1 1
Strategy Analytics Insights on the Global Digital Experience
Global Smartphone Market Outlook
October, 2013
2 2
Agenda
1. Introduction;
2. Global Mobile Devices Outlook
3. Saturation of High-end Smartphone Market
4. Growing Demand for Smartphone In Emerging Markets
5. Vendors’ Strategies to generate profits;
6. Summary & Recommendations.
3 3
GLOBAL MOBILE DEVICES OUTLOOK
Annual Global Feature Phone & Smartphone Shipments (2011 ~ 2015)
Services: Wireless Device Strategies (WDS) / Wireless Smartphone Strategies (WSS)
GLOBAL FEATURE PHONE / SMARTPHONE SHIPMENTS (MILLIONS OF UNITS)
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2011 2012 2013 2014 2015
490.5
700.1
1004.8 1187.0
1498.4
1055.5
879.9
669.2
583.0
344.3
Feature Phone
Smartphone
5 5
Global Feature Phone & Smartphone Shipments Growth YoY (%)
Global Feature Phone/Smartphone Shipments Growth YoY (%)
-40%
-20%
0%
20%
40%
60%
80%
100%
2010Q12010Q22010Q32010Q42011Q12011Q22011Q32011Q42012Q12012Q22012Q32012Q42013Q12013Q2
Smartphone Growth YoY Feature Phone Growth YoY
Services: Wireless Device Strategies (WDS) / Wireless Smartphone Strategies (WSS)
Historical benchmarks indicate that feature phone has gone through minus growth from 2011 while smartphone remains 40% to 50% in terms of annual growth rate;
6
Global Handset Shipments by Quarter
• The feature phone market is slowing, as expected, while smartphone growth in
global market is contributing to the flattening global handset shipments.
• We expect an LTE-driven 4G recovery from 2013/2014 onwards.
Source: Wireless Device Strategies (WDS) service
7
The Handset Market in Review - It is a Mixed Regional Picture Today
Global Handset Shipment Growth by Region: Q2 2013
Percent Growth Year over Year
Service: Wireless Device Strategies (WDS)
8
The Smartphone Market in Review – It is growing in all regions today
Global Smartphone Shipment Growth by Region: Q2 2013
Percent Growth Year over Year
Service: Wireless Smartphone Strategies (WSS)
9
Global Smartphone Vendor Share by Region in Q2’13
• The Chinese vendors, like Coolpad, are becoming big at home, but still small abroad;
Service: Wireless Smartphone Strategies (WSS)
Q2 2013
Global Smartphone Vendor Market Share % N America W Europe APAC CALA CE Europe AME Total
Samsung 34.7% 42.6% 23.9% 39.7% 44.3% 63.2% 32.6%
Apple 31.8% 19.0% 8.5% 7.4% 10.4% 7.9% 13.4%
LG 9.8% 6.7% 1.5% 16.6% 6.1% 1.8% 5.2%
ZTE 3.8% 1.2% 7.3% 3.5% 0.9% 0.9% 4.9%
Huaw ei 2.7% 1.5% 7.5% 1.3% 1.7% 0.9% 4.8%
Lenovo 0.0% 0.0% 8.6% 0.0% 2.6% 0.9% 4.6%
Coolpad 0.0% 0.0% 8.6% 0.0% 0.0% 0.0% 4.4%
Sony 0.3% 8.6% 3.2% 4.8% 13.9% 1.8% 4.1%
Nokia 1.4% 5.8% 1.9% 6.1% 7.0% 4.4% 3.2%
BlackBerry 2.9% 4.9% 1.1% 5.2% 0.9% 11.4% 2.8%
HTC 3.2% 4.3% 2.5% 0.0% 5.2% 0.9% 2.7%
Motorola 3.2% 0.6% 0.5% 7.0% 0.4% 0.4% 1.5%
TCL-Alcatel 0.3% 3.1% 0.8% 4.4% 1.7% 0.9% 1.5%
Pantech 1.0% 0.0% 1.4% 0.0% 0.0% 0.0% 0.9%
Sharp 0.0% 0.0% 1.0% 0.0% 0.4% 0.0% 0.6%
Fujitsu 0.0% 0.0% 1.0% 0.0% 0.0% 0.0% 0.5%
Panasonic 0.0% 0.2% 0.2% 0.0% 0.4% 0.0% 0.1%
NEC - Casio - Hitachi 0.3% 0.0% 0.2% 0.0% 0.0% 0.0% 0.1%
Others 4.6% 1.4% 20.3% 3.9% 4.0% 4.8% 12.2%
Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
10 10
Smartphone Sales by Country in 2017 - Preliminary number
330
165
100
51 4934 29 28 26 25 16 12 11 10 9 20
50
100
150
200
250
300
350
China
USA
Indi
a
Bra
zil
Japa
nUK
Ger
man
y
Sou
th K
orea
Mex
ico
Franc
e
Spa
in
Arg
entin
a
Colom
bia
Egy
pt
Polan
d
Tunisia
Millio
ns
of
Un
its
The USA will remain the world’s most influential supply-side smartphone market
Mexico, Brazil & South Korea quietly becoming a more influential countries
China exceeding everyone’s expectations, due to subsidies; India to follow?
