Ovum Analysis --

Smartphones: the silver lining of the declining handset market

Smartphone shipments will reach 406.7 million by 2014

During 2008, in a first for the mobile industry, consumer demand for third-party applications started driving both handset sales and revenues for developers and OEMs. Apple’s success with the App Store has prompted other players to focus on devices that can enable third-party developers to easily bring applications and services to mobile phones.

Subsequently the global economic downturn has stimulated a renewed focus on smartphones. The collapse of the market for mid-tier handsets in 2009 is polarising the handset market, with vendors and mobile operators focusing on two types of handset: those targeting the low-end and high-end segments. The end result is a quickening of the replacement of 2G in favour of high-end 3G handsets, and greater volumes of smartphones.

Ovum expects that these factors will see smartphone shipments grow by 18.7% between 2008 and 2009 despite the overall decline during the same period in the total mobile phone market. This growth will continue at a CAGR of 19.5% through to 2014, at which point smartphones will account for 29% of the total global handset market.

In Asia-Pacific, smartphone shipments are forecast at 52 million in 2009, growing to 142 million in 2014. Asia-Pacific’s smartphone shipments will account for 30% of the world shipments in 2009.

Symbian remains the market leader and Google Android is the rising star

In 2008 Symbian OS represented 58% of the smartphone market. Its position as market leader has been achieved by Nokia’s championing of the platform and its widespread use within the player’s device portfolio. Following Nokia’s acquisition of Symbian and creation of the Symbian Foundation, Nokia will continue to be an active supporter and drive the platform deeper into its portfolio.

Ovum expects Symbian OS market share will drop to 43% by 2014 due to rapid adoption of new platforms such as Android, although it will maintain its market leadership. From a standing start in 2008, adoption of Android will be rapid and we expect Android shipments to reach 72 million units by 2014, representing 18% of the market and overtaking shipments of Windows Mobile. Android shipments will be driven by adoption by all tier-one OEMs (except Nokia) and an active developer community.

In Asia-Pacific, Symbian OS market share was over 60% in 2008.

Smartphones are dead! Long live managed device platforms

While smartphones are set to proliferate over the next three to five years, the category itself will become less relevant as attention shifts towards distinguishing those devices that are actively managed by OEMs, MNOs, web companies and retailers from those that aren’t. Consumers will increasingly make buying decisions based not on a device’s potential to support advanced capabilities but – crucially – on the vendor managing their data and services on the device.

The ability to deliver a tightly integrated end-to-end service proposition including content and applications directly to consumers was pioneered by Apple and Google. Ovum describes this approach as a managed device platform (MDP), as examined in our report “Of iPhones and Androids: redefining the smartphone and other devices.”

The adoption of the MDP model by Nokia, Google, Microsoft, Sony and other major vendors will drive the adoption of those smartphone software platforms that are backed by these companies.

‘Unmanaged’ smartphones will still have a place in the market. However, they will appeal mainly to users who do not wish to be tied to a particular vendor’s offering or are content with a more basic service package. Smartphone platforms that do not have the backing of major vendors will not ship in significant volume in five years’ time.

Defining the smartphone market

Ovum defines a smartphone based on its software platform; therefore Ovum considers the following to be smartphone platforms: Symbian OS, Windows Mobile, Android, OS X, BlackBerry OS, Palm OS, Web OS and LiMo.

– End –