For a long while, it’s been obvious that there has been a huge shift in the mobile industry. Back in 2006, in a world pre-iPhone and pre-Android, Nokia, Samsung, and even Motorola and Sony Ericsson were the queens of the hive, strolling around the industry like nothing else mattered. Then, on January 9th 2007, Apple held the keynote announcement to end all announcements and changed the face of the industry forever. Suddenly, it no longer was about raw hardware prowess, technical specifications, or who has the most buttons, it was about interacting with your phone, beautiful interface design, and limited albeit flawless processes.
I’ve been looking for graphs that show how the industry evolved since the fateful June 2007 day when the announced iPhone began shipping, because I know the numbers and shifts are extraordinary, but nothing can beat visualizing it all, until I lately came across Horace Dediu’s work on asymco (thanks to a link on TiPb). In a series of posts, Horace points out the shifts in the mobile industry between 2007 and 2010, in terms of market share, sales share, average selling price, operating margins, profit share before closing it all with a comparison of market vs profit share between all vendors.
While all of Horace’s graphs and analysis are worth looking at and dwelling over, here are the ones that I found interesting to remember.
Motorola and Sony Ericsson Lose The Market Share Game
Between 2007 and 2010, across the mobile industry, smartphones and non-smartphones combined, Motorola and Sony Ericsson have respectively gone from 13% to 3% and 9% to 3% in terms of market share. Nokia’s non-smartphones also registered a drop in share from 33% to 27%, while their smartphones rose from 5% to 7%. Those losses translate into gains by Samsung, RIM, Apple, HTC, and other vendors, mostly represented by chinese manufacturers.
Where’s The Money? Hint: With RIM & Apple
In the previous graph, Apple & RIM grew from a combined market share of around 1% to over 6%. But it’s only when you look at their sales share (ie the money $$$), that you notice how big of a mouthful they bit out of the pie. Together they account for 26% of the sale money now, whereas they were running around 3% in 2007. In terms of sales, they now together almost equal Nokia.
Nokia & Samsung’s Selling Price Slides, Motorola and Apple’s Rises
It’s not all gloom and doom in the land of Motorola, apparently, as their average selling price (ASP) for each mobile phone has almost doubled since 2007, when they were still relevant. This can be explained by their shift from so-called “dumbphones” to Android smartphones almost exclusively in the last quarters. Apple have also raised their ASP by almost 100$, this is due in my opinion to the multiple iPhone versions with more storage (16GB and 32GB). Also notice how Apple’s ASP is well over the “99$” subsidized operator price. No, people, an iPhone does not cost a 100$, you’re paying the other 500$ over the length of your contracts. On the other end of the spectrum, we see Nokia’s ASP dipping way below 100$, while Samsung’s approaches 100$ after being in the 150$. It’s almost poetic how easy it is to spot that Nokia & Samsung are now battling it over the low range, while RIM and mostly Apple are kings of the high-range.
Thanks to that ASP, you can see the Operating Margins (OM) of RIM and Apple, leaving them comfortable in their zones, while Motorola and Sony Ericsson dipped well below the surface only to come back for a breath of air in the first half of 2010. Nokia’s OM has joined Samsung’s around the 10% level.
With Less Than 4% Of The Market, Apple Makes 48% Of The Profit
This is by far the most astonishing number to remember. Apple has 3% of the overall phone market share (check the first graph), ie less than 4% if you count out the combined “Others” category of small vendors, and only focus on the big 7 vendors. With this small market share, Apple manages to ooze out almost half the EBIT (Earnings before Interest and Taxation) profit: 48%. Quite remarkable. This might forever shut up everyone who is wondering why the investors are all on board the Apple train. It’s like a slot machine game with only one drawing. No matter how it turns, you’re always getting money out of it. Another interesting figure is RIM, with also 3% of the overall market share (ie also less than 4% of the big vendors) and 17% of the profit.
As for Nokia, in 2007, they had 38% of the market share (47.5% of the big vendors) and 63% of the profit. They were the kings to end all kings! Now, in 2010, they have 34% of the market share (42.5% of the big vendors) and 22% of the profit. It’s a downhill ride, mostly due to the big dip in their ASP and OM.
2007 vs 2010, Market & Profit, Winners & Losers
I spoiled the surprise in the last graph, talking about market share vs profit share, but you might want to look at the graph below. It could not be any clearer. You have your winners: Apple & RIM. You have your losers: Nokia & Sony Ericsson. And you have those who almost defy the logic: Motorola loses market share but gains profit (again, look at the spectacular rise in their ASP & OM to understand how they did it), Samsung and LG gain market share but lose profit (also, look at the dip in their ASP & OM).
From a personal opinion, I would argue that the healthiest of them all is RIM. Apple’s growth is spectacular but it is nearing its limits, unless variations of the iPhone are introduced, while RIM’s steady and logical growth leaves them with much more to look forward to.
Where Does It Leave Android And Windows Phone 7?
As Horace Dediu points out in several of his posts, Android is still the unknown factor in the game. It’s safe to assume that neither Nokia nor RIM nor Apple are looking at an Android handset any time soon (or ever in my opinion), so Android is very unlikely to align with the big market share holder or the big money makers. It’s stuck to the middle of the pie in both instances, with Samsung, HTC, Motorola, SE and LG. All 4 aren’t in their best shape now, Samsung and LG’s profits are dipping, SE is in a big loop of disaster, and while Motorola is finally making some dollars, it’s still insignificant in terms of market share. There are no movers and shakers in any of those, unless you count on a miracle to take HTC from their 1% market share and almost 0% profit share to a significant bite of the pies.
That is all nice hopes and dreams until you bring Windows Phone 7 into the equation. WP7 is aligning itself with almost the same crowd as Android: Samsung, LG, HTC, SE. Unlike what many analysts are saying, WP7 will not take a bite out of Apple’s, Nokia’s or RIM’s pies. If a dent will be made, it will be in all brotherly love inside the LG//SE/Samsung/HTC Android market.
This leaves me to one final observation. Remember the “others” category in the market share? Well, Android’s hopes, in my opinion, don’t rely on any of the big boys now, but on the small Chinese/Asian manufacturers, who are growing at a nice rate. Thanks to Android’s free nature, these manufacturers have a nice OS they can slap on top of their cheap (now, more expensive and sophisticated later, I’m willing to bet) devices and sell in millions. Unfortunately, WP7′s paid nature won’t give it this edge.
It will be fascinating to come back in 2013 and look back at the evolution of the mobile industry between now and then. I hope Horace has more of these graphs by then.
