With Labor Day looming, it’s the time of year to fill the still-wide gaps in real industry news with feverish speculation about the autumn line-up from the smartphone majors. Will it be another holiday buying season built around a face-off between iPhone and Galaxy, or will other contenders get their day in the sun this time?
Amid the wilder rumors and more unrealistic wishlists, some clear themes are emerging which will shape a fall catwalk show with some different hallmarks, and so the potential to shift the current balance of power somewhat. Three of the important flavors of the fall:
‘ There will be a reversion to hardware for competitive edge, which could bring the second tier players ‘ Sony, Nokia and LG in particular ‘ back into the limelight. While the focus in recent years has been heavily on user experience and applications, and these remain important, there is a sense that, on the small screen at least, there are only marginal improvements to be made, while more radical approaches like 3D and full gesture control are too unproven to move the market much this year. So consumers will be more swayed by good old hardware features, in particular the battle of the megapixels, with the camera regaining its place as an important differentiator.
‘ Much of the growth, especially in profits, will come from new form factors rather than conventional smartphones. We may debate the semantics of whether a 5-inch or 6-inch device is a smartphone (as Sprint says), a phablet or just a small tablet, but the larger displays are where the vendors will be chasing margins ‘ while they last ‘ and market share. That means turning out tablets in every imaginable size from 5-inches to a mighty 13-inches, although vendors need to watch out at the high end. This year, growth has mainly been propelled by the smaller gadgets (7-inches and below), and while some consumers may be tempted purely by the novelty of a larger screen size, the real challenge is to deliver content and applications that really make the most of that larger real estate and so justify a higher price tag.
‘ Of course, in handsets, the flight to the midmarket has been going on for some time, and will intensify, putting a spotlight on products that deliver a fully smart, but affordable, experience to first time smartphone users, often in emerging economies. Some of these come will be grown-up featurephones, notably Nokia’s growing Asha range, while most will be basic versions of full smartphones. The big question, of course, is whether Apple will deliver a low cost iPhone this fall, and what impact that might have on the market?
Cameras take the limelight:
With the shift to hardware differentiation for the fall 2013 season, the camera has a particularly high profile. Nokia, of course, has already set a high bar with its headline grabbing 41-megapixel PureView technology and the Lumia 1020 smartphone, though having a second-tier operating system will still offset the appeal of the imaging delights. Nobody else will match Nokia for megapixels, but Sony and Samsung certainly have their own weapons to deploy.
Sony, which has the advantage of its standalone digital camera technology and brands, has come up with an interesting approach, according to leaked documents. It apparently plans to release two snap-on products ‘ the QX10 and QX100 ‘ which will allow high quality image sensors and optics to be added to an existing smartphone.
Sony will also incorporate the imaging technology it currently uses in high end digital cameras and in HDTVs, in its flagship launch for the fall, the latest high end Xperia, codenamed Honami. Xperia has a heavy burden to bear, having been placed at the heart of Sony CEO Kazuo Hirai’s turnaround plan for the Japanese firm, which revolves around growth in mobile and consumer devices, with common user experience and content across them all. According to sources, Sony will use ‘X-Reality’ image enhancement chips, which were developed for the Cybershot camera range, in the new handset, which should make its debut on September 4, a week ahead of Apple’s anticipated launch and on the eve of the IFA electronics trade show in Germany. Honami will sport a 20-megapixel camera and will be the most aggressive example yet of Sony’s pledge, once it took full control of its handset operation by buying out Ericsson, to incorporate more technology from its other activities to differentiate its phones.
Meanwhile, LG has already unveiled its new flagship, the G2, and is delivering to 130 cellcos in the first eight weeks, and covering all four national US operators plus all Sprint’s LTE options. This shows LG ‘ which, like Sony, has been seeing some pick-up in market share and was the clear number three smartphone vendor in the second quarter ‘ seeking to emulate Samsung by addressing as many global channels, and as many frequency band combinations, as possible to maximize addressable market. The G2 is LG’s chance to get broad carrier adoption for a single model, which improves the economics and reduces brand confusion (it is also dropping the Optimus label for this launch).
