The premium segment, which has been consistently outperforming the global smartphone market, captured more than one-fifth of total global smartphone sales as well.

Source: Counterpoint Research Handset Model Sales

There are several reasons for this growth. Despite the tough market conditions in 2022, affluent consumers were more immune to the macroeconomic difficulties than customers from the lower end. Consequently, sales in the premium market grew, while those in the entry and mid-tier segments declined. Also, as smartphones become more central to their lives, people are ready to spend more on their devices and retain them for a longer period. This is also one of the reasons the $1,000 and above price segment was the fastest growing (38% YoY) in 2022.

Another key factor for growth has been the “premiumization” trend across regions. Demand in the premium segment is driven by people getting an upgrade to their last device. The upgrades are evident not only in mature markets like North America but also in emerging economies where consumers on their third or fourth device start to break into the premium market.

Among OEMs, sales for Apple grew 6% YoY in the premium market, expanding its share to capture three-fourths of the total sales in the segment. Apple could have grown more, if not for the iPhone 14 Pro and Pro Max supply disruption during the peak holiday season in 2022. Apple also gained from Huawei’s decline in China.

Apple was followed by Samsung whose sales declined 5% YoY in 2022. Samsung lost out on the China market opportunity due to its weak presence in the region. The launch of the Galaxy S22 series in 2022 also took place much later than that of the S21 in 2021. However, the growth of foldable smartphones has been a bright spot for Samsung.

HONOR gained from a low base as it expanded its market share in China driven by the Magic series. The brand will make a global push in 2023. Google was featured among the top OEMs growing from a low base, driven by the Pixel 6 Pro and Pixel 7 Pro. Google has increased its focus on the smartphone segment. Apart from these, most Chinese OEMs declined as they derive a significant portion of their flagship sales from the domestic market, where operating conditions were difficult in 2022.

Source: Counterpoint Research Handset Model Sales

In terms of penetration of operating systems, Android has been ceding share to iOS in the premium segment. iOS captured three-fourths of all smartphone sales in the premium market. Considering its revenue share and consistent growth trajectory, the premium market is the most important segment.

Source: Counterpoint Research Handset Model Sales

For Apple, the growth in mature markets came from the upgrades in its installed base. The stickiness of the iOS ecosystem with multiple devices and services is high. If an iPhone user also owns an Apple Watch or Mac, the individual’s next smartphone upgrade will likely be another iPhone. Also, because of Apple’s aspirational brand value and step-by-step expansion, its sales have been growing in emerging economies as well. Android’s loss of share to iOS in the premium segment is also one of the reasons for Google’s smartphone push.

However, Android could see a new wave of growth in 2023 as we expect more OEMs to launch foldable devices in the premium segment this year. Existing foldable offerings in China are set to expand to markets outside the country. We will also see HONOR pushing into the European market to gain share this year.

The analysis is based on the Global Premium Smartphone Market Analysis report, available for purchase here.

Related Posts

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$1000 No Longer a Barrier for Smartphone Adoption
Macro Index Ends 2022 with Quarterly Drop

The post Premium Market Captures More Than Half of Global Smartphone Revenue in 2022 For First Time appeared first on Counterpoint.

Under the hood is a MediaTek 1300T (6nm) SoC, an upgrade from Qualcomm’s Snapdragon 730G (8nm) in the previous generation. The dual camera is now replaced by a single 13MP camera and an LED flash too.. The second generation has one more SKU, with 8GB RAM and 256GB storage, which is the one we tested. Lenovo also sent us the keyboard and Lenovo Precision Pen 3 stylus.

Compared to the previous generation, Lenovo has upgraded the specifications to align them with how the tablets are now used by consumers, focusing on display, sound and performance. We have been using the Lenovo Tab P11 Pro Gen 2 for almost three weeks now and below is our analysis focusing on its performance and overall experience.

Design: Sleek, minimalistic and premium

The Tab P11 Pro Gen 2 comes with a dual-tone grey aluminum back which looks elegant. The lighter grey area has a matt finish, while the darker grey area has a glossy finish, giving a smooth and premium feel.

There is a single camera and a flash at the top left with a very thin bump so the tablet can rest almost flat on the surface. At the back, you have Lenovo, JBL and Dolby Atmos branding in very light colors. During our usage, we did notice some fingerprints and dust at the back.

 Lenovo P11 Pro Gen 2 Dual Tone Back

On the front, the tab has a gorgeous 11.2-inch display which we will talk about in just a bit. The front camera is on the top of the display when placed horizontally, which is how we generally use the tab. There are three buttons. Double-clicking the power/sleep button on the top acts as a quick shortcut to open the camera. There are also two volume buttons. All three buttons have a nice tactile feel.

