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Sony Ericsson posted an atrocious 4Q11 handset performance, extending the losing streak of Android vendors. This wasnt expected to be a stellar quarter for SE, but the numbers are way below expectations handset volumes dropped by 20% YoY. Of course, earlier on HTC issued two back-to-back warnings and Motorola delivered a very disappointing 4Q volume performance. LGs smartphone growth started sputtering already last summer.
Samsung is still cruising on but what is happening to all these second-tier vendors? After the Nielsen report on 4Q11 smartphone market in United States, its clear that Apple is slamming Motorola and HTC badly in North America with its cut-rate old iPhone models. But Sony Ericsson does not have much US exposure. And Google is now reporting a heady 700000 Android device activations per day. How is it possible the mid-tier Android vendors cannot eke out revenue growth with that kind of global Android unit explosion still going on?
The most likely explanation is the rapid expansion of the low-cost Android phone vendors, particularly ZTE and Huawei. In 2010, Vodafone and Orange decided to give these Chinese companies a shot at becoming mainstream vendors in Europe. The experiment was a wild success several of the models and particularly the ZTE Blade (which Orange named San Francisco) became bestsellers by pushing smartphone pricing to new lows.
The current state of the UK pre-paid market reflects the sea change gripping the European smartphone market. It demonstrates why Sony and HTC are being marginalized so rapidly. The Huawei Blaze is now selling for 60 pounds without contract and it features a 3 MP camera and a 3.2 inch display. Its only 11 mm thick; a far cry from the chunky low-end smartphones consumers are used to.
HTC Wildfire S costs 130 pounds. Blackberry Curve 9300 costs 145 pounds. Sony Ericsson Walkman Mix costs 65 pounds; but it features a smaller display, lower pixel density and is 3 mm thicker than the Blaze. Established smartphone vendors that have been in the handset business for more than two decades cannot match the price/quality ratio that the Chinese Android vendors offer.
ZTE is now targeting 80 Million handset volume in 2012 and 100% smartphone volume growth. ZTE Blade became the second-best selling W-CDMA phone in China last summer and is now cruising towards 10 million units sold globally. The ZTE Skate is off to an even faster start. And ZTE is actually behind Huawei in China these two combined are likely to hit 25% share of Chinas handset market by summer. By elbowing out old champs like Motorola and LG in China, Huawei and ZTE are building production scale they can leverage to undercut rivals even more aggressively in the rest of the Asia.
ZTE and Huawei are in the process of crushing the mid-tier Android competition, but they are also eyeing other device segments. ZTEs Windows model Tania is debuting in the UK at the monthly contract rate of 10 pounds half of what the Nokia 710 will cost.
After strong gains in Europe and China, the Chinese vendors are now going to attack the US smartphone market in 2012. Squeezed between Apple and Samsung at one end, the Chinese low-cost vendors at the other, mid-tier vendors may be about to demolished. LG, HTC, Motorola, Sony their bad 4Q11 performances are just a prelude to a devastating 2012. It would not be surprising if Google opts to wind down Motorolas handset operations sometime over the next two years and Sony bails out entirely.
ZTE and Huawei demonstrated in the UK market last year just how little brand loyalty consumers have when they see a white label smartphone undercutting second-tier brands by 30-60%. We are likely to witness a US sequel to this phenomenon this year. Globally, the industry could well witness smartphone ASP erosion that is substantially faster than projected.
How China Ate Android - Forbes
Samsung is still cruising on but what is happening to all these second-tier vendors? After the Nielsen report on 4Q11 smartphone market in United States, its clear that Apple is slamming Motorola and HTC badly in North America with its cut-rate old iPhone models. But Sony Ericsson does not have much US exposure. And Google is now reporting a heady 700000 Android device activations per day. How is it possible the mid-tier Android vendors cannot eke out revenue growth with that kind of global Android unit explosion still going on?
The most likely explanation is the rapid expansion of the low-cost Android phone vendors, particularly ZTE and Huawei. In 2010, Vodafone and Orange decided to give these Chinese companies a shot at becoming mainstream vendors in Europe. The experiment was a wild success several of the models and particularly the ZTE Blade (which Orange named San Francisco) became bestsellers by pushing smartphone pricing to new lows.
The current state of the UK pre-paid market reflects the sea change gripping the European smartphone market. It demonstrates why Sony and HTC are being marginalized so rapidly. The Huawei Blaze is now selling for 60 pounds without contract and it features a 3 MP camera and a 3.2 inch display. Its only 11 mm thick; a far cry from the chunky low-end smartphones consumers are used to.
HTC Wildfire S costs 130 pounds. Blackberry Curve 9300 costs 145 pounds. Sony Ericsson Walkman Mix costs 65 pounds; but it features a smaller display, lower pixel density and is 3 mm thicker than the Blaze. Established smartphone vendors that have been in the handset business for more than two decades cannot match the price/quality ratio that the Chinese Android vendors offer.
ZTE is now targeting 80 Million handset volume in 2012 and 100% smartphone volume growth. ZTE Blade became the second-best selling W-CDMA phone in China last summer and is now cruising towards 10 million units sold globally. The ZTE Skate is off to an even faster start. And ZTE is actually behind Huawei in China these two combined are likely to hit 25% share of Chinas handset market by summer. By elbowing out old champs like Motorola and LG in China, Huawei and ZTE are building production scale they can leverage to undercut rivals even more aggressively in the rest of the Asia.
ZTE and Huawei are in the process of crushing the mid-tier Android competition, but they are also eyeing other device segments. ZTEs Windows model Tania is debuting in the UK at the monthly contract rate of 10 pounds half of what the Nokia 710 will cost.
After strong gains in Europe and China, the Chinese vendors are now going to attack the US smartphone market in 2012. Squeezed between Apple and Samsung at one end, the Chinese low-cost vendors at the other, mid-tier vendors may be about to demolished. LG, HTC, Motorola, Sony their bad 4Q11 performances are just a prelude to a devastating 2012. It would not be surprising if Google opts to wind down Motorolas handset operations sometime over the next two years and Sony bails out entirely.
ZTE and Huawei demonstrated in the UK market last year just how little brand loyalty consumers have when they see a white label smartphone undercutting second-tier brands by 30-60%. We are likely to witness a US sequel to this phenomenon this year. Globally, the industry could well witness smartphone ASP erosion that is substantially faster than projected.
How China Ate Android - Forbes
. You live in UK, find yourself a nice Chinese girl there.
