Google Provides an Update on Android Security (Mar 23, 2017)
This is a year-in-review post from the Android security team, and it’s supposed to be reassuring on the state of Android security. However, there are several fairly worrisome data points in here worth pulling out. Google says 0.71 percent of all Android devices had a “potentially harmful app” installed at the end of 2016, so almost 1% of the roughly 1.5 billion Android devices in use, which amounts to almost 11 million actual devices, and that number has risen rather than fallen in the past year. Secondly, even though Google has been working with carriers and OEMs to push security updates to devices outside the very slow OS upgrade cycle, about half of devices in use at the end of 2016 had not received a platform security update in the previous year. Given how frequently Android exploits are discovered, that’s pretty worrying. On the plus side, Google has reduced installations of malware from the store by around 50% across several categories, which is obviously good news, but the fact that it acknowledges some of the apps installed from the official store still contain malware is a sign that it isn’t doing its verification job well enough.
After Google Phone Fizzles, Huawei Turns to AT&T for U.S. Expansion — The Information (Mar 21, 2017)
Based on the headline, I thought this was about Huawei finally being able to sell phones through AT&T’s postpaid business, because that’s the holy grail for Chinese manufacturers, and remains stubbornly unavailable to them at AT&T or any other major US wireless carrier. Where the Chinese vendors have had some success is in the prepaid business, and AT&T currently carries several ZTE phones on its GoPhone prepaid brand, as well as one Huawei phone in a partnership with Walmart. However, what’s actually happening here is that AT&T is certifying Huawei’s own chipset for use on its network, which is really just a possible first step to getting more Huawei phones onto AT&T store shelves. Huawei’s lack of brand awareness in the US continues to be its single biggest challenge – something that hasn’t really changed over the years. I remember having conversations about this with Huawei executives at CES at least six years ago. Until that changes, there’s very little incentive for AT&T to give over shelf space reserved for familiar brands consumers recognize to a relative unknown like Huawei.
via The Information
The whole framing of this article feels very much driven by its subject, Duan Yongping, who runs the conglomerate which owns Oppo and Vivo, two of the world’s largest smartphone brands. The idea that these brands have somehow toppled Apple in China isn’t really borne out by the facts, and it appears the (unnamed) author rather took Duan’s word for it on this and other points. Apple has absolutely seen falling sales in China, but that’s as much about a saturating market and the drop-off from the huge iPhone 6 launch as about any local competitors. It’s also fairly clear that Oppo and Vivo compete in a very different segment of the market from the iPhone, though many who buy those devices plan to buy an iPhone next, per some recent Morgan Stanley research, suggesting that these are customers which aspire to buy iPhones rather than having switched from them. There’s no doubt Oppo and Vivo have achieved impressive market share in China, and therefore also globally, but it’s far less clear that their strategy is sustainable – after all, we’ve seen other Chinese brands (notably Xiaomi) do very well in the short term and then fizzle. In China in particular, the Apple brand is highly aspirational, and that will continue to drive a lot of sales.
Amazon puts Alexa inside its main iPhone app – VentureBeat (Mar 16, 2017)
Alexa’s single biggest flaw today is that it’s a shut-in: for the most part, it can’t leave the house. That means competing in a broad-based way with Siri and the Google Assistant requires getting onto smartphones, and now we have Amazon putting Alexa into the Amazon shopping app on iOS. Job done? Well, no. Because just having an app on a phone doesn’t mean people will use it. And if it’s buried inside a shopping app, that’s a steep hill to climb relative to just holding down the home button to summon Siri. On the one hand, I get the logic of putting Alexa in the Amazon app – it’s an app many of the company’s most loyal users already have installed and likely use frequently, but it also means it’s going to be several clicks away. I can see some parents with kids using it to keep them quiet with jokes, but it’s hard to imagine people using an Alexa buried in a shopping app as their main assistant while away from home. Integration within the smartphone and its operating system is the key here, which will be impossible on iOS but more feasible on Android, as we’ve already seen with Huawei and Lenovo’s integration plans.
This case has been going on for a long time, and is another example of the tensions between US and Chinese tech companies, in the wireless space in particular. Though this case has nothing to do with the concerns about back doors in wireless networks I mentioned in the context of Huawei yesterday, it highlights another concern: that Chinese tech companies have often been willing to sell technology to some of the world’s repressive regimes, and have often had to cover their tracks in order to do so. ZTE got caught doing this in Iran a few years back and the US has taken action over breach of sanctions, as ZTE was incorporating US components. The worst case scenario here was that ZTE would be banned from exporting any US technology to use in its own products, which would have included Qualcomm chips apart from other things and would likely have been devastating. It avoided that outcome, but still has to pay a fine equivalent to its last two years of profits, which is pretty bad by itself. None of this is likely to make US wireless carriers more likely to place Chinese smartphones on their premium shelf space.