The G2 has solid hardware specs, including a 13-megapixel camera, but LG is still focusing more on user experience, claiming its design is the result of extensive research into the way consumers actually use their handsets. CEO Jong-Seok Park said at the launch event: “The innovation that consumers expected has come and gone and we are left with only the technology. With so much focus on the technology, a gap has appeared between what consumers want and what companies create. But this is not how we want innovation to be defined. Technology without empathy can no longer be considered innovation. Innovation for the sake of innovation is old school.”
This is clearly taking several leaves out of Apple’s playbook, and indeed, the OEMs need to take care not to get too carried away with the pleasures of playing in what, for most, is their comfort zone ‘ physical functionality and flashy spec sheets. Google/Motorola’s ‘customizable’ Moto X and LG’s new button-free design are examples. LG has a ‘rear key’ on the back of the phone for volume and power control (ie, where the index finger normally rests when holding the device), and this can also launch the camera and the QuickMemo program.
Similarly, the Moto X, which should guarantee Motorola its first big splash for several holiday seasons, at least in the US, has a strong focus on voice control and the ability to turn on the camera with ‘two quick twists’ of the wrist.
For this season, though, hardware seems set to lure customers more than UI enhancements. “What LG is doing with buttons on the back really typifies the challenge most manufacturers are facing when it comes to differentiation. It is really becoming harder and harder now, and it’s difficult to see how the buttons will make much of a difference,” Geoff Blaber, analyst at CCS Insight, told IDG. Most commentators agree that interfaces that move away from fingers, including voice and gestures, are interesting to a minority of teccies but will remain a niche for some years ‘ and not a reason to choose one handset over another unless everything else is equal. Even Siri, Apple’s voice-controlled personal assistant, while popular with users, has not changed the way that they interact with their handsets fundamentally.
Tablets in all shapes and sizes:
Despite an intense market focus on smaller tablets, which drove most of the growth in the early part of this year, Samsung is supposedly going to announce a model with a display of more than 12-inches, up from its current high end at 11.6-inches. An extra 0.8-inches or so may not sound too significant, but it indicates the willingness of vendors, Samsung in particular, to turn out a rising number of size variations, from phablets to slates of one foot or more, to address as much of the market as possible.
Korean sources indicate the larger device may even debut a third tablet brand for Samsung, rather than being labelled as a Tab or a pen-enabled Note. Apple and Google are also said to be considering larger tablets ‘ in Google’s case, this could even be a route for Samsung to create another Nexus model. Currently, the Nexus 10 is made by Samsung. The biggest Android tablet, however, comes from Toshiba, which released a 13.3-inch offering in June.
Despite all this activity at the high end, a new report from researchers at IHS iSuppli indicates that the 7-inch size is currently the sweet spot. The calculations show that the overall tablet market more than doubled in size during the first quarter of this year, up 111.9% year-on-year to reach 45.2m units, though the total was down 13% sequentially because of the drop-off after the holiday season high. The main driver in Q113 was the 7-inch form factor, largely because their low prices. The $199 segment is attractive to vendors as the cost of the components for these products falls ‘ the average price of a touchscreen for a 7-inch tablet was about $15.60 in the quarter, down 16% from $18.60 the year before, said IHS.
Duke Yi, senior manager for display components and materials research at the research firm, wrote in the report: ‘Sales of smaller sized tablets are rising at a rapid rate, driving shipments of capacitive touchscreen displays ranking in size from 7- to 8-inches. These tablets are inexpensive, with pricing at $199, making them popular among consumers. With the level of competition increasing in both the tablet and panel markets, pricing is expected to continue to decline, boosting shipments of displays and end products in this size range.’
Analysts at IDC also believe smaller tablets are the growth engine. It predicted in May that tablet shipments would reach 229.3m units in 2013, up 58.7% on 2012 and overtaking portable PCs ‘ the devices will surpass the whole PC market in 2015, forecasts the firm. IDC thinks tablets with screens of 8-inches to 11-inches in size will account for only 37% of the market by 2017, down from 73% in 2011.
