share

It's a great misfortune that we don't have data about the future. It makes it hard to tell what's going to happen.

It's even harder because although sometimes we have data about the past, the past and the future don't always look the same.

Clearly that's what makes predictions about mobile computing platforms tricky. Nothing that has happened recently had been predicted by those who had tried to do so in the past.

The difficulty is compounded if trying to forecast in the long term like 4 or 5 years ahead. The tendency is to extrapolate what has been happening to date.

It's tempting to project whatever trends one sees into the future. The problem is that some trends are more visible than others.

For example, let's look at the following three forecasts (IDC, ABI Research and Ovum) projecting platforms for 2015 and 2016. Although there are some differences in magnitude of the entire market, there is a strong similarity between the forecasts and with the current trends[1].

However, when comparing what was happening in 2007 with the market three years later[2] it's clear that most of the change was from the entry of iOS and Android (and a large expansion in RIM as well.)

So how are we to be sure that there won't be another entrant between now and 2016? I presume the argument is that the market is "too big" for a newcomer to make an impact. This argument is equivalent to saying that some organizations are "too big to fail". That might has a right of its own.

However, the evidence has shown that no Goliath has ever stood for long against a suitably equipped David, especially in technology.

Given this knowledge, the pattern or trend that I see more than any other is that the future will be dramatically different than the past. This invalidates any forecast which assumes otherwise, including all those above.

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Notes:

1. The primary difference seems to be with how to treat Symbian. Some forecasters are replacing it with Windows Phone while others are mixing in a bit of "other" and Bada into what used to be Nokia's share.
2. It's quite pointless to try to compare 2005 with 2010 as on this chart's scale (bounded by 1 billion units/yr), the size of the market and the size of each participant's share are indiscernible. As pointed out earlier, predictions from that era focused on PDA market shares and there was no agreed-upon definition of mobile computing competitors.

IDC released a new forecast for the worldwide smartphone market which included a long range forecast--all the way to 2015.

Most people fixated on the share data in 2015. Not hard to do since whoever wrote the press release highlighted this flashy headline. Putting aside the three significant digits of accuracy on every data point and the hard to swallow declaration that a painfully underperforming (in more ways than one) Windows Phone will overtake iOS and BlackBerry to become the second largest platform by units/year in 2015, there is much more to the report.

Using only the public data from the press release we can put together a pretty good picture of the transition being forecast and determine some of the (unstated) assumptions being made. It's these assumptions about the underlying market dynamics which illuminate far more than the falsely precise share data.

The following chart shows both historic platform performance (which is detailed in the Asymco Interactive data sets on a quarterly basis) and the forecast based on the given compound growth rate published.[1]

I see three main assumptions being made:

1. Nokia (or more precisely Symbian) share will be swapped for Windows Phone. The transition period 2011 to 2015 shows approximately 150 million Symbian devices will be sold which is the stated goal for Nokia. IDC is making an assumption that the hardware vendors will roughly maintain their respective shares irrespective of platform dynamics and that Nokia will switch its share of users from one platform to another in a predictable way.
2. iOS and BlackBerry will maintain share. Presumably this is also driven by hardware channel dynamics and relationships with carriers.
3. Android will grow share slightly but the vast bulk of growth will come from market growth.
4. Market growth is strong but undramatic.

Overall this is not a controversial set of assumptions.

Except perhaps that it assumes that the basis of competition in the market is unchanging. Of course it's well understood that the basis has shifted during the tumultuous 2007 to 2010 and forecasts made before the iPhone was launched sound absurd today.

But IDC says that the unpleasantness won't happen again. From listening to the conversations going on today on this blog and elsewhere, their assumption that things will not change (again) is fairly deeply ingrained, indeed conventional wisdom. In that sense IDC is not taking any liberties with the future. The projections of current realities onto the future leads to this type of forecast and status quo defenders should be satisfied, if not rejoice.[2]

However, there are a few more consequences of even this uncontroversial forecast which should make keen observers sit up and notice.