Americans Don’t Care About Nokia (or Huawei) – PCMag (Mar 7, 2017)
This is good from Sascha Segan, explaining why “Nokia” (really HMD Global) and its new 3310 are irrelevant in the US, but also in some ways more interestingly why Huawei (and other Chinese manufacturers) have long struggled here. With Nokia/HMD, it’s a long-standing lack of investment in the unique requirements of the US market including CDMA networking technology, whereas with Huawei it’s a more complex geopolitical issue involving Huawei’s networking gear. It’s easy to dismiss the US government’s objections to Huawei equipment in networks covering US network traffic as scaremongering or protectionism, but in a previous job I heard from very reliable sources about Chinese gear (not Huawei’s) in telecoms networks which had backdoors installed – these concerns can’t just be dismissed out of hand. But even beyond that, there are significant other reasons why the Chinese brands don’t succeed here, including notably the fact that those brands simply aren’t known, and in many cases the companies aren’t doing enough to change that. The one place where some of the Chinese brands do reasonably well in the US wireless market is the prepaid segment, were several have made a decent business. But that’s much less brand- and much more price-sensitive than the much larger postpaid market.
I’ve changed the headline here to reflect two key points from the article: that Lenovo has done an about face and decided to re-enshrine the Motorola brand as the main brand for its phones globally, rather than de-emphasize it as previously planned; and that the company is doubling down on its Moto Mods concept, rather than abandoning it as LG has. The branding decision is a no-brainer: it always seemed odd to take an iconic brand like Motorola and retire it in favor of the Lenovo brand, which has far less (and less positive) recognition among smartphone buyers globally. The Mods decision is an interesting one – this article has one of the first numbers I’ve seen on how well they’re selling – it sounds like roughly half of Moto Z phones are bought with at least one Mod, which is actually a pretty decent attach rate (no pun intended). But Lenovo’s latest financial results say the Z is on track for just 3 million shipments in its first year, relative to Lenovo’s 51 million total smartphone shipments in 2016, so this flagship is still a tiny fraction of its total sales. And that’s a problem, because the rest of Lenovo’s sales haven’t been going nearly as well, and those that have been are very low-end focused. That’s not a great recipe for eventual profitability in smartphones, something that’s remained elusive for Lenovo since it bought Motorola.
I commented on the reports a couple of weeks back that Xiaomi would be building its own chips, and guessed that Xiaomi would likely start at the low end of its device range and work up from there, and that’s exactly what they’re doing: the Mi 5C is the first phone using Xiaomi’s homegrown chips, and sells for a little over $200. It’ll be interesting to see what if anything comes out of the reviews of the phone about its performance relative to Xiaomi’s earlier low-end phones – a solid early performance is critical for building confidence that Xiaomi knows what it’s doing here. The company also said it had spent a billion yuan – around $145 million – on building its capability, and that it received some help from the Chinese government, though it’s not clear how much. To put that in context, Apple’s acquisition of PA Semi alone cost $278 million, and that’s before all the additional work and money it put in organically following the acquisition to build its own chips. So though Xiaomi is splashing out somewhat here, it’s still a small investment in the context of earlier similar investments.
Moto G5 + Moto G5 Plus hands-on: A little less convention, a little more action – Android Central (Feb 27, 2017)
Lenovo’s Moto G range is one of its most popular, providing a pretty nice Android experience at fairly competitive prices, and at MWC it got some nice upgrades. This part of Lenovo’s portfolio has performed much better than the rest at a time when its smartphone sales overall and in China in particular have been collapsing. Those sales have been strong in markets like Latin America, where low-cost Android is a good fit. This is yet another example of the various strategies Android OEMs will have to pursue to find workable market niches – Sony is going up market, Samsung and Huawei rely on large scale in very different segments, and Lenovo/Motorola is finding some success in this low-mid range although not elsewhere.
via Android Central
Sony’s focus on premium continues with these new phones announced at MWC, one of which has been priced at $699, above the base price for other premium phones in the US, with the other not yet priced but featuring a higher end processor and therefore likely to go for even more. These devices also seem to continue the Sony design language of thin, relatively squared-off devices with lots of glass, which is still somewhat distinctive relative to other Android devices, but can make them seem fragile and also often makes them a little uncomfortable to hold. It looks like there’s some clever stuff with the camera, which will continually take shots when you open the camera app so that there’s literally zero lag when you press the shutter button. The big problem here is that what’s ostensibly the flagship, the XZ Premium, won’t launch for months, so any buzz generated now will die down entirely or be channeled into the less premium device instead. It’s also unclear from the reporting which US carriers will actually sell the phone, which is critical because Sony has had a tough time getting US carrier support for years now.
