The global smartphone market has witnessed extraordinary growth in recent years, with shipments rising by 40 percent in 2013 to exceed the 1 billion unit threshold and $266 billion in value. CCS Insight forecasts smartphone shipments of 1.89 billion units by 2018.
However, explosive growth has been accompanied by significant disruption. Large Web players are seeking to embrace the advantages that mobile delivers in the areas of engagement, context, connectivity and price compared with the PC-based gateways that have defined their businesses until now.
At the same time, Apple has redefined the hardware business model; Samsung has built a substantial advantage thanks to the scale of its operations; and the barriers to entry have fallen thanks to factors such as the rise of the Android operating system and numerous reference design platforms that enable a thriving manufacturing community, most notably in Shenzhen, China.
This report assesses the dynamics that are facilitating continued disruption in the global smartphone landscape and the factors that will drive further change over the next three to five years.
CCS Insight concludes that it is myopic to evaluate the mobile phone and smartphone markets and their value creation in isolation. They must be considered alongside Web-based ecosystems, a new wave of content and services, and convergence with other established and emerging hardware segments.
This has two consequences. Firstly, it means that the smartphone market is as dynamic as ever and is far from the permanent “two-horse race” between Apple and Samsung that is depicted by some industry commentators. Furthermore, although a duopoly exists between Android and iOS at an operating system level, fragmentation caused by Chinese government regulation and ecosystem growth on top of Android means the competitive significance of this duopoly is declining.
Secondly, success in the smartphone market and the way in which value is extracted is fundamentally changing.
This report outlines the three dominant profiles that CCS Insight believes will define success over the coming four years.
These are as follows:
- A broader business model such as advertising or retail that mobile extends and enriches
thanks to its advantages of reach, engagement, context, connectivity and increasing
- A parallel business that reinforces the profit margin made on hardware. Increasingly this
is in the realm of content and services.
- Substantial advantages of scale, supply chain and costs that enable profitable
competition using a margin-based hardware model.