If we look at more than the before and after snapshots and comfortable pie-splitting sound-bites there are some profound seismic things being implied.

For example the entire market will be nearly 1 billion smartphones a year (in four years!). Even more startling, considering the "race to a billion" discussion we've been having, some of the platforms seem to be reaching that threshold rather quickly. The following chart shows the cumulative unit sales for the candidate platforms on a log scale:

 

Android is considered likely to break one billion units in five years post-launch. Windows Phone will sell nearly half a billion units and Blackberry will be well over that number.

I tallied the cumulative platform unit totals below:

No less than four platforms will have sold half-billion units by 2015. The suggestion that Android will "win" by having the most units sold seems as hollow as the suggestion that Symbian "won" by having the most users in 2008. Not so much because it will go on to lose them, but because there were plenty of viable alternatives for users to buy and developers to build for. Half a billion users cannot be easily ignored.

So even "safe" assumptions can lead to astonishing results in this market. Namely, IDC is saying that the smartphone market will not have any platform losers.

There is one more thing the report implies. If you look at the ranking of leading platforms (by units/year) in 2008,  2015 and, with a little extrapolation, 2016/2017 you get:

Rank in 2008		Rank in 2015	Rank in 2016/2017
Symbian		Android	Android
Other		iOS	Windows Mobile
RIM		RIM	iOS
Windows Mobile		Windows Mobile	RIM
iOS		Symbian	Other
Android		Other	Symbian

 

In other words, there is a complete reversal being projected. An almost perfect flip: those on top end up at the bottom and those on the bottom end up on top. That's about as controversial as it gets. Pretty impressive for a set of safe assumptions.

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Notes:

1. You should ignore the shape of the curve between 2011 and 2015 as it assumes the CAGR is applied to every year. Although the press release shows a CAGR, the actual report may include various fluctuation in yearly growth. The starting point of 2011 and the end result in 2015 however should be the same.
2. If, on the other hand, you believe that exponential growth, rapid gains in communications speed, new breakthroughs in interaction with devices, and entrants winning with new business models are causes for a disruption, then perhaps extrapolation may not be the way to forecast this market.

Apple's second fiscal quarter has just ended. Time for analysts to put forward their predictions for the quarter's report (due in about 3 weeks.) If history is a guide, the estimates will range quite widely and accuracy will be determined mostly by the ability of an analyst to predict iOS device sales (and iPhone most of all).

How hard can it be?

It depends on what you choose to prioritize as the proxy for sales. In competitive markets there is usually a constraint on demand and rivalry among suppliers. If that's your assumption you might want to use samples from the sales channel as a proxy. That means sampling distribution channels and sales through to end users at retail. You might even watch competitors and index them to each other using historic market shares.

In markets where demand outstrips supply, the best method would be to determine the constraints to production and measure those.

In Apple's case we know from company statements that Apple faces more demand than it can supply. That makes things easier for the amateur because she can just figure out production. In other words, the logical way to forecast Apple's iPhone sales is to guess how many they can make.

That is not trivial since production data is not public. However, we have historic sales data. We also can make assumptions about how much inventory is carried (some data is actually available here as well.)

Combining these public data sets we can build up a model of production ramps and look for patterns of growth.

So here are the patterns of sales for the four versions of iPhone sold to date with some production ramps overlaid. The monthly sales are approximations based on actual quarterly sales divided over the months according to the number of days available.

The assumptions are:

1. Inventory during any one month has to be greater than zero.
2. Inventory must be minimized. Ideally it should not exceed 2 million units and preferably should be around 1 million units at any given time.
3. There is a limited amount of overlap between production of various generations. I.e. once a new version is launched, the older product should end production. Continuing sales of older model should be made available from inventory.

