This page has been archived and commenting is disabled.
China, Smartphones, Margin Compression and the Future of Computing
Last April I opined upon the mobile market in 'My "Hardware IS Dead" Thesis Has Now Torn Through Every Major Handset Provider'. Samsung and Apple, the market leaders have been on a structural decline from a fundamental basis, but Apple in its usual RDF fashion has convinced many that long term trends no longer exist... because the iPhone 6 has been release!
Xiaomi, a Chinese OEM is quickly gaining on Apple and Samsung. It sold 61 million phones last year, a 227% increase year over year! Revenues are up 135% over the same period. This company is growing dramatically faster than Apple and Samsung, and is much too large to ignore as a peripheral competitor. Here's the kicker, it operates off of ~1% margins!
No matter which way you look at it, the margin compression thesis is bound to subsume the big boys. Now, I called the Apple short before it became vogue! I called the Blackberry short before they became the industry whipping boy! I warned about Nokia and made clear that Samsung Will Be Ready To Do That Fruit Thing! How'd I know all of this? It's quite simple, I explained it all in 2012 - Smartphone Hardware Manufacturers Are Dead.
The only way for manufacturers to avoid doing the Blackberry is to a) move to software (cloud) services for margin via a closed (or semi-closed) ecosystem or to b) up their hardware game. Option A is hard with competition from those with network effect working towards their advantage, ex. Google and Apple. Option B is extremely capital intensive, not to mention plain old hard as hell to execute.
Alas, I wouldn't write Samsung off just yet. Apple has a significant revenue boost from the launch of mobile phones which addressed the pent up demand for larger screens. This will, in the short term, not only boost Apple revenues but put a material dent in Samsung devices, solely because Samsung is no longer the only (big brand name) game in town for those consumers who don't comparison shop (most of them). The biggest short term market is in wearables, though, and it is there where Samung stomps all over the competition in both hardward and software - not to mention core functionality.
I welcome all to research the Samsung Galaxy Gear S (ignore the critic reviews and read the comment section below each review, there seems to be a concerted effort to ignore the advantages proffered by this device in favor of devices that are either vastly inferior or not even offered for sale or demo yet).
Follow me: @reggiemiddleton
»
- advertisements -
CrApple
Happpy New Year Reggie. Where have you been?
Meh my mobile phone is 10 years old. A new device I do like is a receiver you can plug an everyday phone into. I got one for my mother of 89. She could not remember how to use a mobile phone. Now she can use her old dail up phone to place a call.
Just curious as I do not have one, but how does an Obama Phone compare?
I think the threat of consumers switching phones to copycat Chinese models to save $500 or whatever is overrated, privacy and security are worth more than$500, nobody is going to buy/use a smart phone they can't trust or sue the maker.
A name brand worth destroying is worth the extra expense.
Brand name greed protection is a powerful motivator for phone security.
For security.......you'll want a name brand phone.
You are correct Smiity. The naysayers spew about apple and google offering up your info to the .gov brigade. While they are also correct in that regard, the .gov is gonna get your data one way or the other anyway since phone data is just one source of info for them. The chinese phone makers on the other hand may well hand over your data to their masters, but it is the other things they might do with it that would worry me.
You are kidding, right? You must be kidding. You read and get your information where? I guess you missed that article about Apple phones containing code right in the OS that would let Apple, or any "authorized" entity, such as virtually any law enforcement agency, right into your phone. And it's not only what's in your phone, it's anything that has ever been in your phone. So you think you have "security" with Apple? My advice is buy the cheapest phone you can. Put the rest of your money into food and precious metal, and never talk about anything on any phone you wouldn't be willing to print in the NY Times.
Thanks, NSA for that -
So you think Google/Apple don't share information with the government, despite the fact that they admitted to it? A chinese phone company may well share information with the chinese government but who cares? As for viruses that may be an issue but I think more if you are downloading chinese apps than from the operating system itself.
Yes well, why spend $800AUD+ for a late model Smartphone..when we all have the earlier versions that do pretty much the same thing.
Now days $800/900 feels like much more than it used to ... thus not buying upgrades any longer from my Galaxy Note 2...and if and when I do....well the likes of Xiami is a real option (most of my family have this brand). Hopefully they improve their software options.
I brought the xiaomi m3 as didn't need the features of the M4.
I have had iPhones before and the xiaomi is better. (Signal strength in rural areas bloody good).
Meanwhiile my IPad has become a nightmare, Apple have completely blotched the launch of IOS 8. They are not responding to any of my requests for bug fixes.
8.1.1. on/off button stopped working, sound disappeared, screen rotation stopped working, keyboard very sluggish, web pages crashing, mail app crashes and needs to be reloaded.
I upgraded to the lastest 8.1.2, the on/off button has been fixed, but IPad crashes and drops apps.
Apple is rotten! When all these problems surface in the media Apple stock is toast.
So Apple will triple their prices to convince their boggled followers that they alone know the truth. I'm not holding my breath waiting for Apple eaters to become rational.
Regarding Samsung on the other hand, and others living on the fat margins, you may have a point.
Just you wait - Apple is delving into virtual reality.
The iAnal app is just around the corner with the vibrator iPhone7 and a heads up display w/ the iSuk (TM) device that lets you do virtual bukkake with Tim Cook and other Apple fans...
Wow...........I had no idea. I may have to backtrak on my pledge to never buy crapple products.
oh, God -seek help! Get a psychiatrist!
Prude.
Happy New Fear Reggie...
Speaking of wearables. Are you reading this on your google glasses ;-)
Ouch!
