Smartphone Wars

How the west was won ?

 Webinar presenters

Peter Richardson Tom Kang Neil Shah

Research Director, Research Director, Research Director,
Tech Strategies Mobile Devices Devices & Ecosystems

23 years experience in the 14 years in the 11 years in the

mobile industry, 15 years industry, 8 years with industry, 3 years
with Nokia, NEC, LG Electronics and LG with Philips
Panasonic Infocom Consumer Electronics

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 Rigorous Methodology = Depth & Accuracy
We implement our top-down/bottom-up techniques to provide fast, reliable and consistent
research, data and facts.

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 Key issues in this webinar

1. Who were the winners and losers in the smartphone

space – and what were the key drivers?

2. What does this imply for the future of both the

smartphone sector and also the broader connected
devices market?

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 Cellular handset installed base

Smartphones more than 50% of installed base

Cellular handset installed base

Smartphones Feature Phones Mobile Subscriptions
9,000.0 9,000.0

8,000.0 8,000.0

7,000.0 7,000.0

6,000.0 6,000.0

5,000.0 5,000.0

4,000.0 4,000.0

3,000.0 3,000.0

2,000.0 2,000.0

1,000.0 1,000.0

0.0 -
2010 2011 2012 2013 2014 2015 2016

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 Global Handset Market

Overall Market Growth (YoY): 8%

Smartphone Growth(YoY): 26%
Feature Phone Growth(YoY): -9%
Global Handset Market
Sales volume (Mn Units)

Smartphone Share
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 US Handset Market

Overall Market Growth (YoY): 0%

Smartphone Growth(YoY): 10%
Feature Phone Growth(YoY): -42%
US Handset Market
Sales volume (Mn Units)

Smartphone Share
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 Asia (ex-China) Handset Market

Overall Market Growth (YoY): 8%

Smartphone Growth(YoY): 36%
Feature Phone Growth(YoY): -9%

Smartphone Proportion of Sell Through

Smartphone Share
Sale (Mn)

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 Smartphone Market Share Development in 2014

Despite relative maturity much brand diversity remains

Smartphone Market Share 2014

Others Motorola Micromax LG ZTE

Microsoft/Nokia Huawei HTC Lenovo Xiaomi
Sony Apple Samsung
100%

90% 24% 22% 24% 22% 22%

26% 26% 24%
31% 30%
80%

70% 12% 11% 13%

14% 13% 15% 18% 18%
12% 12%
60% 4% 5%
5%
4% 4% 6% 6% 6% 6% 6%
4% 4% 5% 6%
50% 4% 5% 6% 5% 5%
4%
40%

30%

20%
26% 27% 29% 31% 27% 26%
25% 24% 25% 26%
10%

0%
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 Samsung Strategy

Samsung Flagship Strategy– Hero models with big screen back-up

Samsung Flagship Sales (life time)

Galaxy Note III Galaxy Note II GALAXY S III

GALAXY S 4 Galaxy Note 4 Galaxy S5

9
8
7 68M 81M 50M
(in millions of units)

6
5
4
3
2 48M
1 38M

0
Aug

Nov

Dec-14
Mar-13

Mar-14
Dec-13
Jun

Jan-13
Feb-13

Aug-13
Sep-13

Jan-14
Feb-14

Aug-14
Sep-14
Jul

Sep
Oct

Jun-13
Jul-13

Jun-14
Jul-14
Oct-13
Nov-13

Oct-14
Apr-13

Apr-14

Nov-14
May-12

Dec

May-13

May-14
* All variations included
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 Samsung Strategy

Samsung Flagship Strategy – fill gaps with ‘Mini’ versions

Samsung Flagship Sales

Galaxy Note III Galaxy Note II GALAXY S III GALAXY S III mini

9 GALAXY S 4 GALAXY S 4 mini Galaxy Note 4 Galaxy S5

8
7
(in millions of units)

6
5
4
3
2
1
0
Nov
Aug

Dec-13

Dec-14
Jun

Sep

Jan-13
Feb-13

Jun-13

Aug-13
Sep-13

Jan-14
Feb-14

Jun-14

Aug-14
Sep-14
Jul

Oct

Jul-13

Jul-14
Mar-13

Oct-13

Oct-14
Apr-13

Nov-13

Mar-14
Apr-14

Nov-14
May-12

Dec

May-13

May-14 * All variations included

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 The iPhone – a competitive WMD

Apple trumps Samsung at the high end – doesn’t care about low end

iPhone 6 - bigger better and faster

Samsung Samsung Samsung Samsung Apple

Apple Galaxy Note 4 iPhone 6 iPhone 6+ Galaxy S5

16
14
12
(in millions of units)

10
8
6
4
2
0
Jan-13

Jan-14
Aug

Nov

Feb-13

Dec-13

Aug-14
Sep-14

Dec-14
Jun

Jun-13

Aug-13
Sep-13

Feb-14
Jul

Sep
Oct

Jul-13

Jun-14
Jul-14
Apr-13

Nov-13

Apr-14

Nov-14
May-12

Dec

Mar-13

May-13

Oct-13

Mar-14

May-14

Oct-14
* All variations included
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 SKU Comparison

Is the future in minimalistic portfolios?

Average Revenue per SKU

Size of the Circle Indicate Avg. Revenue / SKU

Smartphone Revenue (US$ Bn)

4826.6

151.4

486.4 42.0
305.5 25.2 24.6
110.4

No of SKU * Only Active SKU Included

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 Samsung: temporary dip or permanent decline?