The following chart shows the ramps for the various versions of iPhone that satisfy these assumptions and are shown relative to the same time frame (each line shows the number of units produced per month for each generation of iPhone):

I need to stress that this is just my estimate. It's an approximation and not reality. What it does is give reasonably accurate predictions for units sold.

What I've always assumed is that each new version of the iPhone sells twice as many units as the last. This is roughly translated into: each ramp is roughly double the previous ramp (at least on average). The data bears this out. Apple has been very considerate in keeping products on similar cycle times so that we can see this pattern emerge.

Once you build these models, forecasts are not that hard to make:

• The current generation will probably sell around 60 to 65 million units.
• The product will still sell for at least one more quarter (CQ2, FQ3)
• We know how many have been sold so far, so we can be pretty sure what will happen in the quarter just ended and the one just starting.
• Looking at the pattern between generations, we can guess what the iPhone 5 curve will look like and build up the units forecast by month and quarter.

You can sanity-check the forecast by looking at overall market shares for Apple and overall market growth. If share moves too far up or down it might makes sense to revisit the data.

The last time I took a snapshot of the iPad death watch it was March 9th, 2010. Almost a year ago. The now-classic quotes are reproduced here.  Last May I wrote:

Apple keeps a tight lid on new products so that competitors don’t get a head-start on copying, but in the case of the iPad, advance knowledge would not have had any impact. Competitors look at the iPad and see nothing.  They’ll only react once the market explodes and they start to feel belated pain.

I thought that would be that. As the success of the product would become self-evident, predictions of imminent demise would trail off. The pain of share loss would prompt a wave of challenger copycats. Imitation would be the the best form of flattery.

But no.

Critics were not silenced. One year, 15 million units, and $9.2 billion later I went back to the source of the quotes and found the following (published quotes dated after March 9th 2010). (Cited from aaplinvestors.net with some editing for brevity and relevance):

“Problematically, the Android competition is just as expensive as the iPad lineup, so Apple obviously feels free to continue gouging consumers on iPad pricing.” Paul Thurrott, Windows IT Pro, 3 March 2011

“Apple’s iPad 2 might be ‘magical’ but it still should’ve been better ... It needs more G’s. It’s still just a toy” Zach Epstein, Boy Genius 2 March 2011

“11 reasons NOT to buy an iPad 2 ... Reason 5: Competition David Gewirtz, ZDNet, 23 February 2011

“Given what I’ve seen of Honeycomb and Motorola’s excellent tablet, Cupertino will have some serious catching up to do with their iPad 2.” J.P. Mangalindan, Fortune, 4 February 2011

“We very carefully chose our tablet processor, the Nvidia Tegra 2, and to really compete it will take [Apple] some time. You know, [Nvidia] is well known for graphics.” Jonney Shih, Asustek Computer, 3 February 2011

“If you were to ask me in two years time, will Apple have less than 50 percent of the global tablet market, I think that’s a certainty. Neil Mawston, Strategy Analytics, 31 January 2011

“We have an extreme focus on the innovation of LePad and LePhone because these products will dominate the future market. Though Apple is winning a significant share in the Chinese market, it has not gained a clearly leading position yet. Our advantage is we know this market better.” Liu Chuanzhi, Lenovo, 27 January 2011

“The iPad may still be the lone leader, but with 100+ competitors on the way, it won’t likely keep its majority market share unless the pending next generation iPad really addresses all the complaints about the current version, like a missing camera and a lack of a USB port, and the company has to add those features without a major price increase - a tall order, to be sure.” James Brumley, Investopedia, 13 January 2011

“Hands-on PlayBook demonstrations at CES showed its differentiation in multitasking and performance, which may be difficult for Apple/Android to rival.” Mike Abramsky, Royal Bank of Canada Analyst, 11 January 2011

“Apple Inc.’s popular iPad is getting its strongest competition thus far as consumer-electronics manufacturers unveil tablet computers with bigger screens, front-facing cameras for video chatting and more.” Rachel Metz, AP Technology Writer, 3 January 2011