The overall build quality feels sturdy and the tablet weighs just 480 g, which makes it easy to carry around. Overall, in terms of design and form factor, Lenovo has done a fantastic job with the Tab P11 Pro Gen 2, making it a sleek, elegant and premium-looking tablet.

Display and audio: An entertainment powerhouse

The Tab P11 Pro Gen 2 boasts a crisp 2.5K OLED display of 2560×1536 pixels resolution. The dimensions are also more rectangular with a 15:9 aspect ratio, compared to the iPad Air for example. But this makes the Lenovo tablet easier to hold on to as well as consume content as most videos are shot in the 16:9 aspect ratio.

The screen has a 120Hz refresh rate, which makes the overall experience very smooth with scrolls being extremely fluid. The display also supports Dolby Vision and HDR10+ for all your content consumption needs. The panel offers deep blacks, great contrast, wide viewing angles and punchy color reproduction. With 600 nits of peak brightness, outdoor visibility is decent. The display is also TUV-certified to filter blue light, thus causing less strain to the eyes.

The tablet also features a quad-speaker setup tuned by JBL and supports Dolby Atmos for a good surround sound experience. It comes with three modes – dynamic, movie and music. The dynamic mode identifies the content and performs auto-adjustments to deliver the best sound.  The speakers are loud and offer good voice clarity, which is enough for small rooms. There is no need to use headphones when watching content or taking calls. Overall, a good display and crisp and clear audio are some of the highlights of the Tab P11 Pro Gen 2.

Precision pen: Great for taking notes, may be not for artists

The tablet also comes with the Precision Pen 3 stylus which has a cylindrical design and a single button to access the shortcut menu. It can be used to take notes and screenshots, access the laser pointer and camera. The laser pointer is a nice utility that can be used for presentations. The stylus charges magnetically when snapped on both the side and the back.

 Lenovo Precision Pen 3 Stylus

I used it mostly for taking notes. The pressure sensitivity was accurate, and the overall writing experience was smooth. I also have an Apple iPad Air with Apple Pencil Gen 2. I felt the strokes on the Apple device were smoother with less latency, compared to those on the Lenovo device. The pen works well enough to drive everyday needs like taking notes. Some heavy users or artists may find the Apple Pencil Gen 2 in iPads more relevant.

Keyboard: Smooth typing experience

The tablet also has a dock for the keyboard, which is sold as a separate accessory (for around US$99). Our review unit came with a version that had the keyboard inside the box. The keyboard attaches to the tablet using pogo pins. The keys have a good travel and are well-spaced, making it comfortable for long hours of typing. However, when switching from a laptop, it needs some time to adjust. Once you get used to it, it feels very natural. I used it for typing Word documents and replying to emails, and it felt easy.

Lenovo P11 Pro Gen 2 Keyboard

There are several very well thought out shortcut buttons on the keyboard as well, including for back, muting microphone for calls, screenshot, lock and split screen.

The keyboard also has a small trackpad and it supports two-finger and three-finger swipes, and pinch-zoom gestures. But I found that pinch zoom was working on some of the websites on my laptop but not on the tab. The scrolling is pretty smooth. However, due to the small size of the trackpad, I was accidentally pulling down the drop-down window from the top while scrolling. At the same time, I was able to attach a mouse using a USB C hub, which also worked flawlessly most of the time. Sometimes the trackpad failed to work with the Office 365 app, and it needs some more optimization here.

Productivity mode: Windows OS feel 

There is also a productivity mode in the tablet, which, once switched on, converts the layout to more like a desktop Windows OS with a taskbar at the bottom. The notification tray moves to the bottom right. The app drawer is on the bottom left, just like the Start Menu in Windows. You can also open several apps in small windows simultaneously for multitasking. However, I mostly used the split screen feature, which was more user-friendly when combined with the split screen shortcut on the keyboard.

Extended display: Great for streaming, optimization needed for productivity

I also used an HDMI cable through a USB C hub to connect the tab to an external display. The theme on the monitor is like what the tab has on the productivity mode. However, you will not be able to open apps on the tab and drag those to the extended screen, which would have been a more convenient feature, like on laptops or desktops. If an app is already running on the tab, and you will try to open the same app on the external desktop, it will throw a notification saying the app is open on another device and will have to restart. However, streaming content on the external display showed no signs of lag and the overall experience of content consumption was very smooth.

 Lenovo P11 Pro Gen 2 Extended Display Mode

Camera: Easy daily driver for most of video-calling needs

The tablet features an 8MP front camera for video calling and it works across apps like Teams, Zoom and Skype. The location of the front camera is also on the top, which means the camera positioning is at the center when you are taking calls. You end up looking at the camera directly without any effort, just like on laptops. Combined with the loud audio fired by the quad speakers, the tab is an easy daily driver for most of video-calling needs.

