Business, Hardware

Market Shift: All Phones Will Become Smartphones

The smartphone story is buzzing in the world. But the line between a ‘featurephone’ and a smartphone is blurring too. Did you know most featurephones have full web browsers, accept apps and often have advanced inputs like touch screens or QWERTY keyboards?

Total Market Size
The year 2010 established a new record for new mobile phones sold, at about 1.37 Billion units sold. Bear in mind, that the world has only about 1.2 Billion personal computers and about 1.6 Billion television sets. But mobile phones sold almost 1.4 Billion new handsets just during the 12 months of 2010.

Smartphones sold more than a fifth of the phones (22% for the full year) and the rate of smartphones is accelerating; it reached 25% in fourth quarter of 2010. Of those smartphones, 33% were Nokia branded, about 15%-16% were RIM and Apple branded (each) and HTC and Samsung both sold about 8% of all smartphones. Motorola, SonyEricsson, ZTE, Sharp, Fujitsu and several dozen others sold the rest. In 2011, we’re looking at around 30% of all phones sold being smartphones; that’s 450 million units.

The more relevant issue is of course the operating system battle. Nokia’s Symbian ends the year well leading the market, as it was on 38% of all smartphones sold. That used to be an overpowering lead, but it is now threatened. For the full year, the upstart Android by Google achieved about 22% market share – but by fourth quarter, the two were running neck-to-neck and by early 2011, Android is expected to pass Symbian (the recent news story by Canalys that Android had already passed Symbian was premature). After Symbian and Android, the two other major OS platforms for 2010 were BlackBerry OS and iOS, both with about 15%-16% market share. Then the small operating systems were now discontinued Windows Mobile at 4%, Samsung’s Bada at 2% and Microsoft’s Phone 7 at 1%. Others are in smaller numbers than those.

The year 2010 was the first year where half of all mobile handset revenues were generated by smartphones. Individual smartphones generated 3.5x more revenue per handset, than dumbphones. The industry’s average sales price is at 120 dollars – which splits so that smartphones had an average sales price of about 330 dollars, and about 60 dollars for the ‘dumbphones’.

If we examine the biggest ‘dumbphone’ makers – which accounted for 78% of all phones sold but included phones as cheap at 25 dollars each aiming for Africa etc. – and at the top end run into the 200 dollar range of premium ‘featurephones’ with touch screens and quite advanced features. In this dumbphone category, Top 4 players are Nokia at 32%, Samsung at 23%, LG at 10%, and ZTE at 6% share. The small players are Huawei and SonyEricsson both with about 3%, and then Motorola and Sharp both of which have about 2%. Remaining 19% is split by 50 small-scale and specialized manufacturers.

Installed Base
The world has passed 5.2 Billion mobile phone subscriptions. That is not ‘phones’ as many people have multiple subscriptions while using only one phone, and switch the little SIM cards to select which network to use. The number of actual mobile phones in use today is smaller by a billion, at 4.2 billion phones. And the number of unique phone owners is 3.7 Billion. Let’s look at that installed base a little bit more.
Out of the 4.2 Billion mobile phones, 750 million are smartphones (about 18%). Most smartphones support 3G connectivity and have full Internet capability, accepting user-installed applications.
Of the remaining 3.45 Billion ‘dumbphones’ – most of those also have a full web browser (so they can do the ‘real’ Internet. And practically all remaining simple phones can still do the simpler WAP style web browsing). What probably surprises many readers, is that today half of all dumbphones in use are also fully ‘application-capable’ i.e. they support apps designed using Java or Brew. Don’t be surprised to know that even a 13 year old Nokia 5110 supports "apps", i.e. Java games.

Of all phones in the world, 77% are cameraphones (3.3 Billion); more than twice the number of TV sets and nearly three times the number of all PC’s in use including desktops, laptops and tablet PCs like the iPad. Note that all cameraphones will have a color screen as well. How are they used? You might be surprised to find that the world has already 2.1 Billion active users of MMS picture messaging. That is 65% of the total installed base of cameraphones. And yes, MMS is 50% bigger in the number of users than email is on the Internet. The only data service bigger than MMS is SMS with 4.2 Billion users worldwide or 81% of all mobile phone subscribers.

Apps vs. Services
Hot story of 2010 were app stores, and Apple just celebrated its 10 Billionth app download (the word ‘app’ is a bit misleading – the second biggest category of paid downloads are eBooks). As Apple had seen 3 Billion downloads by the start of 2010, which meant that the calendar year 2010 saw a total download number of about 7 Billion apps from Apple’s iPhone App Store. That was clearly the biggest app store; all other app stores produced roughly as many downloads as Apple alone.

While apps represent a good $3B market, total market opportunity for mobile services is 100 times bigger!We don’t have the full numbers yet for 2010, but roughly speaking Apple’s App Store produced app revenues to the tune of 1.5 Billion dollars. If we double that, the global market for user-installed apps bought from all the app stores worth somewhat less than 3 Billion dollars.

Even if those numbers look good, there is a bigger smartphone app paid market than that. The total app market in 2010 was worth about 6 Billion dollars. What is the variance? It is enterprise/corporate applications i.e. business apps, that are sold by IT integrators for typically Blackberries, or Windows Mobile or Nokia E-Series phones sold by the thousands to enterprise/corporate customers. So while yes, ‘apps’ are worth about 6 Billion dollars – which number is not available for those who design iPhone or Android apps (or Symbian or Bada or whatever else) that are sold to individual consumers through app stores. The app store global market size is under 3 Billion dollars – but it is growing strongly.

Now, before you get excited, the value of MMS multimedia messaging globally – which delivers all sorts of media content from videos and sounds to pictures, news, coupons, ads and text – was worth… 32 Billion dollars in 2010 – 10 times bigger than apps. The total ‘value-add’ services opportunity for mobile was worth 100 Billion dollars – 30 times bigger than apps. Don’t forget, the total mobile data opportunity including SMS was worth 300 Billion dollars in 2010. Before you say, that’s teenagers chatting, the answer is clearly no. SMS is massively used to deliver news, ads, marketing, and coupons; enable payments such as paying for car parking, buy tickets; and deliver massive consumer interaction for other media such as television voting like American Idol. Yes, total mobile data is 100 times bigger than apps and app stores.

One more for the end…
The total market of new smartphones sold in 2010 was about 300 million handsets. Not all of those are or will be used to download apps. But the active user base of SMS text messaging grew by? 600 million new users in just one year! Do you understand why I keep reminding you, our respected readers, that while yes, smartphones are big, the app store opportunity is in its infancy, and the real money of mobile today is made on SMS, MMS and other simpler services that work on most phones.

That’s a quick look at the mobile phone market and installed base in the world at the end of 2010. You may freely quote these stats in any use, feel free to link to this blog, or you may say the source is TomiAhonen Phone Book 2010, from which the stats have been taken. If you need deeper stats on the phone industry, please see the eBook TomiAhonen Phone Book for more. The 171 page eBook has 98 charts and tables all fresh with December 31, 2010 statistics on phones, features, average prices, markets, installed bases, regional splits, etc.