Apple may be simply trying to get in ahead of Research in Motion’s aggressively priced PlayBook or combat the early success of Samsung’s Galaxy Tab.” Rick Aristotle Munarriz, The Street, 29 December 2010

4. Competitors are coming. Brett Arends, Wall Street Journal, 22 December 2010

Reason 6: WiFi is still unreliable David Gewirtz, ZDNet, 16 December 2010

“I can’t imagine anyone under the age of 30 wanting an iPad. A PS3, Wii, GameBoy, or even a useful laptop maybe, but an iPad? Furthermore, I do not recall ever seeing anyone under 30 actually using an iPad.” John C. Dvorak, PC Mag, 13 December 2010

“We hope our tablet PCs can reach a global market share of 10-20% initially, and become the market leader in two to three years.” Gianfranco Lanci, CEO and President, Acer, 26 November 2010

“It’s a nice-to-have product, for those of us who don’t have a budget, but is it a must-have product? I don’t think so.” Ashok Kumar, Analyst, Rodman & Renshaw LLC, 12 November 2010

“Steve Jobs never says anything without thinking through it carefully. But I think in this case he may be a little afraid of this category. And he’s finding whatever he can to attack because he sees [seven-inch tablets] as a challenge to the dominance of the iPad.” Adam Hanin, VP Marketing, Viewsonic, 1 November 2010

“There could literally be millions of first-generation iPads gathering dust in people’s home offices already. This product is the tech industry’s biggest MacGuffin yet.” Paul Thurrott, Windows IT Pro, 23 October 2010

“I cannot see a need for the thing.”John Dvorak, MarketWatch, 22 October 2010

”For those of us who live outside of Apple’s distortion field, we know that 7″ tablets will actually be a big portion of the market and we know that Adobe Flash support actually matters to customers who want a real web experience.” Jim Balsillie, Research In Motion, 20 October 2010

“iPhone and iPad have been amazing products that have opened new markets. But I do not think they will own either market in a few years. Android will.” Fred Wilson, AVC.com, 18 October 2010

“The constant search for an ‘iPad killer’ and the sheer multitude of tablet computers launching in the next 18 months should make Apple aware that its competition is fierce and will only become tougher.” Barbara E. Hernandez, PCWorld, 5 October 2010

“HP’s New Tablet Could Be an iPad Spoiler HP’s decision to bundle a tablet computer with its new $399 printer could make trouble for competitors.” Cliff Edwards and Aaron Ricadela, Bloomberg Businessweek, 23 September 2010

“Our tablet will be better than the iPad.” Chang Ma, VP Marketing, LG, 20 August 2010

“Not only is Apple typically lost in the enterprise, but it focuses very little of its time there. And with a new, potentially more compelling tablet coming — the Cisco Cius — the iPad’s success in the corporate world could be short-lived. Here’s why:... 10 The power of Windows” Don Reisinger, Channel Insider, 5 August 2010

“I don’t think there is one size that fits all…I’ve been to too many meetings with journalists who spent the first 10 minutes of the meeting setting up iPad to look like a laptop.” Steve Ballmer, Microsoft, 29 July 2010

“ [...] It still isn’t the device that I’d take to a meeting because it has no input.” Bill Gates, Microsoft, 2 June 2010

“Which means I end up on the iPad — and tablets more generally — where I started. Tablets will not create a new category, but will supplant (or merge with) one or more of the current substitutes: smartphones or netbooks.Here I am less optimistic about the iPhone and webOS than I am about Android. ” Joel West, professor of Innovation & Entrepreneurship, College of Business at San José State University, 30 May 2010

“The iPad is useless. Beautiful, but useless. The iPad is too heavy. It’s awkward to hold and view in public. It’s fragile. It requires expensive accessories to protect it and extract more functionality. ”Josh Belzman, MSNBC.com, 20 May 2010

