was the slickness of the UI, the finger based multi-touch, and the browsing experience.

LG and Samsung were the quickest OEMs to respond, and promptly chose implement the slick UIs and touch screens on their so called “proprietary” handset platforms, not on Open OS platforms such as Symbian or Windows Mobile. Starting with a big marketing campaign for the LG Prada, a myriad of curiously named models appeared in quick succession, like LG’s Arena, Renoir, Cookie, Viewty, Chocolate and Samsung’s Tocco, Pixon, Jet, Behold, Star, Corby and Solstice, among countless others. Both Samsung and LG invested heavily in cross-platform touch screen UI layers -TouchWiz and S-Class respectively.

A rough count of LG and Samsung’s currently shipping GSM/UMTS models shows over 70% of their touch screen phone models are not Smartphones. Samsung and LG have correctly identified the market demand for slick UI, touch screens and Web browsing, and have created the mass market affordable touch phone segment. Samsung’s Tocco is the prime example: a 5 Megapixel, HSDPA phone, which has sold over 9 million units. Samsung and LG’s relatively stable ASPs (Average Selling Price) which are significantly higher than Nokia’s, show that their product mix has not gravitated towards the ultra low cost markets but rather the share gains were as a result of great success of the “mass-market touch” strategy in developed markets such as Western Europe and the US.

Even at the high-end flagship model segment, both Korean OEMs heavily marketed the proprietary models over their very few Smartphones. The Samsung Jet S8000′s key marketing theme was “Smarter than a Smartphone”. Head-to-head comparisons show Jet outperforming competing Samsung offerings like the Windows based Omnia. Similarly LG’s BL40 New Chocolate is presented as its ultimate multimedia phone. With 800Mhz processors, capacitive touch screens and 5 to 12 megapixel cameras, hardware requirements pose no limitations for the proprietary flagships. LG and Samsung are clearly continuing to invest in the proprietary platforms and in cross-platform UI Frameworks, as Samsung’s integration of the Dolphin browser into its SHP (Samsung Handset Platform) shows.

Meanwhile, with the recently unveiled Bada platform (or UI layer) it’s become clear that Samsung is not out to create yet another Smartphone/ Open OS platform but rather enhance its proprietary SHP platform.  If Samsung and LG’s proprietary platforms continue to improve, generate sales and build market share, it is difficult to see them vanish anytime soon.

Are “dumb-phones” really becoming extinct?
Clearly some RTOS phone platforms have fallen by the wayside, and it is certain that over the long term, older Operating Systems are bound to be marginalized or end their lives. But those feature phone platforms that have currently survived will still have huge markets to be sold into in the next few years. The key contenders are the major OEM’s internal platforms:  Nokia’s Series 40, LG’s platform (called WISE) and Samsung SHP/Bada.

There is also one platform that is licensed to multiple OEMs: Qualcomm’s Brew Mobile Platform. Qualcomm’s Brew MP is quietly gaining ground in many markets that have growth potential, especially China’s new 3G markets (and India to follow). Moreover, traditional BREW supporting CDMA operators such as Verizon Wireless, KDDI and Sprint have committed to Brew Mobile Platform going forward.  HTC, traditionally associated with Windows and Android, has recently launched HTC Smart, a Brew MP based phone, to compete in the mass-market touch screen phone segment.  I believe Brew MP’s new positioning as an open, free and Qualcomm-unattached offering has increased its appeal even for GSM/UMTS operators to utilize Brew MP as a basis for operator own-branded mid-range platforms. AT&T’s recent announcement of a major commitment to use Brew MP for a range of mass market handsets is the latest proof of this development

Nokia Series 40 (and whatever is left of Series 30) still accounts for over 80% of Nokia’s shipment volumes- this amounts to at least 320 Million phones in 2009. It still covers a vast range, from ultra-low cost to mid-high end. While Nokia will no doubt increase the proportion of Symbian and Maemo over time, it is still investing in the Series 40 platform into 2010- even adding touch screen capability and if the market returns to growth in 2010, Series 40 shipments could even increase.

Redrawing the platform map based on customer ownership
I believe that the platform definition lines are now being redrawn, and will not follow the traditional Smartphone vs. RTOS dumb phone view. The clear definition of what constitutes a Smartphone is blurring fast.

First, the view of the Smartphone as a device uniquely capable of installing full-fledged native applications is challenged by the following paradox: that LiMo and WebOS are considered “Open OS” Smartphones even though they do not (yet or ever) allow native Linux applications to be deployed. At the same time, Brew Mobile Platform, which has a native SDK and allows native application installations, is considered a feature phone platform. The appearance of Bada will surely obscure this definition further.

Second, I have also shown that high specification hardware, multi-tasking and touch screens are also not the exclusive domain of Smartphones.  Third, the emergence of new cross-platform rich application environments such as Web runtime widgets, can enable Widget app stores on any supporting device, Smart or “dumb”.

