Smart Phone Market Share And Forecast – A Bridge To The Internet Of Things

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Worldwide Smart Phone Market Update

• Smart Phones enjoy dramatic and continuous growth for their suppliers
• They are challenging PCs strongly as a client form factor
• They provide a bridge to a future dominated by the ‘Internet of Things’
• Replacement rates are faster than PCs, reducing the size of the installed base

In 2010

• 215 million Smart Phones worth $73 billion were shipped
• The installed base reached 392 million – over half the size of the PC base
• Apple dominates in terms of revenues and shipments
• Nokia shipped most
• The installed base of Symbian Smart Phones has only just been overtaken by iOS

In 2016

• 377 million will be shipped
• The market will be worth $153 billion
• The installed base will grow to 822 million, overtaking PCs
• The installed base of Android devices will overtake iOS – but only in 2015
• Both Windows Phone and WebOS will become major platofrms

Smart Phones Are Part Of A Massive Mobile Handset Market

In the year to the end of Q1 2011 a total of 1.33 billion mobile phone handsets worth $191 billion ($US) were shipped: the fact that the annual growth in value (31%) significantly outstripped unit shipments (11%) is an indication of the success of Smart Phones, which we discuss, size and forecast in this paper. There are a number of important issues in assessing the market sizing, In particular:

• There is no common definition of ‘Smart Phone’ – if I was a manufacturer I would, of course, claim that all of my phones are ‘Smart’ and all others ‘Dumb’
• Shipments by operating system are difficult to calculate for as many suppliers offer multiple choices on multiple platforms

We have built our model each quarter from published results of the major players and use our expertise to extrapolate installed base numbers. We study a number of other ITC offerings, which help in fitting the enclosed forecast into context. We have a full set of data on this market available for our customers to use in addition to this paper, including details by country, brand, industry sector and consumer v commercial user – so please contact us if you need more.

Apple Leads The Smart Phone Revenues, Nokia in Units

The worldwide Smart Phone business was worth $84 billion in the year to the end of Q1 2011. Market shares for the devices are shown in Figure 1. Apple has been the most important vendor since its introduction of the iPhone and had the leadership position, with its revenues of $37 billion accounting for a staggering 44% of the market. Its offerings virtually define the market and its share is significant – equivalent to the best share HP has achieved in the x86 server market in its best periods. It was followed by RIM, who has pushed hard and succeeded in establishing the Blackberry as a consumer product. Nokia follows in third position and leads in terms of unit sales – having sold 65.8 million of its high-end handsets in the year. Samsung, HTC and LG follow in terms of units – having turned to Google’s Android operating system to reinvigorate their own businesses. HP’s phones appear in the market share for the first time and the company has great hopes for its WebOS operating systems inherited from its acquisition of Palm (which we have bracketed with it since it was a vendor in its own right at the beginning of the period.

Smart Phone Operating Systems are Dominated By Apple’s iOS

Smart Phone operating systems are important when we look at Internet access and the use of these devices as part of wider application and server applications. The development of operating system revenues is shown in Figure 2. Again Apple dominates and, as the only supplier of its iOS, is growing faster than others. You should note that we have not included its iPad business here, as we intend to provide an overview of Smart Tablets in a later paper.
Of the other operating systems – important for the development of software applications typically sold and distributed from ‘app stores’ – RIM’s Blackberry is the next most important, followed by Android and Symbian. It’s important to note that each version of these operating systems creates a hurdle for application providers, as they tend not to be backwards- compatible. Microsoft in particular, with its Windows Phone operating systems, has provided difficult transitions for those adopting it. It will be interesting to see how Nokia’s new strategy to move away from Symbian and Meego to Windows Phone 7 will be affected by future transitions of course.

Not all of these revenues are for connected devices, nor are they all used for accessing corporate applications: however they all provide enterprises with the challenge of accommodating their users, especially those Generation Y employees who expect to be able to use their own phones for social media and other communications at work. Software developers need to know the sizes of these environments in order
to plan their products. When we interviewed Morodo for instance, it indicated that it develops software for 47 vendors, covering around 1.5k handsets.

The Smart Phone Installed Base Has Reached 419 Million

Of course describing the number of mobile devices in use as an ‘installed base’ is somewhat problematic in terms of semantics: nevertheless in total the 235 million shipments of Smart Phones created an installed base of 419 million. The development of unit shipments and installed base is shown in Figure 3. Our research suggests that Smart Phones have a shorter replacement cycle than PCs and have built our comparative calculations on them all falling out of use within five as opposed to eight years.
These challenge the PC as a client device, which had 659 million installed at the end of Q1 2011. There are essential differences between the two platforms. Smart Phones all have mobility-by-design and the greater number of involuntary uses: their users tend to be more ‘consumers’ of apps, rather than ‘producers’ of conventional data. The PC, on the other hand, is designed for local processing and is differentiated by having a full-sized computer keyboard: its users tend to be more ‘producers’ in the traditional sense. They have a clear lead in graphical applications, which their chip producers Intel and AMD intend to exploit incoming years. As we move towards applications using unintentional inputs from metering and location tracking, so the Smart Phone will grow in importance.

Apple’s iOS Operating Environment Will Be Overtaken By Google’s Android… Eventually

ITCandor’s market forecasting includes looking at Smart Phone operating system platforms – the development of which is shown in Figure 4. The installed base moves more slowly than shipments and, despite its surge, Apple’s iOS has only just overtaken Nokia’s Symbian platform in Q1 2100. Nokia’s move away from Symbian is significant in suggesting it is more a component of a feature phone than a
gateway into app stores. In fact the total installed base of Symbian devices is much larger than these shown here, since it is also used on handsets Nokia does not define as ‘smart’.
We believe that iOs will dominate as an operating environment until 2015, when Android will finally overtake it. Blackberry OS is expected to remain as the third largest platform in terms of installed base, while Windows Mobile and WebOS will grow significantly. Understanding the size and development of each operating systems installed base is essential for software companies planning to address advanced applications and infrastructure companies working to integrate Smart Phones into corporate applications. We have only included top line numbers in the enclosed charts – please contact us if you’re interested in looking at these numbers in a pivot table with country-level details.

Some Conclusions – The Smart Phone Is Becoming The Most Important Client Device

In future the Internet of 2011 will be considered archaic in having been dependent on deliberate user interactions via traditional keyboard input. By 2016 many previously analogue processes will have been digitised and we be living in a world dominated by ‘the Internet of Things’. Smart Phones provide a bridge from the traditional PC world; they all tend to have some form of keyboard, which allow users some levels of traditional interaction; they also all include inbuilt cameras from which to capture photographs and videos, although editing and transcoding looks likely to remain in the realm of the PC for some time to come.
For businesses Smart Phones provide major challenges, as young employees expect to be able to use them to access corporate applications and databases. IT managers can’t merely ignore their use and need to address data privacy, the separation of private and corporate worlds, security and data protection issues. We hope that by focusing on their revenue, shipment and installed base statistics ITCandor can help them prioritise and plan for the new world.
As always we are very keen to know our readers’ reactions – so please contact us by commenting below.