“Mum, the iPad is not ‘amazing.’ It’s just marketed very well, both by Apple and its culpable partners in mainstream media. ” Paul Thurrott (in response to comment by Mum), Paul Thurrott’s Super Site for Windows, 26 April 2010

“In short, I don’t get the ‘magical and revolutionary’ vibe that Apple chief executive Steve Jobs touted at the iPad’s January unveiling.” Rob Pegoraro, Washington Post, 9 April 2010

“The first troubling sign is the fact that you can still get an iPad today. They didn’t sell out. The pure slate form factor has failed all these years because, other than for vertical applications, people want and/or need a keyboard for regular use. The fact of the matter is that a touch screen or bluetooth keyboard just doesn’t compensate.” Jonathan Yarmis, Ovum, part of Datamonitor Group, 6 April 2010

“I don’t get it. It costs $500 for the basic model, when you could get a laptop with a lot more functionality for about the same price. The iPad hype machine has been in full effect this week, and I still think it’s just that—hype. ” Alex Cook, Frontier Outlook, 3 April 2010

“As far as what this means to Apple, one thing to keep in mind: Even if the iPad sells more than the iPhone did in its first year, it’s still only around 5% of the company’s revenue. So it’s a very small slice. From there, it probably doesn’t grow as large as the smartphone market. So, if you’re buying under rumors, keep perspective in mind. The iPad’s a great product, but it’s probably not a game-changer.” Eric Bleeker, Analyst, Fool.com, 31 March 2010

“The iPad will remain an expensive, niche device compared to all-purpose netbooks.I think that one of the iPad’s most important uses will be for reading ebooks and publications. Even so, though, when it comes to the marketplace, netbooks will sales still far outstrip those of the iPad.” Preston Gralla, PC World, 30 March 2010

“Don’t Believe the iPad Hype. Apple has sold out pre-orders of the forthcoming device, but it could all be a marketing tactic. By not manufacturing enough iPads for the initial launch date, is this a case of Apple shooting itself in the foot?” Mike Schuster, Minyanville.com, 29 March 2010

“‘iPad Killer’ May be Palm’s Last Hope”Tom Bradley, PC World, 20 March 2010

“Even if your company has relented and now supports the iPhone, as growing numbers of businesses do (70% of the Fortune 100 are at least testing it, says Apple) you’ll want to say “No” to the iPad and other tablets. Here’s why: 8. Speaking of money, there is no money in the company budget to pay for iPads. 9. Not supporting iPad will be the enterprise norm. Robert McGarvey, CIO Update, 16 March 2010

“This morning, the fool’s parade gets started. Apple is taking online “pre-orders” for its iPad tablet, which is supposed to begin shipping on April 3. Buying a new kind of product sight unseen is foolish. Especially given how mysterious Apple has been on what the iPad can do and what restrictions on capabilities and media access it will place on users and content providers.” Galen Gruman, InfoWorld, 12 March 2010

“The recent launch of Apple, the iPad tablet, has won the award for the second edition of Fiasco Awards delivered this Thursday in Barcelona. From the more than 7,000 people who voted via the website www.fiascoawards.com, 4,325 have considered it the fiasco of the year. Fiasco Awards, 2010, 11 March 2010

“I think I’ve mentioned this once or twice before, but it bears repeating until it sinks in: the Apple iPad is not unique, nor necessarily the best of breed in the media tablet sector it is spearheading. And it ain’t gonna help Apple shareholders any.’” Anders Bylund (TMF Zahrim), 11 March 2010

From this critical review, it looks like 2011 will indeed be the year of the iPad 2.

Who is Winning the U.S. Smartphone Battle? | Nielsen Wire.

This is a great chart from Nielsen showing the split in manufacturer share by OS in US installed base. What I consider significant is how the modular software platforms Windows Mobile and Android worked out for the licensees.

