Android slows iPhone growth, can Apple fight back?

January 27, 2011 9:14 AM EST

Apple's iPhone marketshare gains are slowing down in the face of increased competition from Android handsets, Strategy Analytics claims in its quarterly market analysis. Nokia meanwhile says it faces "significant challenges" fighting Apple's iPhone and others in the fast-changing smartphone market.

Strategy Analytics analyst, Neil Mawston, confirms that component shortages have begun to impact the industry, but characterized the impact of this as "mild".

Global smartphone shipments surged a healthy 75% to a record 94 million units in the fourth quarter of 2010, according to Strategy Analytics. Apple remained ahead of RIM and Nokia continued to flounder in the fast-changing market.

Apple's advantages

Nokia faces some significant challenges in our competitiveness and our execution," Nokia CEO Stephen Elop said today. "The industry changed and now it's time for Nokia to change faster." The company shipped 28.3 million smartphones in the quarter.

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Apple meanwhile shipped 16.2 million iPhones worldwide in Q4 2010, almost doubling from 8.7 million units a year earlier. Apple's near 100 percent iPhone sales increase more than matches the 75 percent increase in global smartphone volumes (which reached 94 million) in the quarter.
"Apple benefited from strong operator subsidies and co-marketing, enabling its global share to reach 17% during the quarter," Strategy Analytics said in a release.  "However, Apple's marketshare gains slowed considerably last year due to tougher competition from Android players such as Samsung, Motorola and HTC," they added, confirming iPhone's feeling the Android army heat.

 

Apple spiked from 2% global share in Q2 2008 to 17% in Q3 2009, but growth remained around that level all across 2010. The introduction of a CDMA-capable iPhone on Verizon will intensify competition and build marketshare.

AT&T reportedly has moved to return unlimited data plans on its iPhone tariffs, matching similar moves on the part of Verizon.

AT&T this morning revealed it activated 4.1 million iPhones in Q4 and 442,000 tablets (nearly all of those being iPads).

That's down from Q3, when AT&T activated 5.2 million iPhones, but remains the carrier's second-best quarter yet. It is feasible this also reflects some build-up in future demand for the iPhone 4 on Verizon, which can expect a huge spike in sales once the device goes on sale next week.

For the full year, global smartphone shipments reached 293 million units in 2010, almost doubling from 151 million units in 2008 and 175 million in 2009, the analysts said.

Litigation looms

2011 will be a year of litigation regarding patents and IP, Strategy Analytics predict, adding, "The industry will want to take a closer look at how much Apple may be paying to license or cross-license mobile IP from other firms."

Former smartphone market leader RIM saw Q4 sales climb 36 percent year-on-year, though its rate of growth has slowed as the company has so far failed to match Apple's touchscreen user experience.

With new handsets emerging fast, Strategy Analytics doesn't think it's game over for RIM just yet: "We believe RIM has several technologies under development that could help stabilize its position over the next two years, such as the high-end QNX platform and the Torch mobile browser."

"The big 3 hardware vendors of Nokia, RIM and Apple were less dominant in 2010, as their combined global marketshare slipped from 73% in 2009 to 67% in 2010, mostly due to a spike in Android vendors such as Samsung, Motorola, HTC and Sony Ericsson. Indeed, Android was the star platform of 2010, as it gave iOS4 some much-needed competition and outgrew all major rival operating systems worldwide."
Will Android pay?

The Android threat is intensifying -- though for players in that space the challenge remains making a profit on systems which become increasingly commodified -- in reality they compete not against other platforms but against each other. Though initial signs show they're meeting this challenge -- so far.

Take Samsung's recently-estimated Q4 results, which showed revenue down 12.8 percent as demand slowed down in face of a tough market. Samsung said earnings were expected to fall to $2.67 billion. We'll learn more on this tomorrow, when Samsung's earnings are announced.

These results do confirm Android-powered device sales are no panacea to handset makers, but with Samsung so deeply immersed in a range of business segments (including Apple's own) it may not be the best example.

HTC, for example, delivered a powerful Q4 performance, smartphone shipments climbed 163 percent to 9.1 million units. Motorola saw revenues of $3.425 billion for the quarter, up 21 percent from the figure posted at this time last year.

Despite these gains, Apple's near 100 percent  Q4 iPhone sales volume increase more than matches the 75 percent increase in global smartphone volumes (which reached 94 million) in the quarter. Apple's combined business means that company returned revenue of $26.74 billion and record net quarterly profit of $6 billion.

Future outlook

To characterize the growing impact of Android as a victory for Google could be misconstrued. Apple currently sells two iPhones each second of every day.

With Google prepping Honeycomb for use on tablet devices and Apple preparing to unleash the powerful new multi-core iPhone (5?) in June, competition between the two former allies continues to get ever more bitter.

Expect component shortages to impact the industry as the market explodes at rates exceeding production increase, and the full impact of Apple's $3.9 billion components deal is felt.

Also expect bitter court dramas as competitors in the mobile space look more deeply into Android in an attempt to protect their own IP. (The Oracle v Android case being just the beginning of such activity).

Is Android a long-term threat? Is it profitability or marketshare that makes a business? Tell us what you think in comments below, and I'd once again like to invite you to follow me on Twitter so I can let you know when these items are published here first on Computerworld.