Android OEM profitability, and the most surprising number from Q4’s smartphone market

[Note:  This item comes from friend David Rosenthal.  DLH]

Android OEM profitability, and the most surprising number from Q4’s smartphone market
By Charles Arthur
Feb 9 2015
<https://theoverspill.wordpress.com/2015/02/09/android-oem-profitability-and-the-most-surprising-number-from-q4s-smartphone-market/>

I’ll admit – I’m surprised myself by how low the profitability even of “high-end” Android OEMs is. I hadn’t investigated it in detail until I wrote this post.

The end of 2014’s fourth calendar quarter, and hence year, brought forth a blizzard of data about the mobile and the smartphone markets. The mobile market (so including featurephones) passed the 500m mark for the quarter, according to Counterpoint. The smartphone chunk is growing as a proportion of that faster than ever: in Q4 it made up about 75% of sales.

As a proportion, smartphone sales are rising healthily:

Smartphones are a growing proportion of all mobile phone sales

That compares with a 58% smartphone mix in 4Q 2013. Even so, I don’t expect the 90% mark to be hit before 1Q 2018 (yes, 2018), on the assumption their sales rise as a diffusion curve.

If the proportion continues at about a 3% increase in smartphone share per quarter (as happened roughly in 2014), smartphones will be 90% of sales in 1Q 2016 – just a year away – and 95% in 3Q 2016. By then, effectively all the market is smartphones.

Apple’s enormous sales – 74.5m units shifted – attracted lots of the attention. It ended the quarter with less inventory in the channel than at the start, suggesting that sell-through (ie the number bought by people) was actually higher.

But the really surprising figure – the one that had me firing off emails asking for more detail – came not from Apple, nor any individual company, but from ABI Research. Its headline: “Android Smartphone Shipments Fall for the First Time”.

This is surprising: Android shipments have never fallen from quarter to quarter before

Wow. I mean, truly wow. As it says, that’s never happened before. Android shipments have always increased from quarter to quarter, both for “Google Android” and AOSP, since the platform’s first phone. (Unlike pretty much every other research company, ABI also breaks its Android figures down into “Google Android” – ie Google Mobile Services certified, carrying all Google’s services – and “AOSP” – principally, China.)

Yet here ABI is, saying G-Android shipments fell by 11.9m, and AOSP by 0.47m, a total of 12.4m. That’s quite a lot more than a margin of error.

[snip]