Whereas in the case of Windows Mobile HTC took a significant, nearly dominant share, the Android ecosystem was more balanced between HTC and Motorola. However, HP and Motorola left the Microsoft camps, Motorola going exclusively for Android and HP buying Palm. That leaves Microsoft with HTC, Samsung and Other (mainly LG I presume).

The question of how Windows Phone will shape up vs. Windows Mobile and Android remains. Motorola has signaled they are not interested in WP7 for the time being and so it's likely that they will stick with Android. Samsung is always hedging its bets so it will probably balance its portfolio. One could conceive of Nokia stepping into the US with significant WP volumes, but there are many hurdles on the way.

One can see the challenge individual modular vendors have to edge the overall volumes of the integrated vendors. As Nielsen points out:

But an analysis by manufacturer shows RIM and Apple to be the winners compared to other device makers since they are the only ones creating and selling smartphones with their respective operating systems

Not only are the volumes higher, but so are the margins and hence profit share.

In the last quarter Nokia sold 28.3 million Symbian phones. The average selling price was €156 or approximately $210. That price was down 17% year-on-year.

According to the company,

The 17% year-on-year decline in our converged mobile devices ASPs was mainly driven by general price erosion and an increase in the proportion of lower-priced converged mobile devices sales.

ASP erosion has been a fact of life across all of Nokia's products for quite some time, checked only by the increasing mix of smartphones. However the smartphones it sells have been consistently positioned for lower price points. This is consistent with Nokia's long-term goal of serving "billions" of users.

The trouble with the new strategy is that the Windows Phone product lines currently in the market are not likely to be priced in the $200 range. The reason is that the minimum specifications for Windows Phone 7 are:

• Capacitive, 4-point multi-touch screen with WVGA (480x800) resolution
• 1 GHz ARM v7 "Cortex/Scorpion" or better processor
• DirectX9 rendering-capable GPU
• 256 MB of RAM with at least 8 GB of Flash memory
• Accelerometer with compass, ambient light sensor, proximity sensor and Assisted GPS
• 5-megapixel camera with an LED flash

These don't add up to a product that can be sold profitably at $200. The bill of materials is likely to be in that range (and one has to add $15 for Microsoft).

So there are two possible implications for Nokia's new smartphone strategy.

1. Windows Phone will be ported to lower spec/cost hardware to allow the traditional Nokian market growth model to continue and perhaps combat Android proliferation
2. Nokia's smartphone portfolio will consist of high-priced products, and exclude mid-to-low price products.

Option 1 is difficult to imagine. The user experience that Microsoft is putting forward as its differentiation depends on significant hardware which is unlikely to become very cheap very soon. It is an interesting exercise to think through however. What would we have to believe for this option to become real?

Option 2 is more likely as Nokia conforms to this a new definition of smartphone as "high-end" only. This seems to be the default option given what is visible to observers today.

If Option 2 is in fact the outcome of the new strategy, then it leaves Nokia very vulnerable to a low-end disruption (after it's succumbed to a new market disruption.) The $50 smartphone will be reality this year.

Option 2 also most certainly guarantees that Nokia's current market share of 30% in smartphones is likely to be lost and never regained.

Some might argue that's no great loss. After all, Apple does very well with low share and high prices. However, Nokia is almost religious about market share. The reason being that scale offers significant purchasing power and logistical leverage. It sustains a cost structure, distribution network and a business model that is central to the company's core competency. It's also presumably the reason Microsoft partnered with Nokia in the first place: volumes and wide distribution.

So we're back to the old question: how does the new deal lead to a thriving ecosystem? Does it depend on vendors other than Nokia? If so how does Nokia benefit from the sale of Samsung phones?

• According to rumors, Huawei shipped 30 million phones last year. The target for this year is 60 million of which 15 will be smartphones.
• According to IDC ZTE is now the fourth largest mobile phone vendor with 51.8 million units in 2010. Assuming 70% for 2011, ZTE could ship 88 million units in 2011, 25 million of which would be smartphones.
• These data imply that ZTE and Huawei will ship nearly 150 million phones in 2011 of which 40 million would be smartphones.
• That would imply approximately 7% share of the global smartphone market for these two companies together.