Global Smartphone Sales Forecast by Price-tier
11
• The market share for Premium and High-tier segments are slowing down while the bottom three tiers are growing, leading to the limited profit generation.
• The top two tiers dominated by Apple and Samsung are getting more intensified by 2nd tier groups as the innovation in H/W and S/W is reaching the ceiling.
12 12
SATURATION OF HIGH-END SMARTPHONE MARKET
13 13
USA Smartphone Sales by Wholesale Price-Tier : % of Total
Service: Wireless Smartphone Strategies (WSS)
The premium smartphone percentage will be on the decrease thru 2016/2017 while the relevant market size by volume will hit the summit in 2014/2015 timeframe.
14 14
Korea & Japan Smartphone Sales by Wholesale Price-Tier : % of Total
Service: Wireless Smartphone Strategies (WSS)
The premium smartphone percentage will remain almost flat thru 2016/2017 while the relevant market size by volume will hit the summit in 2015/2016 timeframe.
15 15
WE Smartphone Sales by Wholesale Price-Tier : % of Total
Service: Wireless Smartphone Strategies (WSS)
The premium smartphone percentage will drop by 15% between 2013 and 2016 while lower-tier devices will increase their presence over years.
16 16
Saturation of High-end Smartphone Market
• Cyclical nature, intensified competition with chasing 2nd groups, limited room for
growth in high end markets, higher SP penetration, flattening innovation, trend
towards low-end smartphone, operators’ reluctance for more subsidy…. The stake
is how players differentiate their products with cool services.
Initial concept, Popular in
emerged markets for high
price by replacing FP &
Nokia/RIM SP
Alternatives to Apple,
Grow market share
by H/W, distribution
& marketing
Dominate high-end
markets until the SP
penetration reach
60~70%
2nd groups chasing
the leaders with
diverse products &
differentiators
iPhone fatigue &
Galaxy fatigue,
remaining users are
split.
Strong demand for low-end
SP in emerging markets while
penetration in emerged
market exceed 70~80%
Intensified competition for the
narrower high-end market
leading to price war and
segmentation, if not with
influential differentiators
Market Saturation
2007 2010 2010~2013/14
2012 ~ 2013 ~
2013? 2014?
17 17
High end Smartphone Saturation leading to Market Segmentation (being pioneered by Samsung)
• Super Phablet, Phablet, Flagship, Water/Dust-proof, Imaging, low-cost, Flexible
Display, etc…. Flexible display and wearables expected for better margin. But how?
• Bad for profit generation for all involved players, but when driving out all the
competitors in each segment, the remaining one or two would dominate the profits.
Super Phablet (> 6”)
Phablet (5” to 6”)
Flagship
Water/Dust proof
Imaging
Low-cost
Flexible Display
Wearable devices
Galaxy Mega
VS
Galaxy Note III
Galaxy S4
Galaxy S4
Active
Galaxy S4
Zoom
Galaxy S4
Mini
Galaxy Note III?
