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Think smartphones are ubiquitous now? Just wait

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March of the mobiles ... profits in the handheld industry were worth $14.4 billion in the first three months of the year.

March of the mobiles … profits in the handheld industry were worth $14.4 billion in the first three months of the year. Photo: Andrew Quilty

Five years after the first iPhone went on the market, the sales of smartphones – loosely defined as those that can run third-party “apps” and access the internet directly – now make up nearly two-thirds of mobiles sold in western Europe and north America, though only about half of all users in both regions actually own one. Analysts predict that within two years, 90 per cent of mobile users will have no choice but to own smartphones – even if all they want to do is call and text.

Yet the revolution has had its casualties, with BlackBerry-maker RIM announcing a second quarter of losses this week as well as 5000 job cuts, and the sector’s former dominant player Nokia having its debts downgraded to junk. Some analysts wonder whether both companies will see the sixth anniversary of the phone that undermined their businesses.

“The iPhone had three big effects,” says Neil Mawston, executive director of Strategy Analytics. “We moved from keyboards and keypads to finger-driven touchscreens; that meant a shift away from the painfully slow mobile phone browser to app stores; and it revolutionised the market by encouraging more use of data, beyond just text messaging.” The fact that the first iPhone contracts offered unlimited data use transformed a market in which mobile internet connectivity had previously been parcelled in per-megabyte allocations, to screens with tiny displays.

Casualty ... Blackberry maker Research In Motion has announced another huge loss.

Casualty … Blackberry maker Research In Motion has announced another huge loss. Photo: AP

But the real agent of change was the arrival in late 2008 of Google’s Android mobile software, which soon offered the same touch-driven experience, with several handset companies – including Korea’s Samsung – vying for the top spot. “Android democratised touchscreens and app stores,” says Mawston. “The iPhone was relatively expensive. Android brought smartphones in at low prices.”

That brought about all sorts of other changes – particularly the ubiquitous “apps”, without which no company seems to be complete. Android phones now make up more than half of all smartphone sales (with Samsung’s making up half of those on its own, outpacing Apple). And Apple has grabbed a huge share of the profit in the mobile market: according to Horace Dediu, who runs the Asymco consultancy, in the first quarter of 2012 Apple grabbed 73 per cent of the handset industry’s operating profits, Samsung 26 per cent, and HTC 1 per cent; meanwhile LG, Motorola, Sony, RIM and Nokia all showed losses.

Even so, the profit in the handset industry has grown enormously, from a total of $5.3 billion in the first three months of 2009 to $14.4 billion at the same time in 2012, Dediu points out.

Outpacing Apple ... models show off Galaxy S III phones.

Outpacing Apple … models show off Samsung’s Galaxy S III phones. Photo: Reuters

Apple’s profits have also risen hugely – in effect, it has sucked them out of mobile operators, which have seen their per-user margins diminish. They are not alone in feeling the pinch. Nokia smartphone sales have collapsed as it struggles to reinvent itself after abandoning its own pre-2007 Symbian software. Some analysts worry it could run short of cash before Microsoft’s new Windows Phone software can revive it.

As for BlackBerry, Mawston says: “Arguably its new handsets due out in the autumn are its last chance. If they are a hit it will be back on an upward track. Otherwise it will be downward.”

The economic crunch in many eurozone countries is already showing that the 50 per cent of consumers yet to buy a smartphone will be different from those who queued five years ago. “In some countries such as Portugal most iPhones are sold without a data plan,” says Francisco Jeronimo, smartphones analyst for the research company IDC. “They’re used at home or in offices because in most European countries and the US – though not in the UK – people have to pay extra to get internet data on their phone plan. But if you pay EUR50 ($62) per month for an iPhone, you don’t want to be paying another EUR20 for the data.”

Even so, Jeronimo sees the market becoming 90 per cent smartphone-based by 2016 (Mawston puts it at 2015).

Now, Chinese manufacturers such as Huawei and ZTE have begun making cut-price smartphones for carriers using Google’s Android. “They’ll just be used for voice and text,” says Jeronimo.

Mawston, meanwhile, is certain that smartphones will almost see off other models, whether users want them or not. “In Europe, all the young and rich have purchased one already,” he says. “The older and less wealthy won’t have a choice – they’ll have to buy them. But they’ll tend to go for simpler versions. They’ll use them for voice and text – and the app stores.”

Guardian News Media

Article source: http://www.smh.com.au/digital-life/mobiles/think-smartphones-are-ubiquitous-now-just-wait-20120629-217d7.html


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