I believe the picture that emerges is a platforms landscape mapped by control of the end-to-end proposition. This map is bounded at its edges by two types of propositions (not including the low-end):

Type 1:  the vertically integrated, high-end consumer branded device-and-service platforms of the Apple/Google/RIM /Palm type, where the platform owner or OEM is in control of UX and services (with App Stores and software updates at the epicenter). The operator can aspire to serve as a “smart-pipe” at best, as most services are delivered and managed by the platform and brand owner.

Type 2:  a mid-range proposition involving platforms which are white labeled by design like LiMo, Brew MP and OMS (a customized version of Android). These are platforms that cater to tier-1 operators, where they can define and manage customized UX and services, including Web, multimedia content, data sync, device and software management.  This is classically typified by INQ and Three’s BREW based phones, Vodafone’s LiMo-based 360, and AT&T’s plans outlined earlier. The emphasis here is on services, where consumer access to an application store (for widgets, Java or native apps) is a service but is not as critical to the overall proposition.

In between these two there are hybrids, notably tier-1 OEMs like Nokia and Samsung, who are attempting to build their own end-to-end service propositions with their device platforms (Symbian & Maemo for Nokia, Bada for Samsung) while still collaborating with their traditional operator customers on co-branded services and customized device propositions. Google’s Android partnership with key operators such T-Mobile also falls into this hybrid category.

The bets are spreading
As of late 2009, the only companies who are shipping true Open OS Smartphones in mass volumes are Nokia (Symbian), RIM (Blackberry), Apple (iPhone) and HTC (Windows Mobile, now Android). This will no doubt start to change over the course of time as Android shipments start to ramp up and the rest of the platforms realize their growth potential, but it is still not an overnight revolution.

Looking forward, this thesis shows that the market will be much more diverse than the simplistic notion that everyone either wants an App Store capable iPhone or Droid, or alternatively, an ultra-low cost phone to make phone calls. There is many more commercial dynamics at play, making up a complex platform map which is driven by customer ownership.

In 2009 the number of available device software platforms effectively grew, creating more fragmentation in the industry, not less. There are clearly mid-range segments and geographical markets with varying needs, which can be addressed with various software platforms, not necessarily in the traditional view of Smartphones vs. RTOS “dumb phones”. Simply betting on one or two platforms to rule the industry is not a sensible plan.

- Guy

[Guy Agin has been working in the mobile industry since the days of the Palm Pilot. He has product managed diverse mobile solutions for many companies in the mobile industry. He is currently heading strategy and strategic business development activities at Red Bend Software. He can be reached at guy [dot] agin /a/t  redbend.com]

  • http://antoinerjwright.com Antoine RJ Wright

    This is a very solid and needed dose of realism towards the total mobile market, not just smartphones. I'll be rereading this one as I'm sure that I'll need this spanking over my perception(s) again soon.

  • Thibaut Rouffineau

    Great article with lots of most interesting facts for us to remember.

    Not sure I understand the Android positioning. It seems to be the only platform appearing in all categories, which means it's already fragmented and it has already established itself as being above the traditional industry debates, is this a correct reading?

  • http://card.ly/zarkoh Zarko Hristovski

    Not sure why you categorize the iPhone as an Open OS smartphone. Good article otherwise.

  • http://www.mentor.com/embedded Ben Hookway

    Excellent article. The constant lack of understanding of the sheer inertia of proprietary OS solutions always amazes me.

    A simple analysis of volumes reveals that they are a crucial part of the ecosystem. Reasons for this not being understood? Well, they are not easy to write about in the mainstream tech press and most people who write such articles have smartphones…….

  • http://www.abaxia.com Guillaume Fercken

    Excellent article, thank you for the analysis.

    The definition of a smartphone is blurring, your proposition of redraw is interesting.

    Mass media are now considering smartphones any touch-capable devices with browser and multimedia features… I even heard the first smartphone was the Blackberry, then came the iPhone…

    Market definitively needs an education.

  • http://www.mobilemarketingspot Matt Clements

    Nice article. I see most people now referring to their smart phones as the "third screen". I've been hearing increasing issues with Andriod running on different hardware, and it will hurt its perception in the long run. While Apple's iPhone code is a tightly guard platform, I think the checks and balances are necessary. Brew MP does have potential particularity if more hardware companies adopt this platform.

  • http://www.mobilemarketingspot.com Matt Clements

    Nice article. I see most people now referring to their smart phones as the “third screen”. I’ve been hearing increasing issues with Andriod running on different hardware, and it will hurt its perception in the long run. While Apple’s iPhone code is a tightly guard platform, I think the checks and balances are necessary. Brew MP does have potential particularity if more hardware companies adopt this platform.

  • http://factorfud.typepad.com/mobilefacts/ daniel herb

    Thank you for some thoughtful commentary. A couple of points which I might argue:

    I don't believe Android belongs in your "Type 1". The whole point of Android is in expanding the upper boundary of "Hybrid" — at the upper ranges by OEM UI overlays (HTC, MOT) to optimize for usage types not otherwise as polished as alternatives, at the lower end by messaging-centric devices.