G2
Xperia Z Ultra
iPhone 5S
Xperia Z
Lumia 1020
HTC One mini &
iPhone 5C
LG, Apple
Sony, Google, Apple Galaxy Gear
18 18
How Feature phone market got segmented in 2007 - Music/Messaging/Camera/Design
• Nokia and Motorola captured almost 60% market share by volume in Q4 2006.
• Before 2007, all feature phones looked similar, but Nokia and chasing groups
focused on segmented products (chocolate phone) while Motorola got lagged behind.
• Segmented products didn’t last long, leading to the overwhelming market reaction to
iPhone, the symbol of innovation, from 2009/2010 onwards.
Source: WDS (Wireless Device Strategies) service
• The same formula could be applied to the current high-end smartphone market.
• The key to survival would be differentiating factors. (LTE-A, Qualcomm, Lego,
Kakao, etc)
19 19
GROWING DEMAND FOR SMARTPHONE IN EMERGING MARKET
20 20
Smartphone Penetration by Region (APAC/CALA/AME) between 2010 and 2017_Preliminary
Services: Wireless Device Strategies (WDS) / Wireless Smartphone Strategies (WSS)
As opposed to the developed markets such as NA and WE with over 75% penetration in 2013, the below regions have the potential to grow the smartphone market down the road.
Global Smartphone Penetration (%) of All Handsets 2010 2011 2012 2013 2014 2015 2016 2017
Asia Pacif ic
- Handset 579.9 672.5 753.0 850.1 911.2 985.9 1053.0 1112.9
- Smartphone 96.7 189.9 319.7 519.6 623.5 824.1 920.0 997.5
Asia Pacific Smartphone Penetration 17% 28% 42% 61% 68% 84% 87% 90%
Central & Latin America
- Handset 157.2 200.6 188.7 183.2 191.0 190.2 194.7 201.4
- Smartphone 20.2 36.4 59.8 91.0 116.1 153.6 176.9 191.5
Central & Latin America Smartphone Penetration 13% 18% 32% 50% 61% 81% 91% 95%
Africa Middle East
- Handset 151.2 185.4 178.1 171.0 187.6 178.0 182.2 187.4
- Smartphone 15.5 30.0 36.7 52.0 71.9 84.9 99.6 113.1
Africa Middle East Smartphone Penetration 10% 16% 21% 30% 38% 48% 55% 60%
Total Smartphone Penetration for Three Regions 15% 24% 37% 55% 63% 78% 84% 87%
21 21 21
Smartphone Penetration by Key Emerging Countries between 2010 and 2017_Preliminary
Global Smartphone Penetration (%) of All Handsets 2010 2011 2012 2013 2014 2015 2016 2017
India
- Handset 149.7 172.5 183.1 210.5 236.3 252.7 265.1 275.2
- Smartphone 5.8 10.9 20.5 45.0 65.0 85.0 102.0 119.9
India Smartphone Penetration 4% 6% 11% 21% 28% 34% 38% 44%
Indonesia
- Handset 46.5 52.5 56.5 60.1 63.0 65.5 68.8 71.1
- Smartphone 6.3 9.0 10.0 16.6 22.8 28.7 34.5 39.0
Indonesia Smartphone Penetration 14% 17% 18% 28% 36% 44% 50% 55%
Brazil
- Handset 55.9 75.5 72.3 70.0 71.2 72.2 73.1 73.9
- Smartphone 6.5 13.9 23.0 35.9 41.0 46.9 51.0 54.0
Brazil Smartphone Penetration 12% 18% 32% 51% 58% 65% 70% 73%
Mexico
- Handset 22.2 34.6 34.5 33.5 34.2 34.6 34.9 35.0
- Smartphone 3.9 7.0 10.9 17.1 20.0 22.0 24.0 25.5
Mexico Smartphone Penetration 17% 20% 32% 51% 58% 64% 69% 73%
South Africa
- Handset 11.0 18.3 19.8 18.1 19.0 19.6 20.1 20.5
- Smartphone 1.9 4.1 5.8 8.4 10.5 12.0 13.0 14.0
South Africa Smartphone Penetration 17% 22% 29% 46% 55% 61% 65% 68%
Total Smartphone Penetration (%) for Five Countries 9% 13% 19% 31% 38% 44% 49% 53%
Services: Wireless Device Strategies (WDS) / Wireless Smartphone Strategies (WSS)
Top 11 emerging countries by smartphone volume in 2014 (China, India, Brazil,
Mexico, Indonesia, Philippines, Vietnam, Thailand, Argentina, Saudi Arabia,
Nigeria) will be the primary focus market for all vendors including Samsung,
which is dominating the markets across all price-tiers at the moment.
