success of iPhone 4S enabled Apple to bounce back against Samsung in 4Q11, but it will be increasingly hard to stay in the front rank without LTE.
If Apple waits until the fall, it will cede operator support to Samsung and enter the 4G space when prices have already fallen significantly. Its brand power has compensated for technical mediocrity in the past, but its impact will reduce as the market shifts to 4G and Asian vendors.
The first clutch of financial results from the handset makers, and their launches at the Consumer Electronics Show [last] week, carried hints of the smartphone market pattern to come this year. The big tussle, of course, will be between Samsung and Apple, but much of the latter's outcome will depend on how quickly it gets into the LTE market, which has evolved far more rapidly than expected from the territory of a few cutting edge curiosities to a mainstream sector where prices are already falling. At least WP7 did get into the LTE game at CES, notably with Nokia's high profile attempt to win US customers at last.
Whether it succeeds will be an important factor in whether, by 2013, the Finnish giant is back in contention, or whether – as Samsung said this week – it will have lost its crown irrevocably to its Korean challenger.
Beyond the three giants, the other players will also be struggling to hold onto their positions – LG, HTC and Motorola Mobility are expected to report disappointing holiday quarters, and the latter will have a major transition to make once it becomes Google property, as will Sony Ericsson as it loses the “Ericsson” element of its ownership and brand. And coming up beneath all these established contenders for the LTE smartphone space are ZTE and Huawei, the latter using CES to launch its bid for smartphone relevance.
Samsung started the year in buoyant mood, with CEO Choi Gee-sung predicting the firm would ship more handsets this year than Nokia, ending the Finn's 14-year run in the lead. Choi said Samsung had already overtaken its archrival in handset revenue terms in the last quarter of 2011, because of its greater success in smartphones, and would achieve the same in unit volumes in 2012.
However, many analysts believe Nokia's continuing strength in feature phones, and in midrange handsets for emerging markets, will see it through, especially as its new Lumia range should boost its fortunes at the higher end. According to a poll of various analysts by Reuters, Nokia will have sold 418 million phones in 2011, falling to 388 million this year, while Samsung will rise from 320 million to 359 million, still not surpassing its rival.
Although the headlines focus on Nokia's smartphone comeback attempt, based on WP7, the firm is still plowing significant efforts into its low end platforms – Series 40, legacy Symbian (now called Belle and still being updated), and new low-end Linux-based systems.
Samsung vs Apple
Of course, another factor in whether Samsung achieves the dominance it seeks will be how far Apple can claw back any losses to the Galaxy range. The iPhone maker's fear of Samsung has been clearly seen in its barrage of lawsuits against Galaxy, but with the Android vs iOS patent litigation war virtually at stalemate, the vendors must focus on competing on good old-fashioned product appeal.
Here, Apple does not need to set the bar nearly as high, in features terms, as its competitors, because of the power of its brand – no iPhone has been cutting edge, and the decidedly underwhelming iPhone 4S still managed to propel Apple back into the front ranks of the smartphone game, despite a lack of LTE or other features which no other player could ignore. The iPhone remains the most coveted smartphone in the US, according to the latest consumer study by ChangeWave, which found that 54% of its respondents planned to buy an Apple handset within three months. "Apple has never dominated smartphone planned buying to this extent more than two months after a major new release," according to the survey, although the figure is down from 65% in September, when the 4S was just on the horizon, and the main factor has been the rise of Samsung’s score, from just 5% in September to 13% in December.
Samsung overtook Apple in the third quarter to become the world's largest smartphone seller after shipping 27.8 million units, three times more units than a year earlier, a feat which doubled the Korean giant's market share. Dongbu Securities estimates that the firm sold 32 million smartphones in the fourth quarter, mainly because of the success of the Galaxy S II, which shipped in May and broke the ten million unit barrier more quickly than any previous Samsung product.
The race to LTE
However, the success of the iPhone 4S will shake up the rankings again. But the biggest danger for Apple will be a long wait for the “iPhone 5” and, especially, for LTE, as 4G support becomes important to a growing number of operators round the world, which need to encourage their users to migrate to the new high capacity, cost efficient systems. That will motivate them to place heavy weight behind devices which can lure customers to 4G, as seen in the smartphone announcements by all the main US operators at CES. Nokia's debut of the Lumia 900 at AT&T hit the headlines for novelty value, but more established US brands were also hurling LTE devices at the big three cellcos (along with new Samsung LTE handsets for MetroPCS). HTC also had a WP7 model for AT&T, and there were new Android units form LG, Motorola, Samsung and Sony.
HTC's WP7 4G offering is the Titan II, with the first 16-megapixel camera to hit AT&T’s catalog as well as a huge 4.7-inch screen. On the Android side, AT&T will also sell the first LTE smartphone from Sony Ericsson - soon to be simply “Sony” after the Japanese firm's buyout of its partner, a transaction which is likely to herald a newly aggressive assault on the US, leveraging the Sony consumer electronics brand. Like Nokia, the company has never been a significant force in US handsets. Its Xperia ion will come to AT&T's 4G network in the second quarter, but will still be running Android 2.3 rather than the new Ice Cream Sandwich.
AT&T is also promising "the first LTE-connected Android tablet under $300” [€237], the Pantech Element, and its first midmarket 4G smartphone, the Burst 4G from the same vendor. This will be priced under $50 with contract, or can be bundled with the Element for a total of $249.99.
The highlight of Verizon Wireless' new LTE roadmap is the Droid 4 from Motorola, and it is promising the Droid RAZR Maxx, a variation of the high profile RAZR with longer battery life. Verizon also announced an exclusive LG device called the Spectrum, which will feature the Korean supplier's latest advanced display technology, “True HD IPS,” which is also used in its high end TVs. Verizon also promised an LTE version of the 7.7-inch Samsung Galaxy Tab, and personal hotspots from ZTE and Novatel MiFi.
Meanwhile, Sprint also outlined its LTE device map as it plans to roll out services around mid-year in 11 major markets. Its first products will be the Samsung/Google Galaxy Nexus smart-phone, and LG's 4G “eco-phone” Viper LTE. The carrier will also offer a personal hotspot from Sierra Wireless which will support CDMA, LTE and its current 4G technology, Wimax. The Tri-Network Hotspot will connect as many as eight devices via Wi-Fi, using the fastest connection available for backhaul, and will include a microSD slot to store content for sharing among users of the gadget.
Prices already spiraling down
Pricing is already an important factor in LTE – just as Verizon, in particular, has managed to get LTE handsets into the mainstream far more rapidly than was seen in 3G, so other processes have accelerated, notably the shift from premium to mainstream prices. This has been intensified by the recession – Samsung has had good timing, as its Galaxy brand has reached the top of the popularity curve just as tighter budgets make consumers more likely to choose the “safest” option. It also has the breadth of reach, and the economies of scale, to withstand economic slow-down and price flexibly, even in LTE. This will be important, especially with cost cutters like Huawei promising to enter the LTE space around midyear too.
AT&T, looking to build traffic on its LTE network, is already adopting mass market pricing with its two $50 LTE handsets (the Burst and the Samsung Exhilarate). CMO Mark Woodward told FierceWireless that, as soon as devices fall below $99 to the consumer, the carrier sees a huge uptick in adoption at this “magic price point”.
The focus on mid-market 4G devices plays to the strengths of Samsung, but also tier-two players like Pantech, which also features at Verizon with the $50 Breakout LTE. That operator also offers several 4G models for about $100, half the generally accepted with-contract tag for high end smartphones. Verizon sells the HTC ThunderBolt, Samsung Stratosphere and LG Revolution for around $100.