ANALYSIS: How the Year 2011 Will Pan Out in Smartphones

Let's start with this incredibly volatile year of the Smartphone Bloodbath, as I called it Year 2: Electric Boogaloo. We now have the full data on first and second quarter performance, and plenty of signs into the current quarter. Given that some trends are spanning into the full year, we can do a preliminary projection for full year 2011 sales by each major brand, and the operating systems.

SMARTPHONE BRAND PROJECTION
There are several big predictions I used were as follows. In general, the trajectory of each brand follows the recent past strongly weighted on the sales change from First to Second Quarter 2011, as this period is the first full quarter of the 'Nokia customer give-away' due to the Elop Effect. Then for several individual brands I made the following five predictions:

1) Apple to release the next edition of the iPhone (so-called iPhone 5) in the last days of September so a couple of millions new iPhone sales are added to 3Q. Then they'll have of course a monster Christmas quarter and I am assuming no low-cost iPhone model. If the Nano iPhone appears in time for 4Q broad sales, Apple could be 10M more easily in 4Q. However, we believe that Apple's "Nano" strategy is actually selling the older iPhones, i.e. iPhone 4 will become the new "iPhone nano", just as the company is selling the 3G S to low-cost operators today.

2) Nokia N9 MeeGo sales will be modest towards the end of the year because Nokia only releases it in countries like Boratstan (pardon, Kazakhstan) and Switzerland and New Zealand (yeah, we know)...  I am projecting total of 1 million N9 and other MeeGo sales split 200,000 in 3Q and 800,000 in 4Q.

3) Nokia's Microsoft Windows Phone 7 based Smartphone will be released by end of October and sold broadly, achieving 3 million sales by year-end.

4) For Motorola, I am assuming Google will want to de-emphasize market share gains (to placate Android partners) and focus on profitability, hence I see no meaningful Motorola growth. Motorola is patent vault plus a place where Google can experiment with hardware.

5) For Samsung, I see an increased emphasis on in-house Bada OS.

With that, this is how I see the top 10 handset brands selling in 2011. Note I have ranked the brands by full year 2011 market shares.

Brand . . . . . . 1Q Units . . .  2Q Units . . . 3Q Units . . . 4Q Units . . . 2011 Total . . . 2011 Market Share
Apple . . . . . . . 18.7 M . . . . . 20.3 M . . . . 24.9 M . . . . . 36.4 M . . . . 100.3 M . . . . . . 21%   (16%)
Samsung . . . . 12.6 M . . . . . 17.8 M . . . . 24.9 M . . . . . 33.8 M . . . . .  89.1 M . . . . . . 19%   ( 8%)
Nokia . . . . . . . 24.2 M . . . . . 16.7 M . . . . 12.9 M . . . . .  9.5 M . . . . .  63.3 M . . . . . . 13%   (34%)
HTC . . . . . . . . . 9.7 M . . . . . 12.2 M . . . . 14.2 M . . . .  18.2 M . . . . .  54.3 M . . . . . . 11%   (8%)
RIM . . . . . . . . 14.5 M . . . . . 13.3 M . . . . 12.2 M . . . .  11.1 M . . . . .  51.1 M . . . . . . 11%   (16%)
LG . . . . . . . . . . 4.7 M . . . . . . 5.4 M . . . . . 6.7 M . . . .  10.6 M . . . . .  27.4 M . . . . . . 6%   (2%)
Sony Ericsson . . 4.9 M . . . . . . 5.3 M . . . . . 5.6 M . . . . .  5.9 M . . . . .  21.7 M . . . . . . 5%   (3%)
Huawei . . . . . .  3.0 M . . . . . . 4.0 M . . . . . 5.0 M . . . . .  5.8 M . . . . .  17.8 M . . . . . . 4%   (2%)
Motorola . . . . . . 4.1 M . . . . . . 4.4 M . . . . . 4.5 M . . . . .  4.2 M . . . . .  17.2 M . . . . . . 4%   (5%)
ZTE . . . . . . . . . 2.2 M . . . . . . 2.8 M . . . . . 3.5 M . . . . .  4.1 M . . . . .  12.6 M . . . . . . 3%   (1%)
Others . . . . . . . 2.6 M . . . . . . 5.8 M . . . . . 6.1 M . . . . .  5.7 M . . . . .  20.2 M . . . . . . 4%   (4%)