What is remarkable about this is that the market share of these vendors was zero in the previous year.  It's hard to get comfortable with this market entry. The challenge for forecasters and analysts is that there is little history to draw upon. How will the entrants affect the rivalry between firms? Will the distribution be overlapping with incumbents or will the entrants be competing with non-consumption?

The only thing we can be certain of is that the adoption of smartphones is increasing at a faster rate than is foreseeable.

Stephen Elop stated that Nokia expects to sell approximately 150 million more Symbian devices before the transition to Windows Phone is complete. Assuming that figure is achievable (which is far from certain) I tried to understand how that figure will affect the volume and share numbers for Nokia in the coming years.

It's very likely that the first WP phones will not ship in large volumes until 2012. Product development cycles being what they are, unless there is an ODM rebranding (i.e. taking an HTC phone and gluing a Nokia sticker on it) the minimum development time is at least 12 months. Keep in mind that Nokia does not have engineers to build such a product today and hiring them alone can take months.

The following two charts show what a two year forecast that adds up to 150 million Symbian devices looks like. I assumed Windows Phones begin to ship in 2012 and, keeping in mind that WP7 is designed for a higher hardware specification than the current Symbian phones, I show a modest ramp for a total of 15 million units in the first year.

I also forecast the overall market assuming continuing growth levels and calculated the effect of Nokia's share.

The share at the end of 2012 would be approximately 6%.

Note however that the share above depends highly on Nokia selling 150 million Symbian units in the next two years. One could question why would anyone buy a product whose platform that's been declared end of life. Perhaps there is a built-in assumption that end users are inherently stupid. However even in that scenario the question is which distributors will make the same bet with Nokia? Or, even more perplexing, which operators are willing to stock EOL products for two years when that shelf space is getting strong bids from Nokia's rivals.

Picking up the discussion of vendor share, I used Canalys estimates of platform shares to visualize the effect of Android on the smartphone market:

Not wishing to belabor the point, but Android and iOS are less than 2 years old as platforms. In that time frame these two johnny-come-latelys have taken 50.2% of the most competitive technology market on the planet.

Here is the share data:

Since the market is not a zero-sum game, I prefer the first chart, but this second view stresses the transition away from incumbent "others" / Windows Mobile toward Android in the licensed OS market.

The final chart shows the competition against smartphone non-consumption. I like this chart best of all as it shows the effect of Android in growing the entire pie for smartphones.

What would have happened without Android is anyone's guess but my bet is that the market would not have grown as quickly. Apple is producing iPhones at capacity and RIM is growing into new markets. Symbian's strongest markets also do not overlap (much) with Android.

However, the trend seems to be for consolidation of platforms (fragmentation within platforms notwithstanding). This trend, however, is over a very short time span. The smartphone industry started a decade ago and the time frame shown in these charts is a mere 3.5 years.

The question remains whether the headroom visible in this chart still allows for new entrants or whether the platforms we see today are the last we'll ever see in mobile computing.

I'm still willing to bet that there is room for innovation and for new platforms. Just like the two newcomers that came to conquer half the market emerged seven years after its inception, new contenders like Windows Phone, Bada, MeeGo, WebOS can still make an impact.

The conquerors came with new business models and a focus on computing not telephony. Can factor innovation and the ubiquity of mobile broadband keep this market open to newcomers?

The smartphone market has grown threefold in the span of three years. However, as noted previously, the share of units running a licensed OS has not grown dramatically. The following chart shows the vendors' shares with the same brown/green dichotomy between licensed and unlicensed OS's.

In order to gain some insight into this licensed OS area (and who the "others" are) we need some visibility into which OSs are being licensed and what their shares are.

