Apple’s iPhone is best bet to lead phone markets in the near future

Some history – Apple versus Samsung (oh … and Nokia)

Mobile handsets hit the common markets somewhere in the 1990’s. It is well-known that the late 1990’s and the early 2000’s belonged to Nokia. Everything mobile was something called a Communicator. Very soon, Palm and Motorola were in the fray. Somewhere, BlackBerry realized pagers were history and came up with RIM 850 (A history of BlackBerry in 9 iconic phones).

The mobile consumer battle was heating up – Samsung and Sony mobiles hit the market. Monochrome moved to Color. Someone put a flap on the mobile phone. There was a Pen device that could be used to simulate ‘touch’ on the phone. Mobile handsets toyed with the idea of a touch screen.

The good old Nokia Communicator

The good old Nokia Communicator

Then in 2007, something happened (iPhone 1 Launch). The iPhone was neither the first touchscreen phone nor really the first smart phone but it was a revolution. Even though the iPhone changed the market, it was way too expensive and not all consumers opted for it. Samsung and Apple hit markets around the same time – Samsung slightly earlier.

Timelines

Timelines

Lets not forget Operating Systems

Behind every handset, well….there is an Operating System. Even as the handset market changed, operating systems running these handset too underwent a transition. Nokia had Symbian and Samsung Bada. Apple continued to stick to iOS. Google announced Android soon after iPhone 1’s launch. Microsoft killed Windows Mobile and released something completely new (Windows Phone) a year later.

With these three operating systems now available, Mobile Apps were the next big thing. Most handset vendors had two options, either move to one of two (Android or WIndows) operating systems or woo customers with their own “smaller” app base. One thing was clear, only operating systems with a good app eco-system had a better chance of “survival”.


“Galaxy copied the iPhone,” – Chip Lutton, Apple’s Associate General Counsel in July, 2011

“How dare you accuse us of that! We’ve been building cell phones forever. We have our own patents, and Apple is probably violating some of those.” – Dr. Seungho Ahn, Samsung vice president’s reply


And soon, it was 2010

The Mobile market was headed for a three-way battle – Samsung, Nokia and Apple. Consumers were tempted to choose one of these three. True, other players still continued to hold their own (a Blackberry here or a Sony or a HTC there) but it was these three and then, the rest.

Nokia as the leader

Nokia as the leader

Even though Apple’s prices refused to come down, iPhones became very popular. First world countries adopted the iPhone quickly. Other countries too soon got interested through a niche market.

“Uber is efficiency with elegance on top. That’s why I buy an iPhone instead of an average cell phone, why I go to a nice restaurant and pay a little bit more. It’s for the experience.” – Travis Kalanick, American Entrepreneur


Other vendors, notably LG, Huawei and Xiaomi joined the race. Nokia’s decline had started. In 2011, Nokia went into a partnership with Microsoft. Two years later, Microsoft bought Nokia. After a decade and a half where Nokia lead the handset consumer market, it was over.

Nokia Sales decline as other vendors become stronger

Nokia Sales decline as other vendors become stronger

Lets review global handset sales over the last five years (courtesy IDC).

riod Samsung Apple Lenovo* Huawei LG Electronics Others
Q1 2015 24.6% 18.3% 5.6% 5.2% 4.6% 41.7%
Q1 2014 30.7% 15.2% 6.6% 4.7% 4.3% 38.6%
Q1 2013 31.5% 16.9% 4.7% 4.2% 4.7% 38.1%
Q1 2012 28.9% 22.9% 5.0% 3.4% 3.2% 36.6%
Smartphone vendors

Smartphone vendors

Operating systems have stabilized over the last 5 years. Android is the undisputed leader.

Period Android iOS Windows Phone BlackBerry OS Others
Q1 2015 78.0% 18.3% 2.7% 0.3% 0.7%
Q1 2014 81.2% 15.2% 2.5% 0.5% 0.7%
Q1 2013 75.5% 16.9% 3.2% 2.9% 1.5%
Q1 2012 59.2% 22.9% 2.0% 6.3% 9.5%
Operating System Market Share

Operating System Market Share

Now what?

Windows Mobile 10 (a new avatar of Windows Phone) is expected to be released in a few months from now. It will replace Windows Phones. Simultaneously, there will be no Nokia phones, only Microsoft phones. Samsung and Apple will continue to release newer versions of their Waves, Galaxies and iPhones.

Any 30+ age bracket consumer looking for their ‘reliable’ Nokia phone will have to make do with a Microsoft phone. If he or she does not accept Microsoft as a handset vendor, they will have few other choices. One option would be to switch to an iPhone or Samsung phone. Alternately, they could switch to older known names like LG or Motorola or perhaps try something new like the Xiaomi or Huawei.

Any ‘younger’ consumer, in the 18-30 age bracket exploring the handset market for the first time is more likely to be tempted with Apple’s snob iPhone market or switch over to new and exciting options like the Xiaomi. It is less likely they will use the ‘traditional’ handset vendor like Samsung or Motorola or Sony (unless these vendors come up with something trendy enough for this generation).

Statistics too have shown a similar pattern. Samsung handset sales have declined over the past year. Sales are down by 21% – BBC News. And guess who is eating into this share, phones from the emerging Chinese markets!  Samsung have unfortunately also lost their OS. They tried some operating systems over the last five years (including Windows Phone) and have settled with Android (Tizen though, will be an interesting development).

Android is popular and has a HUGE number of apps but that is what makes it, at times, unstable and unwieldy to manage. In terms of overall sales, Samsung are still are way ahead of Apple but given their decline, it may not mean much.

Apple on the other hand does not seem to be too badly hit by these market changes. They will continue to cater handsets to their niche or snob market. This market is likely to remain and even grow over the next few years. Their easy to use interface is helpful in getting new users to adapt and learn quickly. They manage their releases well and maintain quality.

Finally

Much as a Nokia or Microsoft fan would hope Windows Mobile 10 turns things around for them, it will be a tough hill to climb. Samsung continues to try different things to get its fast-reducing customer base back with them – if they lose more customers they will end up behind Apple.

Newer vendors like Xiaomi (from emerging markets) seem keen and raring to go, but there is enough competition for them already.

For now, Apple will continue to remain the best bet. At this stage, they are well placed and unless they screw things up, their handset / operating system combo offering can ensure they remain the top handset provider the next few years.

Now, if only they made affordable phones, things could be even more interesting!

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