Samsung’s Gear VR headset has been by far the top-selling VR device so far, with over 5 million units “sold” (although many were likely given away or bundled at a very low price with smartphones) versus under a million so far for Playstation VR. Mobile VR is the mass market segment, and it’s always going to beat the hardcore VR rigs on volume, but the performance is often sub-par, and the user interface on the Gear VR has been pretty abysmal. The Daydream VR headset Google debuted late last year was much better in this regard, with a nice little hand-held controller which was mostly much easier to use, though it can be a little glitchy at times. It looks like Samsung now has a much more usable controller too, which should be a big help in making its VR experiences more enjoyable. The new controller ships with a new version of the Gear VR headset, and may or may not be available as an accessory for existing owners (price and date are also still unavailable).
This, to my mind, is one of the bigger announcements coming out of MWC – that Google will finally allow other smartphone makers to use the Google Assistant, after several months of keeping it exclusive to its own Pixel smartphone. I described that decision at the time as representing a big strategic shift for Google, and probably a mistake, and the evidence since has borne that out. The Pixel has sold in small numbers, Amazon’s Alexa has extended its lead considerably as the voice platform of choice for hardware makers, and even at MWC itself Android vendors announced Alexa integration despite Google’s shift here. The good news is that it’s only been a few months, but the bad news is that this change in policy will come too late to hit the new flagships debuting at MWC, including the new ones from both Samsung and LG. It will likely become available later, but shipping as an integrated part of these new smartphones would have been much better. I’m betting that Google will continue to pay for this strategic misstep for some time to come – even once it’s available, OEMs will want to offer more differentiation than the Google Assistant allows them, which will continue to make Alexa an appealing alternative.
After last year’s largely unsuccessful focus on modularity, it looks like LG has gone back the other way, with a really solid, slab-like phone that trades removable items for dust and water resistance. We’ve seen phone makers go for durability as a selling point before, sometimes in a core model and sometimes in a rugged variant (Samsung favors the latter), and it’s rarely enough to act as a big differentiator, especially in a premium phone. But it looks like LG is also majoring on the combination of a really big, high-res screen with small bezels and better one-handed use. It’s always interesting to watch the pendulum swing back and forth between masses of clever features and simplicity with the Android vendors, and we’re seeing that here. I’m betting this phone does better than the G5 last year, but LG continues to be in a tough spot in smartphones – it’s losing money every quarter, sales are falling, and it’s stuck in that unfortunate middle within the Android ecosystem where it’s neither at big scale in premium devices nor price competitive enough to do really well in the mid market. I don’t see this phone dramatically changing its fortunes.
HMD Launches New Nokia Phones – Wired (Feb 27, 2017)
Quick explainer for those that haven’t followed the saga of Nokia over recent years: Microsoft bought Nokia’s Devices and Services business, including the smartphone and feature phone businesses, a few years back, along with exclusive use of the Nokia brand in these markets for several years. That exclusivity has now expired, and Microsoft last year sold the rump of the feature phone business to a new Finnish entity called HMD Global, which now has the rights to manufacture phones under the Nokia brand. The original owner of the Nokia brand and devices business, which now mostly makes telecoms network gear, has essentially nothing to do with these new phones. The MWC announcement actually covered three smartphones, the Nokia 3, 5, and 6, but almost all the attention has been on its resurrection of the extremely popular candy bar feature phone from 17 years ago, the Nokia 3110. It’s fascinating to see both the BlackBerry and Nokia brands get reboots at MWC from new companies – both were once key players in the global industry but have fallen enormously from those heights, and are probably past the point where a meaningful resurrection is possible, considerable nostalgia notwithstanding.
I think this headline from the Verge captures my sentiments on this phone pretty well. I have covered BlackBerry as a company pretty closely in the past, and still do to some extent, and whenever I write about them or post charts on Twitter, the first response I almost always get is “I though they went out of business”. The reality is that BlackBerry has dropped so far out of the public consciousness in what were once their biggest markets that a phone like this at this point isn’t really going to get them anywhere. The moment for this phone was years ago, not today, and at this price ($549) it’s not an option for the markets where the BlackBerry brand still means something to consumers, like Indonesia. So many of even those who once insisted on a physical keyboard have now caved to the inevitability of the full touch screen, and the vast majority of those won’t go back now they’ve discovered apps, content stores, and everything else modern smartphones have to offer and BlackBerry devices have never really been able to. At least now the risk is mostly on TCL’s books rather than BlackBerry’s, and the reality is that the hardware business at BlackBerry is so small now (under $100 million in the November 2016 quarter) that this is almost all upside for the company – if TCL doesn’t sell any, that’s more or less a continuation of the tiny hardware revenue BlackBerry has been booking, and if it sells a few hundred thousand, that’s useful additional revenue. But this is very likely to be a tiny overall revenue opportunity for both companies, and I’m curious to see how long TCL sticks with the partnership.