Overall performance: Good for entertainment, basic productivity

I mostly used the tablet to stream content, play games, read emails, take video calls and type text over the last couple of weeks. There were no performance issues most of the time. Under the hood is a MediaTek Kompanio 1300T SoC paired with 8GB of RAM, which was able to handle everyday tasks with ease. I also played games like Call of Duty: Mobile and Asphalt 9: Legends. Both ran smoothly without any hiccups.

The 8200mAh battery lasted for more than a day. The tab comes with 20W fast charging, which takes two to three hours to charge the battery completely. One good thing here is the length of the USB cable, which is almost 1.5 times that of what comes with the iPad Air. This is very convenient when the tab is mostly resting on the table with a charging port at some distance.

In terms of software, the tab comes with Android 12L out of the box. The operating system is clean and runs smoothly, except for some glitches in terms of integration with the hardware and optimization of applications. But Lenovo is promising three years of updates and we expect to see some more optimizations on the software side to make the experience even better.

Key takeaways

• With the Tab P11 Pro Gen 2, Lenovo has hit the sweet spot of performance, experience and price. It has made some great decisions in terms of what to include in the hardware based on tablet usage.
• A good display and audio, great performance, premium design, solid build quality, and software that is only bound to improve, make the tablet an easy choice.
• The added stylus and keyboard support provide the tab with even more versatility.
• The tablet delivers great experience in content consumption, reading, calls, battery life, gaming, typing and completing tasks on the go, thus catering to almost every need of a regular tablet user.

The post Lenovo Tab P11 Pro Gen 2 Review: Good for Entertainment, Basic Productivity appeared first on Counterpoint.

A similar trend followed in the launch of the iPhone SE 2 in 2020. The SE 2 came with a similar design to the iPhone 8 (launched three years before in 2017). Again, with the iPhone X and XR, there was a change in the design of iPhones, and the iPhone 8 form factor had become “old”. SE 2 also featured the latest available chipset which was A13 Bionic. However, the SE 2 was more than just a smaller iPhone. With Apple focusing on a service-driven business model, the iPhone SE provided an affordable entry point to Apple’s ecosystem and the A13 could provide best-in-class experience for all Apple’s services to its consumers. It helped in bringing new users to the iPhone installed base. It was also favored by many corporate buyers looking for a lower cost and therefore, lower risk platform to run enterprise applications.

SE was again refreshed in 2022 bringing 5G capability to the mid segment in Apple’s portfolio. It also featured the A15 bionic chipset. SE 2022 performed well in some markets like Japan and the US. However, it has not been as successful as SE 2. The form factor of SE 3 now looks dated and needs an upgrade. Over, the last few years, consumers are also preferring smartphones with larger display sizes. Considering the trend, Apple has in fact launched the iPhone 14 Plus with a larger display size.

In 2016, the average screen size of smartphones was 5.1 inches. This is when SE’s first generation was launched with a 4-inch screen. However, the average screen size of smartphones sold in 2020 was 6.2 inches and 2021 was 6.4 inches. While the SE second and third generation featured a 4.7 inch screen. The gap between the average display size and SE’s display size has been widening. Hence a larger display SE is due already. This is where the iPhone mini, with a 5.4-inch display might come in.

Exhibit – Average Display Size of Smartphones 2016 vs 2021

Source: Counterpoint Research Handset Model Sales

Apple launched the “mini” series with iPhone 12 and refreshed it in the iPhone 13 series. However, in terms of sales, its performance was underwhelming. From the launch, until Q2 2022, iPhone 12 mini contributed to less than 10% of 12 series sales, and iPhone 13 mini contributed less than 5% of iPhone 13 series sales. As a result, the mini-series was discontinued with the iPhone 14 launch. Likely, one of the main reasons for this underwhelming performance was the smaller display at a premium price point of US$699.

However, if Apple were to bring the ‘mini’ form factor at a lower price point of around US$429 in a refreshed SE model it would substantially change the value proposition. With the success of older generation SE devices, we have seen consumers are willing to accept some trade-offs of smaller displays in return for the overall Apple experience. Hence, re-spinning mini as a new SE would make a lot of sense. It would also allow Apple to amortize development costs related to the mini form factor such as tooling and other mechanical components.

One of the differentiating features of SE was including the latest available chipset, but in an older form factor. However, with the 14 series, Apple has shifted its strategy with only Pro models getting the latest A16 Bionic chip. While the USD prices have remained the same, there is now a wider gap between the Pro and the non-Pro models in terms of specs. A new SE, which will likely launch in 2024 (assuming the two-year SE refresh cycle), along with a larger display, will likely sport the latest available chip in the “non-Pro” iPhone models.

Note: This information is speculative and not based on any specific evidence or knowledge of Apple’s plans.

Related posts:

iPhone Mini: Can it be the new SE?
Apple iPhone 14 & