★ Lenovo Reports Q2 Loss, Flat Smartphone Sales (Aug 18, 2017)
Android Police has a review of the Asus ZenFone AR, the second phone to carry Google’s Tango augmented reality technology. It sounds like it’s a big improvement over the clunky first phone from Lenovo, but it certainly doesn’t sound like it’ll be a big seller, while Tango itself doesn’t sound like it’s moved on much either. The review is worth noting because Google has been in AR for far longer than Apple, and yet Tango seems to have stalled at the experimental phase, with lots of effort from Google and yet very little to show for it. Two phones, neither of which will end up selling in large numbers, very few apps and essentially no meaningful position in AR just at a time when the space is about to take off thanks to Apple’s entry through ARKit in iOS. That’s something of an indictment of Google’s failure in this area, with its Daydream VR effort faring a little better but also not yet finding a sizable market niche to call its own. One other thing to note from the review here: it sounds like Tango absolutely hammers battery life on this device, and that’s something that will be well worth watching when ARKit-based apps launch on the iPhone in September. Pokemon Go has already taught us that apps featuring AR (and location-based elements) can be hard on batteries and still be popular, but it will detract from AR’s popularity on the iPhone if ARKit apps show a comparable tradeoff in battery life.
via Android Police
HMD Global Launches First High-End Android, Nokia 8 (Aug 16, 2017)
NDTV’s Manish Singh has an interview with the head of consumer electronics sales for Amazon in India which provides several interesting insights on trends around smartphone sales there. It seems Amazon’s sales of smartphones in India have risen dramatically in India over the past year, up 100% overall but up by far higher percentages in the smaller cities around the country. Perhaps more importantly, Amazon is finding that a smartphone is often the first purchase a customer makes through the site, but in many cases turns the customer into an Amazon convert, with many other purchases following that first positive experience. In a sense, this is the equivalent of Facebook or Google pursuing strategies to expand internet access: the efforts are designed to create new potential customers who are more likely to be loyal to Amazon, though this would be even more effective if Amazon launched its own devices, something NDTV has previously reported it was working on. The piece here also talks about Amazon’s strategy of offering the broadest possible range of devices and brands while also securing the odd exclusive including phones from OnePlus and a particular model of the iPhone. That’s an interesting strategy in a market where a majority of smartphone sales are still made in offline retail, but online is an increasingly important channel. Overall, some good insights into both Amazon’s India strategy and the Indian smartphone market. Also worth noting: this separate story from NDTV on the new Nokia 6 (from HMD Global) hitting 1 million “registrations” (effectively a soft pre-order) on Amazon’s website in India, which is running some special promotions and bundles around the phone.
Essential, Android founder Andy Rubin’s fledgling smartphone outfit, has announced additional funding from companies including Tencent and Amazon, but still refuses to say exactly when its smartphone will go on sale, saying only that a date will be announced in a week or so. It’s also announced that Amazon and Best Buy will be the retail partners for launch, while Sprint was announced earlier as the exclusive US carrier partner. If you’ve read any of my previous pieces on Essential, especially the first one, you’ll know how skeptical I am that an effort like this can succeed. The market is so mature at this point and the distribution and other battle lines so clear that breaking in with yet another Android phone will be a real challenge, one further exacerbated by what’s going to be limited distribution on the weakest carrier in the US. The funding is therefore intriguing, because it suggests these backers see something in the phone that I don’t. Importantly, it’s Amazon’s Alexa Fund specifically that’s making that company’s investment, something the Journal piece I’m linking to here doesn’t dig into at all, but which suggests that the phone will major on Alexa integration, something hinted at earlier by Andy Rubin as part of a statement about the phone’s ecumenical approach to voice assistants, but not made explicit. And backing from both Foxconn and Tencent is intriguing in the context of a phone that’s mostly being launched in North America for now. Recent conversations I’ve had suggest Amazon’s smartphone sales business is going very well, but of course many of its sales are of the kind of low-end prepaid handsets people buy outright anyway rather than the higher-end premium hardware Essential will be selling. I continue to be very bearish on Essential, but at least it sounds like we might finally see the hardware hit the market soon.
Huawei Smartphone Reportedly Coming to AT&T (Aug 4, 2017)
I’ve had a few items recently about Huawei, including an item earlier this week about global smartphone market share, and you’ll hopefully have sensed that I think it’s a fascinating company to watch. But one of the other consistent themes about Huawei is that it’s been successful in much of the world with one big exception: the US, where the major carriers haven’t sold its phones. Fellow Chinese smartphone maker ZTE has been more successful in getting its phones ranged by US wireless carriers, especially in the prepaid space, but Huawei has been absent. And it’s worth noting that when it comes to the postpaid market that dominates the US, there are really just three big brands: Apple, Samsung, and LG, in that order. Every other vendor has under 5% of the total US smartphone installed base, with Motorola and HTC rounding out the top five. With all that as context, the fact that The Information is reporting Huawei is working with AT&T for a launch, possibly built around its next flagship, is kind of a big deal. Given the flagship focus, this almost certainly means it’s coming to AT&T’s postpaid service, which is arguably an even bigger deal, and follows on from earlier reporting that AT&T was certifying Huawei’s chipset. Between this and the availability of the Motorola Z2 Force on all four major carriers, we’re potentially entering the first real phase of expansion in the US smartphone lineups offered by major carriers in quite some time, following a period of simplification and focus. That’s yet another sign of both maturing smartphone markets and a maturing wireless market in the US, which is going to force carriers to get creative in how they attract and retain customers.