22 22
China Smartphone Sales by Wholesale Price-Tier : % of Total
Service: Wireless Smartphone Strategies (WSS)
Many local vendors (tier 1: Huawei/ZTE/Lenovo/Coolpad, tier 2: Xiaomi/Oppo/Meizu) are gripping their
local shares with some invisible support from local carriers while foreign vendors are expected to
struggle to keep the share. The low-tier TD-SCDMA segment has been a main driver for the big growth
in entry-tier market this year.
GNI per
Capita
$5,740
(2012)
23 23
India Smartphone Sales by Wholesale Price-Tier : % of Total
Service: Wireless Smartphone Strategies (WSS)
Samsung is arguably capturing the top spot while local vendors such as Micromax, Karbonn and Spice
are beefing up its influence based on the price affordability and appealing specs such as Dual-SIM.
GNI per
Capita
$1,530
(2012)
24 24
Brazil Smartphone Sales by Wholesale Price-Tier : % of Total
Service: Wireless Smartphone Strategies (WSS)
While premium tier is estimated to represent the highest share in 2013 and 2014, mid, entry and ultra-
low combined will account for more than 50% in 2014, with the share in 2017 expected at 63%.
GNI per
Capita
$11,630
(2012)
25 25
Russia Smartphone Sales by Wholesale Price-Tier : % of Total
Service: Wireless Smartphone Strategies (WSS)
As with other emerging countries, the premium tier is likely to lose its share through 2017 while lower-
cost smartphone are expected to replace the market, once occupied by premium.
GNI per
Capita
$12,700
(2012)
26 26
Comparison of GNI per Capita/Population _ Top Emerging Countries
It would be essential for vendors to figure out the GNI(Gross National Income) per Capital and
population of each emerging country. They should have a different strategy for Saudi Arabia, Thailand
and Vietnam.
GNI per
Capita
$12,700
(2012)
Russia
144M
GNI per
Capita
$11,630
(2012)
Brazil
201M
GNI per
Capita
$1,530
(2012)
India
1.23B
GNI per
Capita
$5,740
(2012)
China
1.36B
GNI per
Capita
$9,740
(2012)
Mexico
118M
GNI per
Capita
$3,420
(2012)
Indonesia
237M Philippines
98M
GNI per
Capita
$2,470
(2012) GNI per
Capita
$1,400
(2012)
Vietnam
89M
GNI per
Capita
$5,210
(2012)
Thailand
66M
GNI per
Capita
$18,030
(2011)
Saudi Arabia
29M
GNI per
Capita
$1,430
(2012)
Nigeria
173M
Source: World bank database (2011/2012)
27 27
Factors why lower-cost smartphones are inevitably gaining traction in emerging markets
• Feature Phone replacement: Affordable price & Appealing, but limited specs • Almost free OS: Android, Firefox, Ubuntu versus iOS, Microsoft • Market Size: Foreign vendors and local vendors neck and neck to capture the
market share. They could lower the device cost to target the potentially growing market.
• Chipset availability: Low-cost turnkey chipset for 2G/3G/possibly 4G available from several players such as Qualcomm, MediaTek and Spreadtrum
• Geographical setback 1: Due to the sparse wireline broadband network, smartphone with wireless connectivity is regarded alternatives.