The environment is very different than when Nokia ruled the industry

Samsung Lifecycle

First Invincible
Peak Trough Recovery Period
(T+10) (T+15) (T+18) (T+30)

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 Smartphone Feature Adoption

All products converging on similar feature sets

Smartphone Feature Adoption

5” above Displays (%) 8M Pixel above Cameras (%) Quad Cores (%) LTE (%)
80%

70%

60%

50%

40%

30%
Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

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 Android Display Size Analysis

5 inch display sweet spot

Display Size for $200~$399 Price band

5.5~ 5.0~5.49 4.5~4.99 4.0~4.49 ~3.99

100%
10% 14% 14% 16%
90% 19% 21% 23% 22%
27% 26% 27% 24% 23% 25% 27% 25% 28%
80% 16%
17% 21%
20%
70% 23%
29% 30% 28%
60% 28%
35% 40% 39% 47%
35% 40% 49%
50%
36% 36% 52% 54% 46%
40% 34%
29% 27% 31%
30% 30%
20% 36% 33%
20% 21% 24%
22% 18%
24% 27% 15% 17% 23%
10% 22% 19% 20% 18%
15% 14% 12% 12% 8% 8%
0% 3% 2% 3% 1% 1% 1% 1% 1% 0% 1% 1% 1% 1% 0% 5% 0% 4%
0% 2%
0%
Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
'14
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 Top 20 List: Phablets in 2014 (5” and larger)

Phablets
1 Samsung Galaxy S5
2 Samsung Galaxy Note 3
3 Xiaomi Redmi Note
4 Samsung Galaxy Note 4
5 Apple iPhone 6 Plus 16GB
6 LG G2
7 Apple iPhone 6 Plus
8 Samsung Galaxy Grand Neo
9 LG G3
10 Apple iPhone 6 Plus
11 Samsung Galaxy Grand 2
12 Samsung Galaxy S5 16GB
13 Sony Xperia Z2
14 Samsung Galaxy Mega 5.8
15 Huawei B199
16 Samsung Galaxy Grand 2 Duos
17 Samsung Galaxy Note 3 Neo
18 LG G Pro Lite
19 ZTE nubia Z7 Max
20 Apple iPhone 6 Plus

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 LTE Phablets Growing By Leaps & Bounds

Phablets (5”+) penetration rose from a third to almost two-thirds of the total
global LTE smartphone sales in 2014

LTE Smartphone Sales by Display Size

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 Expanding Internal Memory Capacity

This is great news for memory intensive content and app developers as well as
component players

Smartphone Sales by RAM (GB)

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 Thin is In

Gionee Elife S5.5 Gionee Elife S5.1 Vivo X5 Max Coolpad Ivvi K1 mini

5.5 5.1 4.75 4.7

Smartphone Comparison by Thickness

4.5-5.0 5.0-5.5 5.5-6.0 6.0-6.5 6.5-7.0 7.0-8.0 8.0-9.0 9.0-10.0 10+

100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2014(A)% 2015(P)% 2016(P)%

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 Top 20 List: Thin is in

Thin smartphones that are less than 7mm

1 Apple iPhone 6 16GB
2 Huawei Ascend P7
3 Samsung Galaxy Alpha
4 Sony Xperia Z Ultra
5 Huawei Ascend P6
6 Gionee ELIFE S5.5
7 Lenovo S968T
8 Alcatel One Touch Idol Ultra
9 Huawei Ascend P6S
10 Huawei G700
11 BBK vivo X3L
12 Huawei P6-C00
13 Alcatel One Touch Idol X
14 Vivo X3t
15 Vivo X3S
16 Lenovo VIBE X S960 IdeaPhone
17 Alcatel One Touch 6040X
18 Karbonn Titanium Hexa
19 Lava XOLO Q1000S
20 Lava Xolo Q1200

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 Bestsellers by each price band in 2014
Sub $100 $100-$199
Brand Model Brand Model
Nokia 301 Xiaomi Redmi
Nokia 206 Motorola Moto G
Samsung Galaxy Fame Samsung S3 mini
Nokia Lumia 520 Huawei Honor 3C
Samsung Star Pro Duos Nokia 515
3.5-4” Display 5M Camera 4.5” Display 5-8M Camera

Single Core 4 band 3G 1300 mAh Dual Core HSPA (3.9G) 1600 mAh

$200-$299 $300-$399
Brand Model Brand Model
Xiaomi Mi 3 Samsung Galaxy S4
Xiaomi Redmi Note Apple iPhone 4S
Samsung Galaxy S4 Mini Xiaomi Mi 4
Samsung Galaxy Grand 2 LG G2
Samsung Galaxy Mega Sony Xperia Z1
5” Display 10M Camera 5.2” Display 13M Camera 2G RAM

Quad Core LTE 4G 2000 mAh Quad Core LTE 4G 2200 mAh

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 Hardware as a Differentiator..?

Different brands – similar specs – massive price disparity

Hardware Spec

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 Brand as differentiator…?

Projected Handset Shipments - 2015

Indian OEMs Chinese OEMs Other OEMs

35M 75M 16M

29M 15M
21M
13M
18M
17M 10M
12M
14M 9M
11M
8M 8M
10M
6M
3M
7M
4M
3M
5M
3M
2M
3M 2M

2M 2M
3M

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 More and more computers coming

Smartphones will only be 50% of the mobile computers in the future

Connected Mobile Computing devices

* Devices with a 500MHz processor and connectivity

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 Conclusions
1 Smartphone growth in mature markets is flattening.

2 Smartphone growth in emerging markets remains strong

3 Android and iOS have divided share

4 Apple margins are huge, Android vendors’ are not – vertical integration wins but is hard to
replicate

5 Samsung is unlikely to regain lost share due to strategic missteps

6 Alternative OS platforms missed the boat, it isn’t coming back – yet

7 Hardware ≠ Differentiator

8 Traditional brands remain relevant but are marginalized by local players

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 Questions?

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 Thank you
www.counterpointresearch.com

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