via The Information
Motorola Z2 Force Reviews Highlight Tradeoffs (Aug 3, 2017)
I saw an article pop up this morning from Mashable about Apple and its repairs policy, and then saw another this afternoon from the Verge (linked below) on the same topic, which made me wonder why, and it turns out that the answer is a new report from the Repair Association. The Repair Association is an industry body made up of device repair companies and environmental and other organizations, and as such has a clear point of view on device repairs: they’re a good thing, and any limitations on repairability are a bad thing. I had a long Twitter exchange this morning with the author of the Mashable article about this topic, and the thrust from my side of the conversation was that the framing here is all wrong. Yes, Apple does place restrictions on who can repair its devices and how, and it also increasingly designs its devices in ways which make them harder for third parties to repair, but as I’ve said before in the context of iFixit and other repair companies’ reviews of Apple devices, this isn’t done to thwart repair companies or customers, and it isn’t a money grab.
The big shift in Apple’s design over recent years has been increasingly tight integration of components, which has been a key enabler of making devices smaller and more powerful, something that’s been a part of iPhone and iPad design from the start but which has more recently spread to the Mac line as well. This definitely makes repairs harder, and Apple also places restrictions on how screens can be repaired because they’re integrated with the Touch ID sensor that controls device unlocking and Apple Pay among other things, and repairing them without access to special tools stops Touch ID from working. Again, that’s a side effect of Apple’s security-centric design and not a deliberate strategy to frustrate would-be repairers or customers. Apple opposes some of the stricter standards and regulations proposed by states and various bodies because they’re often designed to prioritize repairability over functionality, sometimes in ways which seem directly aimed at the way Apple designs its products. Meanwhile, Apple has made enormous strides in its environmental efforts over the last few years under the leadership of Lisa Jackson, formerly head of the EPA and therefore no slouch when it comes to environmental protection. That’s extended from using sustainable energy to better recycling of parts with Apple’s Liam disassembly machines and so on. Apple is moving in the right direction here, and as the Verge piece at least acknowledges, none of what Apple is doing here is actually environmentally unfriendly, as the Mashable piece suggests.
via The Verge
New smartphone shipment and market share numbers are out for Q2 from various analyst firms, and they all show the same broad pattern: somewhere between a modest decline and modest growth year on year for the market as a whole, modest growth for Apple and Samsung, and strong performances by three Chinese vendors, with Huawei making significant gains in the number three spot. IDC, Strategy Analytics, and Canalys among others differed slightly on the exact shipment numbers, while Strategy Analytics seems to find another 20 million or so shipments somewhere compared with the others. The top four spots have now remained unchanged for over a year, with the exception of Q4 last year, when Apple briefly pipped Samsung for the number one spot, though this quarter Xiaomi’s resurgence squeezed Vivo barely out of the top five. Huawei got within a few million of Apple’s sales total for the first time off the back of pretty strong growth, but Xiaomi had by far the fastest growth (which you already know if you’ve read two earlier pieces on Huawei and Xiaomi). The broader picture has Chinese vendors dominating the top ten, though these firms only report the top five in their public releases: by my count, Chinese vendors take seven of the top ten spots, with Apple, Samsung, and LG the only exceptions. And those Chinese vendors rely enormously on the Chinese market for their sales, while several have no presence in the US at all, meaning that the smartphone market is increasingly fragmented globally, with different players taking the lead in different parts of the world.
via Android Police
Apple reported its fiscal third quarter / calendar second quarter results today, and they came in at the high end of its guidance and beat analyst estimates. One of the biggest surprises was strong iPad unit growth year on year after four years of declines, and just the second quarter of revenue growth for iPads during that period, thanks largely to sales of the lower-priced $329 iPad introduced earlier this year. But Apple said all its product categories saw year on year revenue and unit growth, with Apple Watch reportedly growing 50% year on year, and Mac and iPhone unit growth up modestly, while the Services business continued on its recent tear, driven largely by the App Store, but also to an extent by Apple Music and iCloud storage plans. iPhone ASPs were up modestly year on year driven by stronger sales of the latest Plus models, and would have been up more if not for the fact that the company sold down its inventory significantly, with almost all the reduction being made up of more expensive phones.
