Seven predictions for smartphone market

Apple launched two new phones, including a ‘cheaper’ one. Microsoft acquired Nokia’s phone business. Apple has lost market share to Android, and Microsoft with Nokia have had really poor results. Microsoft seems to be doomed with their existing strategy. Newcomers can surprise if they are able to build the right alliances. Android will be #1.
 
The response to the iPhone 5C and 5S has not been overly enthusiastic. Many people see 5C as too expensive and 5S as not offering too much new innovation or features. It looks like Apple doesn’t look to acquire more market share and volume, but focuses on margins and profits and wants to keep its market share in places like China. Apple’s App Store is still the most important marketplace for developers and app firms to make money. And the iPad is doing well in its own category.
 
The Microsoft – Nokia cooperation failed (see my prediction from July: Nokia needs an endgame for rebirth). It is hard to see that Microsoft’s phone business will be a success, at least in the near future. They have no carrier relationships or logistics, and wanted to get those from Nokia, but Nokia has also lost them during the last 3 years and we don’t know how Microsoft will be able to adopt that competence. Microsoft has been too slow with its own software, which could mean other vendors are now even less interested in creating WP phones. Nokia and Microsoft talked many times about ‘the ecosystem war’. Microsoft is now weak in that war and typically it doesn’t make sense to declare a war if you are weak. Maybe Microsoft should think about other strategies, like partnerships and offering software and enterprise solutions to any ecosystem.
 
Newcomers, Firefox, Tizen and Sailfish (Jolla), have been slower than many experts expected. Many parties, including carriers, would like to see a third ecosystem. It is hard to see how they can break into the market until some carriers start to provide strong support for them. Android is really taking the low cost phone segment, which makes it hard for Firefox to succeed there. Tizen has had support from carriers, especially in Asia, but we are now in a wait and see mode. Carriers have no track record of building an ecosystem themselves.
 
Jolla has very ambitious plans with Sailfish. It really plans to make a top-level phone with innovation in the user experience too. It is hard for a small company to build logistics, distribution channels and a new ecosystem. It helps that Jolla’s phone can also run Android apps. Either way, the third ecosystem should offer something totally new to users. Based on my own experience with different platforms and devices, I feel Jolla and Sailfish is the strongest candidate to offer something new. But it cannot do it alone; its hope is that other parties start to support and utilize its Sailfish platform.
 
 
Thinking about all those components, I have some of my own predictions for the mobile devices and ecosystems. 1) Apple will keep its own segment, maybe win some more market share with new phones, and by bringing new devices like watches and TV, but not target Android’s leadership. 2) Microsoft continues its desperate war and cannot really win a significant share and is too proud to change its strategy. 3) The third ecosystem should offer something better, a disruption and really attract carriers and developers, but also other industries, e.g. media, finance, automobile or retail to support it. 4) A carrier coalition cannot create the third ecosystem alone, a real external leader is needed to do it. 5) Sailfish can surprise the market although Jolla cannot do it alone. 6) Wearable products will come to the market and the smartphone alone is not enough for any ecosystem or company. 7) The mobile phone is and will be a lifestyle device, not only an effective and boring tool.
 
What could change the situation? Microsoft’s new CEO can have a significant influence on this prediction. If Microsoft gives up with WP and focuses on offering Office and enterprise solutions for all operating systems and ecosystems, it could actually make the company more relevant in mobile, and otherwise Google can kill the dominance of these Microsoft’s cash cows. And if a third ecosystem can offer a disruption as iPhone did in 2007 by partnering with other industries, people could rapidly start to use it. Most probably the next couple of years in the mobile device business are full of boring times with Android and iOS, but there is a chance that someone can fundamentally change it again and make it interesting.
 
Jouko Ahvenainen is serial-entrepreneur and co-founder of Grow VC Group (growvc.com), a new funding solution. In the 1990s Jouko worked for Nokia in Europe and Asia, and then lead the 3G practice at Capgemini globally. The last 12 years Jouko has been an entrepreneur and investor.

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