Monday, July 8, 2013

Smartphone Market Saturation

To me, there's two types of smartphone user:  Those that will pay for a good smartphone experience, and those that won't.  You can then divide these users as follows:

Paying:  Apple, Microsoft and Blackberry
Non-Paying:  Anything Android related (Samsung, HTC, etc).

We've been hearing for quite some time, the argument between the two sides of this divide…  In the one camp, you have people that sit loyally by their chosen brand, be it Blackberry or Apple. In the other camp are those that have no real brand loyalty and they are quite vocal about not understanding why people are willing to pay so much for an iPhone, for instance.

Quite rightly, this larger Android group has been saying for a while that sales of their cheaper phones are outpacing the sales figures of Apple's. 

Quite rightly, they say that the Android platform has put the smartphone in more people's hands as it's more accessible financially to people.  

Quite rightly, they say there is more choice to choose from, as you have brands like HTC, ZTE, Huawei and Samsung clamouring to win over the same group of people.  

Choice is good for the consumer, right?  Well, not quite.

Anyone that pays attention has noticed a few things:
1)  When a new Apple iPhone comes out, the same people are paying a premium and buying the new model.
2)  When a new Android phone comes out, people wonder if they can swing a free upgrade/major discount or not.  

In short, the Android market is saturated by people with cheap phones that they largely didn't pay much for (Canadians excluded, as the carriers will hose them at every opportunity, including staying with them for another few years), and aren't willing to prematurely pay to upgrade from.

This is leading to a totally foreseeable outcome:  Look at the earnings reports now coming out of these manufacturers.

HTC:  In the second quarter of 2013, HTC reported profits of 1.25 billion New Taiwan dollars ($41.6 million), down from NT$7.40 billion the year before and well below analysts' pessimistic expectations. Revenues fell 22 per cent to NT$70.7 billion ($2.33bn) and HTC's shares fell on late trading after the figures were released.

Samsung:  Their flagship subsidiary (which makes TVs, chips, phones and more) is once again expecting record-breaking quarterly results, but its projected £5.4bn ($8bn) operating profit is just not big enough to assuage shareholders' fears: the company's mobile growth is slowing and the stock fell 3.24 per cent to 1.226m won a piece (£715, $1,070).

You can guess how this will continue...