In the latest quarter it was reported by CNet that 95% of all handset revenues went to two vendors: Apple and Samsung. Many would decry this type of market share by just two vendors. But those who do are the insiders who are crying foul because they are ineffective at competing. The HTC’s. Nokia’s and LG’s of the world to name but a few. My sympathy’s are a bit muted for these other competitors as they can only blame themselves for the predicament they find themselves in. I guess what a find most surprising is not the former but the latter. Samsung seems to have really cornered the Google Android market. I can’t say I ever forecast-ed one handset vendor being dominant with a OS that is controlled by Google. Apple on the other hand is something we more or less expect, except that they routinely seem to blow away our expectations
Samsung has done an excellent job in marketing its flagship Galaxy product line. I think if you asked anyone “name an Android Tablet or smart phone”, Samsung’s Galaxy would most likely be the first word out of people’s mouths. Certainly there are many tablets out there that run Android. But when I look at tho leading manufacturers besides Samsung, most are desktop and laptop vendors turned. I see names such as ASUS (I currently have a ASUS laptop running Windows 7), Sony, Toshiba, Lenovo, etc..Very few Smartphone vendors shipping Tablets. I think when you think about where do people buy mobile devices a lot buy through their carrier. An area where Samsung has strong historical ties and the vendors named do not. It has been impressive that Samsung has emerged the strongest, by a good stretch in the Android space. The model Google has is similar to how Microsoft created the OEM channel for PC’s. The difference is no one OEM accumulated so much market share as to make the other players seem small and insignificant. It was a vibrant partner ecosystem, something that I am sure Google looks at and see’s Samsung threatening. Google is now rumored to be looking at manufacturing their own tablet. I am not so sure this is a good idea, not to mention I can think of no company that picked a particular business model; and transitioned to a different model. Apple always did everything soup to nuts from its earliest days. Microsoft always looked to partners to deliver consumer value. It will be interesting to watch what Samsung;’s reaction to this will be.
That leads to the next real question which will be does Samsung lead in competing against Apple or does Google? From a revenue standpoint it is Samsung as they manufacture the devices that people will be buying. However from a strategic perspective Google owns the Android OS and is looking to leverage device manufactures to enhance and drive mobile search, which in the end is where the big revenue lies for Google. As I wrote a few weeks ago this is projected to be a $20 billion market by 2015. In my view Google should stick to its core strength rather than stretch itself into direct competition with partners like Samsung. However like so many things in enterprise America, egos enter in and in many instances poor strategic decisions are made.
Apple is the real behemoth here, make no mistake. Of the 95% revenue share, Apple has 80% of the revenues. This is primarily being generated by the Apple iPhone 4s. I find that in and of itself amazing as the 4s is what I deem a point release, not a major release. It shows the tremendous love consumers have for Apple. Wall Street also loves them as Apple is being projected to become the first company with a market value of one trillion. With the pending announcement of the next release of the iPhone 5 it seems full steam ahead for Apple. I take some comfort in Samsung’s numbers as Apple needs some stiff competition to at the every least keep them focused on delivering the next generation products.
A serious question I have been thing about in this space is what happened to Research in Motion? Early in the smartphone space they were king and now when we talk Smartphones and RIM we speak of an also ran. The same can be said of Microsoft/Nokia. I think both these groups were guilty of the same thing which was narrowing the market to business versus consumer. I am not sure they filly grasped what a phone was. It was simply a platform for developers. In et end what makes a great business phone is the applications that it runs and the functionality it gives the end-user. There is nothing that prevents a iOS developer or Android developer from creating a great business application. That is why you see both Apple and Samsung being increasingly used as the preferred device of enterprise customers. In my mind the functionality that a phone will provide is just a function of feature creep. It is not, nor has it ever been a question of is it a business phone or a consumer phone. When you buy a laptop do you distinguish between a consumer laptop and a business laptop?
Currently we see a two-horse race and there are some who hope we can have a fuller field with which to have the race. The carriers would like to see more choice rather than just a couple controlling the ecosystem. Microsoft, Nokia and RIM would love to be the third choice for consumers and provide an ecosystem as vibrant as Apple and Google. I see the carriers being at the whim of the innovation that comes from the tech sector. It’s in the DNA of the Silicon Valley, to think big and think outside of the box The carriers track record of being cutting edge on innovation is spotty as best. Where they do well is building out the networks we need to connect. As far as a third ecosystem I can see that happening I am just not so sure that the aforementioned vendors, Microsoft, Nokia and RIM are the ones that can pull it off. I see it more likely a “new” entrant could rock the world of the valley, Maybe Facebook? Twitter? a new start-up? All these are more likely in my opinion. The inky thing I can guarantee things will change and when they do it will happen quickly.
Good Night and Good Luck
Hans Henrik Hoffmann April 3, 2012
Hans Hoffmann's Blog 