Causality that shapes the mobile landscape | Barney Style

Monopoly on Money. You might as well get used to that mischaracterization. It’s going to get used to the point of ad nauseam, and it’s going to be followed by verbiage like:

  • Tax evasion
  • Child Slave labor
  • iSheep
  • Injustice

Some people will buy into it and some people won’t. It depends on how sensitive your head is to the stupid. 

-Jason Yeaman 

This is part 1 of 3 in a beginner series that compares and contrasts the different strategies deployed by Smartphone makers, and the impact those decisions made on shaping the current mobile landscape. If you were ever curious as to why things are the way they are but didn’t want to dive into granularity, I hope to make it a little easier for the neophyte to digest.

In this first installment (Part I of III) we are going to analyze OEM’s at the hardware platform level, in the context of the current state of the marketshare and financial components. This is specifically exclusive to the smartphone segment of mobile technology. In Part II, we will get into the Business model and Marketing strategy. In Part III, we will have enough background to discuss how the Operating System impacts the end user and the drivers behind cost, support, life-cycle, security and privacy.

Overview: Where the money goes.

There is a stark contrast between the business models of the top 5 Mobile Operating System creators in the context of the smartphone. Within this small group of companies we see alliance, convergence, duplicity, defection and even abandonment. But first, lets look at how the different hardware platforms impact the pot of money, created by consumer expenditure, on smartphones.

  

Marketshare vs. Profit

Canaccord Genuity, a capital market wealth management and brokerage company, completed an analysis on smartphone OEM (Original Equipment Manufacturer or ‘The guys who make things’) marketshare captured and discriminated that metric against how much profit the OEM’s captured. More simply put: 

  • For every 100 smartphones sold globally, how many were made by manufacturer ‘X’

Vs.

  • For every 100 pennies of smartphone profit available, how many were earned by manufacturer ‘X’

According to Canaccord research, Apples global Marketshare in the smartphone-space is:

  • ~15%

I take that to mean that out of every 100 smartphones sold across the planet, almost 15 of those are iPhones. That ain’t too shabby considering Apple only sells 1 phone, albeit in a couple-three/four flavors. And if you take into account that there are ~1,000 smartphone brands…some would say they are looking pretty good. 

There are a few of the factors that drive the smartphone marketshare metric:

  1. Price-point
  2. Business model
  3. Strategic objectives

A comprehensive analysis is much more granular, but for the sake of simplicity I’ll focus on these and discuss the impact in the second segment (Part II of the series).

According to their analysts, Canaccord placed Apples capture of smartphone Operating Income at:

  • ~92%

Operating income is a measure of profitability, usually tallied by subtracting expenses from revenue before interest and taxes have been incorporated into the earnings equation. For the sake of simplicity, I take this as: For every 100 pennies of profit available in the smartphone-space, 92 of those pennies went to Apple.

So, Apples 15/100 phones sold, grabbed 92/100 cents earned. From this, we can extrapolate that the remaining 8 pennies are to be split between the following competing hardware OEM’s:

  • Samsung
  • Blackberry
  • Lenovo (Motorola)
  • Microsoft
  • HTC
  • Huawei
  • LG
  • Sony
  • Xiaomi
  • Alcatel
  • Oppo
  • Pan tech
  • One plus
  • And the other ~987 or so device builders

If I haven’t lost your interest, you might be thinking this is all about scoreboard. Well, it’s not. There is an impact to you as a smartphone user/consumer, in the areas of:

  1. Investment: How much your next smartphone is going to cost.
  2. Support: How long your handset will continue to be viable in getting software updates.
  3. Life-cycle: How often you will need to buy a new phone if you prefer exclusivity to the brand you currently have.
  4. Security: How focused is and at what priority does your OEM place on your security while operating a smartphone on the public IP (The Internets)
  5. Privacy: Depending on the business model, companies that provide data services, web services and devices will compromise your privacy (AT&T, Google, Lenovo) so they can make a profit.

The above 5 areas will be discussed in Part III

Hardware/Software primer

Apple is unique, as it is the only company that exclusively deploys its own Operating System (iOS) on its own smartphone hardware platform  (iPhone)

Samsung deploys Googles Android on some of its smartphones, but also has its own Operating Systems (Tizen) that it deploys on other hardware models and it’s wearable line, and (BADA) which is all but dead.

Microsoft, with its acquisition of Nokia,  deploys Windows Mobile on its own hardware, but also licenses its operating system to other hardware platforms like LG, Xiaomi etc.

Blackberry has shifted from the exclusivity of deploying its own operating system, BB10, on its own hardware platforms…to deploying Googles Android on platforms like Priv and upcoming Vienna.

Like Googles Android, there are other mobile operating systems without dedicated hardware platforms trying to gain some smartphone traction. These include:

  • Firefox OS (Mozilla)
  • Sailfish (Jolla)
  • Ubuntu Touch

Then there are OEM’s who build custom firmware (ROM) packages for specific hardware platforms based on the Android mobile operating system which Google acquired from Andy Rubens Android INC. These include:

  • MIUI (Xiaomi)
  • Cyanogenmod (Cyanogen)

The data in this overview is far from all-inclusive, but should give you an idea of the current state of the market and identifies the influencers in the mobile landscape as it pertains to smartphones. 

Part II should be released in the next few days, outlining how and why the market spread got to where it is, and will delve into the strategies that affected the distribution of dollars between Mobile Technology makers.

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