I heard Yellen has stopped buying S&P futures and started loading up on iphones to keep the US economy aloft
nice job Janet
How the fuck can Apple get $849 for each iPhone 6? I see no margin compression here, Reggie.
Young with money will buy apple, microsoft surface pro has issues apple folks dont want, so if microsoft cant keep up, how can people with a top of the line mentality trust the super cheap. I know you are talking phones but same applies there. Certainly there is a market for cheap, lots of folks are desperate to survive, so good there are cheap options.
"Young with money will buy apple"
That made me laugh. Thanks.
Microsoft is slowly sinking=it is iand ANTIQUATED technology=run by crooks and fossils
dreadnaught,
Microsoft is one of the only vendors in this space that WILL remain for the long haul.
From what I see of their vision the "antiquated technology" will enable Microsoft to gain market share.
Until then please keep using either the "all eyes" operating system OR the fruit flavored operating system and share your private information with the world.
I'm in China right now and I'll probably buy one of the cheaper new big screen ripoff phones with imaginative names like "Note." They won't run google play without rooting them but Amazon has most of the apps I need. Mymail does a pretty good job as a phone only emal client for gmail. Also bing search does a good job and isn't blocked like google search. And for $150 - $200 you get a pretty nicely specced phone.
They don't run google play? Sounds like a feature, not a defect, to me.
yea, im not buying a fucking chinese smartphone!
That means you want buy an iPhone since those are made in China, as well as about 80% of the phones sold.
I was walking in Mexico today and took a look at some cell phones some small store was offering. For a basic phone and 100 minutes it was $15. Unbelievable.
A tracfone with a few hundred minutes and triple future minutes cost me $15. This with a touch screen and all those "special" feature. Get a life!
How did a Sandy Hook victim end up mourned as dying in the recent Pakistan school attack?
20,000 Ebola cases later…
HR 428 sponsors to increase pressure for release of 9/11 Commission’s 28 classified pages
I want to see the Mary Jo White memo about how the Reno/Gorelick "wall" which was established to block foreign intel being sent to the Justice Department.
Many sources claim "The Wall" was created to protect Clinton from investigations into his illegal foreign campaign contributions (like say the Lippo Group and their friends in China's intel. Oh yeah, remember Al Bore pocketing money at the Chinese temple?) (Also look up how satellite secrets ala Loral were passed to the Chinese via Clinton contributors in Loral...also backing Hitlery. The Chinese went from crashing missiles into backyards to blasting satellites in orbit in a few short years. Hmmm.)
Funny how they put Gorelick into the Commission and then that nitwit Kean let her stay on as Commissioner when her complicity and negligence came to light. She should have been thrown off the Commission and immediately put on the witness stand along with Reno.
White predicted the Wall would leave the US vulnerable to a terror attack. One of the few docs keep secret by the Commission.
Reggie were you been at?
Nowhere apparently.
Still banging the same old drum.
Still waiting for margin compression (or something) to CRUSH Apple.
And they just keep getting wealthier...
Same old, same old.
Why do I need a new phone? Am I missing some fantastic new labor saving feature? Freaking two year old phone still does what I need. Signed, Gramps!
Maps, check email, text, phone...zzzzzzzzzzzz.
I refuse to pay for any NSA tracking device, or even carry a free one, however convenient it may be.
APPLE and GOOGLE have made their phones unhackable.....nobody else cares if the NSA can listen to you
My rotary dial phones still work really well after 40 years. No sign of wearing out. I don't have to charge them up either. No batteries as the phone co. provides the power.
They also doubles as a tuner for the guitar and banjo as the "dial" tone is approximately a B note.
Sincerely,
Gramps the Luddite
Whats the use of having awesome new chipsets when the networks speed determines the speed of our devices?
Edit
Btw my string-to-cup phone device still works too
Talk about, blast from the past...Where he been?
Jonjon:
Given the Xiaomi and their like competition, we will find out very quickly.
Smartphones are like solar panels, they will get cheaper than you believe possible.
Also, the incremental utility of all the improved processors, memories and displays is minimal, so price will be the determinant.
I wonder theoretically what would it take for an entrenched player to make that business model shift. From say "innovation" to pure attrition to crash margins and outcompete on volume.
Long time no see, Reggie. I guess next we'll hear from Bruce K.!
Microsoft jumps on the "Margin Compression Bandwagon" with Google leading the way...
Microsoft's new Nokia Internet phone costs...$29
Microsoft has unveiled a budget, Internet-connected phone under the Nokia brand, which will cost $29, as it steps up its efforts to capture the rapidly-growing emerging market consumer.
The Nokia 215's Internet connection – albeit 2G – sets it apart from Microsoft's other low-end devices, giving users access to Facebook,Twitter, a weather app and a web browser.
he Nokia 215 will be released in "select markets" in the Middle East, Africa, Asia and Europe in the first quarter of this year. Microsoft also claims the phone has battery life of up to 29 days.
The Chinese/Korean/Japan/Asian strategy is government subsidies and protection to destroy all competition.
the amazon strategy.
Samsung Galaxy S gear? WTF?? The best smartwatch that nobody needs. LOL! People's love affair with ever more electronic gadgets is going to end sooner or later. Human beings have already a hard time to keep up with that stuff - our biology , brain and nerve system simply isn't built for that. Looking at the way people (mis)use smartphones, smart watches and the likes I am very bullish on eye clinics, ear repair and psycho therapists - to name just a few very obvious areas that will see a huge wave of fresh demand.