• Geographical setback 2: Large country would cost a lot of money to install the cellular network, making local operators non-flexible in terms of subsidy.
• Low household income/weak spending power/infrastructure/logistics
Global Smartphone Forecast by ASP (US$)
28
• Surging volumes expected in lots of emerging countries are closely related to the lower smartphone selling price due to the price-sensitivity in those markets.
• Both NA and WE will also be affected by the emergence of meaningful smartphone volumes in lower price-tiers.
Source: Wireless Smartphone Strategies (WSS)
29
An Ultra-Low Smartphone Wave is Emerging in H2 2013
• Entry-level smartphones from Android are surging in China, emerging Asia, Africa, Eastern Europe and Latin America… Apple and “Microkia” missing this spike in growth…
• Ultra-low-cost smartphones are about to emerge (e.g. Magicon Ultra Smart, Lenovo);
Service: Wireless Smartphone Strategies (WSS)
GLOBAL SMARTPHONE SALES BY WHOLESALE PRICE-TIER (MILLIONS OF UNITS)
0 6
83
199256
304349
387
0 0
0
1
8
17
29
44
0
100
200
300
400
500
2010 2011 2012 2013 2014 2015 2016 2017
UltraLow (<US$35)
Entry (US$36 - 99)
VENDORS’ STRATEGIES TO GENERATE PROFITS
31 31
How to generate the new sources of profits when high-end market slows down
Committing more to leading carriers for LTE/LTE-A/Innovation/Segmentation
Turning to China/India with TD-LTE/FDD-LTE/Innovation/Segmentation
Looking at emerging countries with diverse product portfolios (Soccer phone)
Growing the volume share by gripping the local distribution channels
Good cross-selling momentum by bundling phones, laptop, tablets, and TVs
ONE Brand image across its diverse portfolio, phone, tablet, laptop, TV, etc
High-end segment
Low-end segment
Multi-screen Convergence
Working on the incomparably superb services (contents, imaging, education)
Standardized Solution for multiple screens & platforms
Maintaining the lean and streamlined production operation
32 32
One differentiator Global LTE Handset Vendor Share Trends: Q2 2013
• Samsung and Apple remain dominant, due to deeper distribution presence;
• The global LTE smartphone market is growing at 430%+ YoY, from 11M to 58M;
Source: Wireless Device Strategies (WDS) service
Global LTE Handset Vendor Marketshare by Country (% of Total) 2013 Q1 2013 Q2
Samsung 25% 47.0%
Apple 41% 23.5%
Sony 5% 6.2%
LG 7% 4.0%
BlackBerry 4% 4.0%
Nokia 4% 2.8%
HTC 1% 2.4%
Pantech 3% 2.2%
Motorola 3% 1.6%
Sharp 2% 1.4%
Fujitsu 2% 1.4%
Huaw ei 1% 1.2%
ZTE 1% 1.0%
Panasonic 0% 0.3%
NEC 0% 0.3%
Kyocera 0% 0.2%
Others 1% 0.6%
Total 100.0% 100.0%
Other differentiators in H/W, S/W & Services
• LTE-Advanced
• TD-LTE (relatively low 3G penetration at China Mobile with over 750m users)
• NFC/Wi-fi 802.11ac
• Flexible/Bendable Display
• Wearable Mobile Devices (Glass, Watch, etc)
• Wireless Charging
• Sensors (Fingerprint, Biometrics, etc)
• Multiscreen strategies across smartphone/tablet/laptop/PC/TV/Car/Office
33 Source: Wireless Device Strategies (WDS) service
34 34
SUMMARY
35 35
1 High-end segment shows a sign of slowing down amid the rise of low-end segment, consumer fatigue and stalled innovation.
SUMMARY & RECOMMENDATIONS:
Conclusions & Recommendations
2 Decent profits from high-end market will smoothly transit to low/mid-segment where we see lots of room for growth. It would matter to partner with local channels and to customize the products.
3 New technologies will inevitably emerge and spur more growth. Vendors must be differentiated.
4 It would be essential to have the segmented products for high-end and low-end tiers for now.