TOTAL . . . . . . . 101.2 M . . . .  108.0 M . . .  120.5 M . . .  145.3 M . . . . 475.0 M

Projection Source: TomiAhonen Consulting Sept 7 2011. This forecast may be freely quoted and distributed

As the year 2012 bloodbath will mostly reflect the state of the industry by the end of 2011, not 1Q, I will post the fourth quarter projection separately, but let's first observe a few interesting developments to look for. Samsung will probably run Apple neck-to-neck for honors of who is biggest in 3Q. If the iPhone 5 is delayed, Samsung should take it, but if the iPhone 5 launches last week of September, it should be tantalizingly close. Then in 4Q, the global love-affair with the newest iPhone should give Q4 safely back to Apple even with strong Samsung growth as well.

Nokia continues its downfall. Nokia falls to fourth place by third and down to 6th place by fourth quarter. It was as big as numbers 2 and 3 combined as recently as half a year ago. Ouch!

Motorola continues its demise, dropping to 8th place in third and down to 9th place by the end of 2011.

RIM drops one more place to HTC, but then staves off LG's surge to hold onto the ranking of 5th biggest Smartphone maker still by end of year in Q4. That will also be their full-year rank, as HTC takes fourth place. Nokia's third place on the full year is only due to the pre-Elop Effect First Quarter 2011 results.

Huawei will chase Sony Ericsson for seventh biggest title by 4Q and ZTE will chase Motorola for the 9th biggest title. Will be very interesting if any major changes like if Nokia CEO Stephen Elop is fired, or Google starts pushing Motorola forward. Or of the iPhone 5 is delayed later into the year and doesn't get global launch in time for Christmas, Apple could do worse, but like I said, if the decide now to split the product range and give us a lower-cost Nano in addition to the iPhone 5, Apple could do far better... unless they're perfectly happy with the current 3G S/4 and the potential upcoming iPhone "4 is Low Cost, 5 is Premium" sales strategy.

Now let's look at the operating systems:

SMARTPHONE OS PROJECTION
What lies ahead? We need to put emphasis on happenings from the first half of this year. For a few brands, made some specific assumptions (see above for iOS i.e. Apple). For Samsung, I see a growing shift to Bada OS, which will reduce somewhat the dependency on Android.

For Nokia, I am assuming one Windows Phone 7 based Microsoft Smartphone released by end of October, which needs to be a hit phone (no Antennagate or N97 production problems etc.). It will get the biggest promotion push Nokia has ever done, as Stephen Elop's career depends totally on the success of his Microsoft strategy, and expect Microsoft itself to put tons of marketing money on this launch too. I think even with a shortened quarter, it should do about 3 million sales. And then there is the MeeGo sales as per above. So these new OS based premium phones will eat into Nokia's Symbian sales, which will see an even bigger drop from 3Q to 4Q, as there is the simultaneous shift from Symbian to the two others.