Perhaps more significantly for the longer term outlook, the company provided guidance for the September quarter which essentially guarantees new iPhone hardware in September. I would guess that at the very least Apple will have the successors to the current phones on sale in the usual timeframe and in the usual volumes, while my hunch is that the new higher-end model will also go on sale at the same time but be even more heavily supply-constrained than new iPhones usually are.
Apple continued to talk up performance in mainland China as distinct from the Greater China region it reports, where sales were down 10% year on year, the best result in nearly two years, but still a drag on overall results with other regions all growing, all but Japan at double digit rates. Tim Cook also addressed the issue of VPNs in China which I wrote about yesterday, and defended Apple’s stance, which is a combination of following the law in each country where it operates, and believing that it’s better to engage and stay in a country than leave, even where it disagrees with policy (my notes on this portion can be seen here).
Overall, Apple’s management on the call seemed as bullish as they have for some time, clearly looking forward to what they expect to be a strong finish to the year in both product and financial terms. Tim Cook wasn’t drawn the slightest bit on new iPhones, but did hint at new products this fall, talked about the role of autonomy beyond vehicles and Apple’s big project in this area, raved about ARKit and the potential of AR, among other things. There’s clearly a good mix of products coming to market in the near term and investment for the long term which Apple’s management is also happy about. That’s no guarantee of a strong performance in the September or more importantly the December quarter, but I continue to be pretty bullish on what’s coming over the next few months from Apple.
LG Reports Weak Smartphone Results, Losses in Q2 (Jul 27, 2017)
I’ve already commented this quarter on Samsung’s preliminary results, which let us know that it would report record high revenues and operating income. But we had to wait until its final and full results for the quarter were out to know the contributions made by its various divisions, though I’d had a good guess in that first comment. As expected, the Semiconductors division (which includes memory, ASICs, and Samsung’s new separate foundry business) was by far the strongest performer in the quarter, growing 47% year on year and contributing 57% of operating income for the company on just 27% of its revenue. That was driven, as expected, by a combination of market growth and price increases, with memory making up nearly 80% of sales. But the IT & Mobile division, which has been stagnant or declining in recent quarters, also contributed to revenue growth, up 17% year on year, the best in several years. A big contributor was the shift of the company’s Galaxy S launch from Q1 to Q2 this year, which had sent Q1 revenues down 15% year on year but boosted the year on year comparison this time around. Profits and margins, though, were both down on last year in the mobile division, suggesting perhaps because of the expenses associated with the launch shifting from Q1 to Q2 as well, and perhaps because the company is making a big marketing push around one of its most compelling flagships in several years. My bet is that the rest of Samsung’s year will go as well as its first half, based largely on the combination of higher chip prices, growing components shipments, and a big boost from Apple OLED orders for its new phones. Some of those drivers will ease next year, especially if other suppliers are able to ramp up OLED production to help meet Apple’s needs in the next generation of phones, but Samsung’s on a pretty healthy trajectory right now and there’s not much sign of that stopping. The biggest short term question is how it will position the Note 8 that’s due to launch next month, given the increases in usable screen size in the Galaxy S line and last year’s troubles, and how competitive it and the Galaxy S8 will be versus the new iPhones launched a month later by Apple.
via Samsung (PDF)
Apple Drops to Fifth Place in China Smartphone Market in Q2 (Jul 26, 2017)
Motorola today announced the latest variant in its flagship Moto Z series, the Z2 Force, which is a follow-up to the Z2 Play announced a while back. Motorola, of course, is part of Lenovo, which had pared back the Motorola branding over the past year, although today’s launch suggested it’s reversed course on that front, with lots of “batwing” Motorola logos and the full version of the brand (not just “Moto”) on stage and elsewhere. The Moto Z is the only really high-end phone either Lenovo or Motorola makes, but even then the Z2 Play is priced at $500, well below flagships from other manufacturers. Lenovo has said on earnings calls over the past year that it expected the Z to sell around 3 million units in its first year, so this isn’t a mass-market flagship in anything like the same category as the iPhone or Samsung’s Galaxy S and Note phones, or even the LG G series. The Z line has been pretty much a niche proposition, and there are two big reasons for that: the modular approach, and the Verizon exclusivity in the US. Though neither of those changed with the Z2 Play, the Z2 Force will be available on all four US carriers, and offers a shatterproof screen and some other advantages over the Z2 Play. But it will also command a far higher price at around $800, putting it in line with the most expensive flagships from competitors. That’s a fairly bold move, but suggests Lenovo/Motorola feels comfortable about the device and its ability to differentiate in the market. Motorola has had an interesting set of differentiators over the last few years, in some ways going back to basics by emphasizing battery life and now shatterproof screens, while the modular approach is likely to be too niche to drive really meaningful sales. But will four-carrier support and a monthly financing program through Affirm, Motorola is definitely broadening the distribution this time around, and that should help it expand the addressable market quite a bit. None of that is going to catapult Motorola into being a major player in the US market again, but it should certainly allow it to take more meaningful share and re-appear on the radars of people who have written it off as a Verizon-only vendor in the US.