Mobile devices in Q2 2018 – ‘smart’ dominates, but we need something more secure

You cannot ignore the importance of this market; for instance… each day in the last year we spent an average of a billion dollars on 3.8 million mobile devices, resulting in the equivalent* of 18% of the world’s population purchasing a mobile phone tablet or smart wearable by the end of June… adding those to the ones we already had means that the equivalent* of 42% of us had some sort of device… on average we each spent $44 on devices and $155 on telecom services to make them work in the year.

My Figure shows the development of the market by type from 2004 by quarter on a rolling 4-quarter basis. It shows that annual basic (or ‘feature’) phone shipments were more successful than ‘smart’ ones – sustaining annual shipments of over a billion for most quarters between 2007 and 2012. The decline in those products heralded the current era in which intelligent devices giving us a portal into the digital world became predominant.

In the early days of smart phones analysts argued about their operating systems and whether iOS (only available on Apple’s products) or Google’s Android (available on almost all other suppliers’) would win; in essence both opinions proved correct as Apple (now valued at over $1 trillion) takes the biggest revenue (46% of all mobile devices – not just the ‘smart’ ones) and Android – the vast majority of shipments.

At the moment Samsung is a strong number one in shipments and number two in revenues, but I doubt it will keep up against Chinese competition; Huawei, BBK (which owns the OnePlus, Oppo and Vivo brands), ZTE, Xiaomi and Lenovo are growing their businesses much faster, spurred on by much greater demand in Asia Pacific. I show annual market shares by type and spending and market shares for unit shipments in my Figure.

On a regional basis Asia Pacific played ‘catch up’ in 2011-12, overtaking the Americas and EMEA as the largest consumer of mobile devices (see Figure). Since then shipments have been more attuned to regional population numbers. Their declining shipment levels in all areas is an indication of their success – most country markets have reached maturity leaving few underpenetrated areas (such as China, India and some parts of Africa).

Looking to the future there are a number of significant challenges for mobile device manufacturers. In particular:

• Data protection and privacy – the trading of your personal data by mobile device suppliers and their social media partners now needs to be done with your express permission under GDPR and other data protection legislation.
• Moore’s law – we can’t expect the huge improvements in technical performance we’ve seen in the last 10 years to continue as component miniaturisation gets closer to the atomic level.
• Scale economies and partnerships – there are very few component suppliers to choose from if you’re an up and coming mobile device vendor, while huge and increasing sums of money are needed if you want to compete with them.

This is a Far East/US market from a vendor point of view – Europe has been devoid of suppliers since Nokia sold its mobile phone business to Microsoft in 2013. In an interesting move a group of its ex-Nokia execs have bought the rights to introduce new versions its once world-dominant feature phones, although it will be almost impossible for these to emulate their past success.

Looking back at this market in 10 years time I hope this generation of ‘smart’ devices will have been replaced by something better – secure devices which make money for their users should they choose to share some of their personal details with suppliers.

Notes*: I use ‘equivalent’ in this post because of course many wealthier people have multiple devices, while many more than 58% have none.