The following chart shows the share of the various licensed platforms[1]. (I blanked out the Integrated vendors.)

Before we dive in to understand the effect of Android, we have to understand the licensing of OSs in 2007.

The chart shows Windows Mobile and "Other" splitting the market. Windows Mobile is rather easy to understand. It was still growing as a platform and Ballmer was famously quoted in 2007 as saying he liked their strategy "a lot".

But "Other" is something of a mystery. What "Other" actually mostly meant was Symbian[2]. But not only the Symbian that Nokia was shipping and licensing to some vendors. At the time, Symbian also had a version called MOAP "Mobile Oriented Applications Platform" which was in use in Japan (somewhat analogous to the variants of Android now in use in China).

Fujitsu, Mitsubishi, Sony Ericsson and Sharp developed phones for NTT DoCoMo, using an interface developed specifically for DoCoMo's FOMA "Freedom of Mobile Access" network brand. This UI platform was based on the UI from earlier Fujitsu FOMA models[3]. The user could not install new C++ applications and therefore these were not platform devices, however the industry still included these units as "smartphones" .

So what we've witnessed in the last two to three years is the replacement of MOAP and Windows Mobile share with Android TAPAS and OMS.[4]

But, more significantly, when looking at the rise of Samsung and Motorola and HTC we were also witnessing the demise of Palm, Fujitsu, Mitsubishi and Sharp (plus a myriad of Windows Mobile licensees even larger than the Android army).

The significance here is that "other" in smartphones is still mostly about branded vendors. This is in stark contrast to the low-end of the phone market where “others” are quickly replacing branded vendors.

So we can conclude that the smartphone market is so far showing a distinct preference for branded vendors. The value of the brand is still evident. But ZTE and Huawei are quickly developing Android competencies. How long will it be before the branded vendors feel the pressure from the upstarts?

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Notes:

1. The Other category includes WebOS which was not licensed during this time frame but is not material enough in terms of share.
2. A few million units running flavors of Linux were also on the market in 2007/2008.
3. FOMA was also implemented with a Linux OS and the same UI.
4. It should be noted that except for Windows Mobile, all the licensed mobile OSs including LiMO and Symbian are now open source. Android's success is not therefore due to being the only OS that is "open".

The smartphone market grew to about 100 million units last quarter. That's nearly double what it was a year earlier and triple what it was three years earlier, the year the iPhone made its debut.

Few markets grow this quickly, especially as this tripling happened during one of the worst recessions for a century. 100 million units a quarter is not a small number. The rate at which smartphones are growing makes clear the trajectory of where all phones are going.

As I've shown in profitability charts, vendors have been benefiting to differing degrees. The overall smartphone market with individual vendors is shown below:

I've used the color coding of shades of green for vendors which use their own operating systems and shades of brown for vendors which use a licensed operating system (licensees).

What remains interesting is how the share of licensed OS products has changed since 2007. I selected two snapshots in time: Q1 2008 and Q4 2010 and compared the shares that licensees were able to obtain.

The shares of licensees was then 36%, and is now 38%. Not a huge increase, but an increase nevertheless. In the last such analysis in Q3, the share of these vendors (which I also call "Modular") was actually lower than in early 2008.

RIM has held steady in terms of share. HTC has added a few points of share. Apple seems to have gained a healthy share which Nokia seems to have lost. Samsung and Motorola have certainly made a bigger mark in the last few quarters.

But I would caution that share comparisons when the market is growing at nearly 100% are not very meaningful. All vendors are increasing their sales, though a different rates. What would be more meaningful would be a "share of growth" measure where each vendor's increase in units is divided by the overall market's increase.

That analysis gives us the following chart. (I added Q1 2010 for comparison).

Samsung did very well, but surprisingly perhaps, so did Nokia, tying Apple for second place.

The licensees (whose pie slices have been exploded) added up to 52% of total growth (y/y) and the integrated vendors had 48%. A pretty even split.