Meanwhile, Windows RT has struggled in any form factor. The fall will see Microsoft’s revamped Surface RT, on which it will pin its hopes of kickstarting its ARM-based operating system second time around. It could also be boosted by a tablet launch from Nokia, heavily rumored though branded as ‘bizarre’ by some market watchers. The Finnish vendor was expected to release a tablet as long as two years ago, running Windows Phone, but was then understood to have held back from an RT device for fear of clashing with Microsoft’s Surface, and because it wanted to concentrate on establishing its WP8-based Lumia smartphone range. However, the lack of a large-screened device does squeeze Nokia’s market opportunity and restrict Lumia to an increasingly cut-throat handset space.
According to various reports, Nokia is planning a fall launch for a 10.1-inch RT tablet with 1080p HD display, running a Qualcomm Snapdragon processor like Lumia, with detachable keyboard and 32Gbytes of storage. This would launch in September with AT&T and be manufactured by Compal, according to the Microsoft-News.com blog. Various sites have published pictures of the purported tablet, in multiple colors and one with a Verizon logo. And images have also surfaced of a phablet with a screen around 6-inches, which could support WP8 rather than RT. However, it would make more sense to hold a new Windows Phone offering until Microsoft releases the next upgrade ‘ WP8 GDR2 is just rolling out, while GDR3 is in testing.
Apple iPhone ‘5C’?
So will Apple join the midmarket dash with a low cost iPhone? There are talks of delays, component shortages, internal disagreements, but the broad consensus is that a smaller model, perhaps called iPhone 5C, will make its debut along with the latest upgrade to the standard device, expected on September 10, or perhaps in a separate, later event. The junior version would have fully fledged iOS 7, most analysts believe, but lower end hardware, allowing it to come in at a price tag between $300 and $400 and still deliver margins to Apple.
Apple’s excellence in managing its supply chain will certainly ensure it can make good margins on a handset in this price range ‘ which, after all, is hardly going after the sub-$200 space increasingly pursued by lower end Android vendors and Nokia. But the challenge will be to ensure a lower cost model does not devalue the premium image of the brand, already somewhat compromised by prepaid models and broad distribution, and that it does not cannibalize the high end device too much (as the iPad Mini has done in the tablet space). Not because of profits, since Apple may achieve the same percentage margin on its smaller product, but because the higher capability hardware drives what is increasingly vital to the business case, the consumption of content and services.
Among the predictions for the new iPhones are that the high end (5S?) will have a more powerful processor, fingerprint scanner, NFC, and even a top quality camera (never Apple’s strong suit) as well as a somewhat larger screen and integration with various services including an updated Siri. Meanwhile, the ‘iPhone 5C’ would be plastic instead of metal, would use the existing A6 processor and have less memory than the bigger model, and would sell heavily on the trademark Apple user experience and services such as iTunes, rather than cutting edge hardware. There is the danger for Apple though ‘ users have never bought iPhones for their physical attributes, which have usually been average in smartphone land, but for their UI and applications/content, hence the real threat that affluent users will choose the ‘C’ version, not just those who would otherwise not have purchased an iPhone.
New devices:
Though the volumes will stay, this holiday season, with smartphones and tablets, there will also be high interest in new form factors combining fast connectivity, touch displays and advanced multimedia.
These will range from the miniaturized ‘ everyone, it seems, will have a smart watch, though we believe the potential of that technology is limited to companion devices, not high value mobile gadgets ‘ to the enterprise-class, with new cloudbooks, ultrabooks, convertibles and other as-yet unseen contenders to be the defining ‘post-PC’ design. Gaming consoles and TV systems will be important areas where lessons learned on the handset can be transferred to drive multiscreen experiences (Amazon, in parficular, is likely to develop products in these areas).
There will be a welcome wave of creativity which, in time, will put pressure on the Google/Apple axis, and on the assumption that smartphone specialists in general will set the post-PC agenda. Web and software houses, like Facebook and Mozilla, will make a good stab at following Google into device dominance, and may avoid the temptation to assume this must involve inhouse hardware too. But the rise of the new form factors and operating systems will be gradual and will not have a significant effect on buying habits in fall 2013. In the short term, the real battle will be Apple’s, to reverse its decline in share and find a viable solution for the midmarket, and the major changes of position will be among the existing Android players. Brand new entrants will have to wait until 2014.