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The potential impact of the iPhone 5 in numbers – smartphone market insight

Few industries are watched with more interest than the mobile industry these days as new handsets are announced left, right and center, and we prepare for the next stage of the ‘battle of giants’ between Apple and Google (Android) for smartphone supremacy (honourable mention to RIM and Microsoft). But the product that seems to be the center of the attention is the yet to be announced iPhone 5.

The next generation iPhone from Apple is widely expected to be launched sometime in September of this year, but other than that there is little we know about what is referred to as the iPhone 5. Yet the device is probably the hottest and most sought after new product in the market at the moment. But to fully understand its potential impact on the mobile market we have to look at where we are currently and consumer intent.

Smartphone market status: Apple vs Android

At a mobile operating system level the smartphone market is currently a two horse race between Android and Apple iOS. Their strategic approaches are opposite, but in terms of volume they are both hugely successful.Whilst Apple iOS is exclusively on Apple’s own devices and under strict control, Android is open and has been adopted by a variety of handset manufacturers, with the leading ones being HTC, Samsung, Motorola, LG and Sony Ericsson.

A recent Canalsys report of the global smartphone market indicates that Android now has a 50% share of the smartphone market globally, shipping over 50 million units in Q2 2011. Apple iOS moved into second place globally with 19 percent of the market, shipping over 20 million units of the iPhone, overtaking Nokia and their Symbian platform. Nokia was also stripped of their status as the leading individual smartphone vendor, with Apple taking the top spot followed by Samsung, which has been riding success of their Galaxy line.

Apple largest smartphone vendor

Overall the global smartphone market grew by 73 percent year over year.

There are regional differences in terms of both smartphone growth and operating system/vendor performance, as highlighted in reports from both IDC and a Kantar report exclusively for The Guardian. The IDC report highlights that key growth areas for smartphone vendors in the coming years will amongst other be APAC (China especially) and Latin America, markets that where featured phones are still dominating market share, but that are changing quickly towards smartphones.

The key for growth in these markets, as well as some of the more mature smartphone markets, seem to be lower cost handsets, an area where Android handsets have performed well due to the wide range of handsets available running the Android OS compared to Apple iOS.

Consumer intent: We want Apple

A recent report from Kantar Worldpanel about the growth of Android market share in UK indicates that almost all of the growth comes from consumers upgrading from a non-smartphone as there is very little shift between smartphone operating systems, especially between iOS and Android.

Kantar global consumer insight director Dominic Sunnebo says the following:

“We are yet to see any real signs of consumers switching between Android and Apple. Our data shows that Apple and Android’s customers are intensely loyal when choosing their upgrade. One reason for this is the investment consumers make in their device through apps.”

One could argue that both dominating smartphone operating systems are building barriers of exit for their customers based on our addiction to mobile applications, an area where especially Apple has had huge success with their App Store.

So while both of them are good at keeping their customers once they have won them, what about winning new customers? A few recent surveys in the US indicate that 50 percent of users looking to get a new phone in the coming months prefer to get an iOS device (iPhone). Combine that with a study that shows that 50 percent are interested in getting the iPhone 5 within the coming year, and things start to look very bright for Apple. Both of these studies were amongst US consumers so are therefore not necessarily reflective of the global market.

While Apple is doing well and showing impressive growth globally, there are challenges ahead, which is where the iPhone 5 and potentially other iPhone models come into the picture.

What tomorrow might look like

They way i see it there are two keys to Apple continuing their global growth in the smartphone market; continue to deliver market leading devices and to diversify their offering (handset options).

An iPhone 5 with all the latest specifications will address the first and ensure that the iPhone is up their with the top spec Android handsets, potentially stopping the more tech focused consumers from shifting towards their rivals, as well as keep getting their loyal customers to ugprade to the latest handset. The iPhone 5 combined with iOS 5 is about innovation and staying ahead of the competition.

While more and more people in emerging markets might be able to afford the relative pricy iPhone, current global trends indicate that the key to large growth in market share is to deliver affordable handsets to the mass market that is looking to upgrade from featured phones to smartphones. As identified before, these are also markets where pre-pay models are more common than mobile contracts, therefore making the upfront cost of the handset an important factor. To increase their share in those markets before rivals get a strong foothold, Apple needs to deliver a more affordable iPhone, hence the many speculations around a potential iPhone 4S or iPhone Lite that will have a lower production cost.

Tomorrow in iPhone 5 numbers

Below is a table outlining forecasted global smartphone sales by smartphone operating system from Gartner. Using that as a starting point and then applying some of the metrics below, i will try and outline what the potential impact of the iPhone 5 could be. Yes, i know it is a flawed calculation full of assumptions, but its purpose is to outline what could happen if consumer intent was correctly reflected in the numbers (with the assumption that consumer intent was the same on a global scale).

 

Gartner smartphone global sales forecast

I will be using overall global sales figure for 2012 as the starting point: 630 million units

The overall global growth between 2011 and 2012 will be: 35% growth or 163 million units

Consumer intent research indications of iOS (iPhone 5) penetration: 50%

Current iPhone customers upgrading based on upgrade figures for iPhone 4 (source: Fortune): 77%

Number of iPhone 5 sales to current customer base: 69 million units

Number of predicted new iPhone 5 customers: 81 million units

Total 2012 sales of iOS smartphones/iPhone 5: 150 million units

Apple smartphone market share: 23.8%

As you can see this forecast is quite a bit higher than the Gartner one. While it might be optimistic to believe that Apple might steal 50% of the global growth in smartphone sales or that 77% of their own customers will upgrade, it has not taken into consideration number of Android or other operating system customers that potentially could switch to the iPhone 5. Either way the future looks bright for Apple and the iPhone.

Challenges: Patent wars

The name of the game in the smartphone marketplace at the moment seems to be patent rights and lawsuits, with everyone suing everyone all over the world claiming infringement of each others patents. All the big ones seems to be patent shopping at the moment, trying to get the upper hand on their competition.

In the end we as consumers are the only ones losing out.

A word of caution – global resourcing

As consumers we rarely think about all the things that go into creating the gadgets that we use on a daily basis, and the strain on natural resources due to our consumption of amongst other mobile phones. With a growth rate that we see today we need to get much better recycling systems in place for our old technology when we renew. If you want a good and informative read about this, check out this article from thenextweb.

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