As Nokia knows to its cost, the featurephone market is shifting to affordable smartphones, mainly driven by Android, more quickly than most had expected, hitting the Finnish company’s strategy of relying on its low end platforms to sustain it while it transitions to Windows Phone higher up the chain.
According to IDC’s quarterly Mobile Phone Tracker report, the total handset market will grow by only 4% in 2012, compared to 2011, to reach almost 1.8bn units. This will be the lowest annual growth rate for three years, and most of the slowdown will be at the low end, where featurephone shipments will decline by 10% this year. This is not all down to migration to smartphones ‘ non-smart handsets will still account for 61.6% of the total base at the end of 2012, says IDC, but their owners will be less likely to swap their devices because of uncertain economic prospects.
By contrast, the smartphone segment will offset the featurephone decline with a 38.8% increase to 686m units, driven by high carrier subsidies, falling average selling prices and component costs, increased awareness and lower cost data plans. Android will dominate the sector, and will continue to do so for the next four years at least. IDC expects the Google OS to account for 61% of the smartphone OS base this year, driven largely by Samsung, though this lead will be eroded gradually after 2012, and will be down to just under 53% by 2016.
The main factor in that decline will be Windows Phone. By 2016, this will have taken second place with 19.2%, up from 5.2% this year, while iOS will have slipped slightly from 20.5% to 19%. Assuming Nokia will be a major beneficiary, such an outcome would finally justify the Finnish firm’s decision to transition to Windows, but there is a great deal of pain along the way. The company’s share price fell to a 15-year low this week, and one of the factors is concern over its loss of share in markets where it was once invincible, such as China and India.
Its lead in major Asian economies is particularly under threat from the rising strength of local brands, whether pushing featurephones or Android. According to ABI Research, the Asian handset market will grow by 6.9% this year to total 624m devices, but Nokia’s hold will weaken. ABI says it still had 37% share of the Indian base in 2011, but in times past it had sometimes achieved over 70%, and it is under pressure from Samsung and from local suppliers like G’Five, Micromax, Karbonn and Spice. In Indonesia, Nokia’s market share shrank to 21% last year, losing out to RIM and local vendors like Nexian, HT Mobile and Cross.