    The real driver of Type 1 is having a cloud or PC-based service as brand fulcrum. If you want to deliver an integrated service it doesn't matter whether your OS is "open", whether you truly have an OS, or any other criteria which denotes "smartphone" as opposed to a rich feature phone. Instead delivering an integrated service experience is the dividing line. Open only matters when and if a service experience breaks down.

    BREW has gained momentum in some regions and vendors (the AT&T announcement at CES was a surprise win), but that position is nuanced by losing traction at others. Far more important is the state of developer depth and engagement in BREW. The real point to BREW is that it is "open" as a platform only to OEMs who can invest headcount over years on it. Indy developers have voted with their feet to direct distribution (i.e. app store) models. BREW is a "most cost" distribution path for merchants, casual game vendors, etc.

    And that is the real point of difference between the typologies. The consumer use cases for Type 1 are built around content consumption and delivery not possible on Hybrid and Type 2 devices. Hybrid is migrating to messaging-based and messaging-delivered activities (including messaging as transport uses, such as social networking). What will this mean for RIM who is firmly in Type 1 but with a Hybrid use case and OS? And Type 2 remains voice-centric, waiting for better voice search, navigation, and content.

    Finally, no WinMo at all?

  • http://www.xero.com Rod Drury

    We've been discussing the difference between iPhone/iPad and a PC operating system today.

    http://blog.xero.com/2010/01/the-ipad-morphing-ma

    The iPhone is a modal computing device, and this approach now has been upscaled to a netbook style form factor in the iPad.

    To me this starts to superset smart phone discussions. And this design clarity is relevant to what's happened in the smart phone market.

    I used Windows Mobile from the first device and then 4 years ago moved to a Blackberry. The BB was simply the best designed mobile email experience.

    Microsofts persistence in trying to shoehorn a desktop metaphor onto a phone means they missed the market. They had plenty of time but the design was always wrong and never meaningfully changed.

    But my need for other apps is starting to outweigh my need for the best email experience so I'll probably move to an iPhone, especially if iPhone 4 has a flashing notification light.

    RIM, while great at mail and phone haven't understood interaction design for a multifunction device. The BB front screen and even the icons are appalling.

    The basic 'next applications anyone would use' have never been provided. They just had to look at the iPhone front screen to see that simple Stocks, Weather and World time would do for most business people.

    This lack of design skills is also evident in RIM's poor app store execution. So RIM look increasingly screwed.

    Microsoft simply have to buy RIM. It's the only chance for both companies in this space. But as I've seen written somewhere before, tying the legs together of the 3rd and 4th horse doesn't often beat the winner.

    Cheers

    Rod

  • Guy Agin

    Hello Antoine, Thibaut, Zarko, Ben, Guillaume and Matt

    Thank you for your comments. I just want to emphasize that I am not at all claiming that Smartphones are not gaining in market share, developer mindshare and revenues- they are indeed growing and becoming the focus for new investments. I just wanted to instill a measure of accuracy and balance into the discussion

    I would like to mention a new data point that surprised me recently: IDC has published a fresh Smartphone forecast just a week ago, where they forecast Android to ship 68M in 2013. While the big news is that Android overtakes iPhone and WinMo, but stil only 68M after everyone and their dog seem to be building an Android phone these days??

    http://www.electronista.com/articles/10/01/25/and

    Guy

  • Guy Agin

    Hi Thibaut

    With regards to your comment/question on Android positioning:

    Indeed it is a bit difficult to categorize what Google is doing with Android- the way I approached it, is that Google is partnering with Operators (and Motorola) so it allows co-branding and some customization of the phone UI layer, but it still retains some of the key services like the Android Market and other services. This is why I classified it as "hybrid" (within this categorization there are "Google Experience" phones and "non-Google experience" phones).

    What Google might be trying to do with Nexus (does NexusOne imply that it's a line of phones..) is almost the equivalent of the iPhone- selling a branded phone directly with Google services. That is why I categorized this version of Android in "type 1"

    Guy

  • Guy Agin

    Hi Daniel

    Thanks for a very insighful comment

    - I agree with you on the type 1 category and I think you are basicallly supporting my thesis: that the definitions of what is a Smartphones are certainly blurring, and the categorization should be more around the level of branded and integrated service experiences offered to a device, and who owns that proposition.

    - on BREW- I agree that with Qualcomm's new Brew MP positioning, BREW caters less to the masses of 3rd party developers and more to 2nd party developers, and in that sense, its stature as a developer platform could be diminished.

    -On WinMo- it definitely belongs in the analysis (probably in the hybrid category), but I left it out, perhaps since at this point it seems to be in a state of transition, where Windows 7 might change its positioning.

    Guy

  • http://smartphonenoob.com/2011/03/05/keep-your-money-maybe-even-keep-more-of-your-money/ Smartphone

    Very interesting, especially as it seems nowadays every man and his dog has an i phone. Everywhere you go someone is tapping away on their Blackberry, downloading an app for their iphone and so on. I personally don't have either and was beginning to think I was the only one! Just give me a phone that I can make calls on and send texts….I don't need all this extra stuff…..or maybe I do…..how did people survive without an app to tell them their shopping list……..

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