So we get these kinds of totals for the year 2011. Again I am ranking the OS platforms by their full year 2011 market shares:

OS . . . . . . Q1 Units . . .  Q2 Units . . . Q3 Units . . . Q4 Units . . . 2011 Total . . . 2011 Market Share
Android . . . 35.5 M . . . . 49.0 M . . . . . 59.3 M . . . .  75.9 M . . . . 218.7 M . . . . . 46%
iOS . . . . . . 18.7 M . . . . 20.3 M . . . . . 24.9 M . . . .  36.4 M . . . . 100.3 M . . . . . 21%
Symbian . .  25.5 M . . . . 17.7 M . . . . . 13.5 M . . . .   5.8 M . . . .   62.5 M . . . . . 13%
RIM . . . . . . 14.5 M . . . . 13.3 M . . . . . 12.2 M . . . . 11.1 M . . . .   51.1 M . . . . . 11%
Bada . . . . .   3.5 M . . . .  5.4 M . . . . .  7.7 M . . . . 10.5 M . . . .   27.1 M . . . . .  6%
MS WP7 . . . 1.5 M . . . . .  1.1 M . . . . .   1.8 M . . . .   5.1 M . . . .    9.5 M . . . . . .  2%
MS WinMo .  1.7 M . . . . .  0.5 M . . . . .   0.2 M . . . .   0.1 M . . . .    2.5 M . . . . . .  1%
MeeGo . . . .  0.0 M . . . . . 0.0 M . . . . .  0.2 M . . . .   0.8 M . . . .    1.0 M . . . . . .  0%
Others . . . .  0.3 M . . . . . 0.7 M . . . . . . 0.7 M . . . .   0.6 M . . . . .  2.3 M . . . . .   0%

TOTAL . . . 101.2 M . . . 108.0 M . . . . . 120.5 M . . . 145.0 M . . . . 475.0 M

Projection Source: TomiAhonen Consulting Sept 7 2011. This forecast may be freely quoted and distributed

Again, some interesting developments - Symbian holds its third place in third quarter but then tumbles all the way to fifth place behind RIM and Bada, barely ahead of Windows Phone 7 by fourth quarter. Blackberry OS/RIM holds its third place but by end of year faces a surging Bada. I don't foresee strong support by Microsoft partners to the Nokia shift, so I see the other Microsoft WP7 makers all riding the Android wave to the end of the year, partly because Microsoft's strong marketing push supporting Nokia.

Also note, the fantasy by Nokia CEO that Nokia could somehow sell 150 million more Symbian phones is completely wiped out by now. This FULL YEAR, there will be 62.5M Symbian phones sold, which includes Nokia's Symbian partners like Sharp, Fujitsu, Panasonic etc. After the Microsoft partnership was announced on Feb 11, Nokia will sell about 49 Million Symbian based smartphones in total in the year 2011. Then next year, 2012, Nokia will shift aggressively to Windows Phone 7, so at best - at best - Nokia could add 25 Million more Symbian sales in 2012. That's yes, folks, 74 Million - only half what Elop promised of those 150 Million more Symbian sales. And after that, it would be peanuts per year.

If it's true (and increasingly what Stephen Elop says has less and less of a correlation with what normal people would equate with 'the truth') that Nokia continues to support Symbian till 2016 - Nokia would then need to do about 19 Million more Symbian Smartphone sales - each year - through 2014 to fulfill his 150 Million pledge. Ain't gonna happen - because those 19 Million would eat into the Microsoft Windows Phone sales. As long as Elop is in charge of Nokia, he will slavishly set the Microsoft interest ahead of Nokia's interest and thus he's not going to let those Symbian sales cut into weak WP7 sales.

That's how I see the year forming, based on the early data this year, and pending no other massive surprises of the style of Nokia abandoning Symbian, HP killing Palm/WebOS or Google buying Motorola haha, but if that was the first half of the year in the Bloodbath Year 2, then we can expect similar surprises in the second half as well.

Remember, the handset business is a hits business (remember the Razr) and one hit phone can totally make or break a company (remembering the fall of Motorola). The hottest phone or line of phones now is the latest Galaxy series from Samsung. And who knows, if suddenly LG or Sony Ericsson or Huawei release a hit phone - that could greatly tumble the end-of-year situation. Sony Ericsson isn't pushing its PlayStation Phone and the company got hit hard with the Japan's tragic earthquake - but there is one thing certain in this industry: nothing is certain.