Intel’s 7560 Modem Could Push Next iPhone to 1Gbps – PCMag (Feb 21, 2017)
There’s some conjecture here on two points: that simply because Intel has added CDMA/EVDO capability to its next LTE modem Apple will use it globally, and that a modem capable of delivering peak throughput of a gigabit per second will actually do so in real world environments. The latter is an obvious stretch, given that real-world performance is always a fraction of the theoretical peak, but the former may well be a stretch too. I’m not convinced that Intel could ramp up production quickly enough to be the supplier for all of the next generation of iPhones – that would be a massive step up over its iPhone 7 supply. And I’m not convinced that Apple, having finally gained a measure of redundancy by dual sourcing modems for the iPhone 7, would so quickly jump back into single sourcing, especially given the performance limitations of the current generation Intel modems. That’s not to say this would never happen, and it’s obviously a very interesting point of leverage in the context of the current bad blood between Apple and Qualcomm, but I still think it’s somewhat far fetched at this point.
Samsung to Use Sony Batteries in Galaxy S8 Phone – WSJ (Feb 17, 2017)
The fallout from the Note7 recall continues: Samsung is apparently adding another battery supplier to its roster, though Sony’s capacity is so small that it will likely be by far the smallest by volume. None of this guarantees anything – the Note7 had problems because both battery suppliers produced faulty batteries and because Samsung’s design put pressure on those batteries. Given that those same two suppliers will be making most of the batteries used for the S8, and Samsung of course will still be designing it, what those three companies do differently is far more important than adding another minority battery supplier. As such, I suspect this is probably better read as an attempt by Samsung to exert some pressure on its existing suppliers by demonstrating a willingness to look elsewhere than any sort of strategy to ensure safer batteries in the S8. In that way, this is analogous to Apple’s recent move to give Intel some of its iPhone modem business. But all this also highlights the difficulties in shifting suppliers at such scale – neither Apple nor Samsung can suddenly switch suppliers at this volume, and even if they could the new vendors often underperform relative to the incumbents (as here with Sony’s batteries and also with Intel’s modems).
HTC has another tough quarter, with revenue down 13% YOY, but smaller losses – TechCrunch (Feb 15, 2017)
I don’t typically track HTC’s financials that closely, because they’re so small (just $700 million in revenue last quarter) and such a minor player at this point, but it’s worth checking in from time to time, especially as HTC expands beyond its traditional smartphone business into VR and ODM manufacturing for Google. Interestingly, there’s very little sign of any meaningful bump in revenues or profits from either of these initiatives, which either means that their contribution is tiny or that the traditional smartphone business is declining even faster than in the past. Revenue was down 13% year on year, and the company has had negative operating margins for seven straight quarters and most of the last three years. On the Q3 earnings call, HTC said that it was near breakeven on its smartphone business, and blamed the VR business for the overall losses. It also refuses to talk about the Pixel business at all on earnings calls, citing the lack of public disclosure by Google (which is odd because Google has confirmed it). Regardless, it’s worth noting that the company’s gross margin is just barely in the double digits, which obviously doesn’t leave much room for marketing and other corporate costs. HTC is one of a number of what were major Android vendors a few years back which have faded considerably, and unlike Sony it doesn’t yet seem to have figured out how to make the business work at its new smaller scale.
HTC will launch mobile VR device as follow-up to Vive – CNET (Feb 15, 2017)
I covered HTC’s Q4 results yesterday, and it was clear that VR was not yet making a big positive dent in the business yet. Part of the reason is that Vive, like Oculus Rift, is a marginal play – it relies on heavy duty existing hardware and is itself expensive. It’s no coincidence that the top selling VR headset today is Samsung’s Gear VR, with over 5 million units, because it’s compatible with many smartphones and costs very little. HTC is smart to move into this territory too, though of course if this device really is limited to one of its own smartphones, that’s a pretty small addressable market too.
Huawei Sold More Phones but at Less Profit — The Information (Feb 10, 2017)
Huawei was the number three smartphone maker I said was one of several missing from that recent analysis of who captured the profits in the global market, and it does actually make a decent profit (relatively speaking) on its hardware. According to the Information, the relevant business unit made $2 billion in profit in 2016, or a margin of 7.7%, which may not sound like a lot but given that almost all consumer electronics businesses generate low single digit or negative margins, it’s not bad. It was down from 11% in 2015, but Huawei invested enormously in marketing in 2016 and saw 30% smartphone growth as a result. It can probably ramp down that spending in 2017 while still seeing decent growth, which should help it get closer to its $4 billion profit goal for the year. Huawei continues to be a very interesting company to watch in the smartphone market, and is one of only a handful of companies which have managed to drive a decent profit from making Android smartphones.
via The Information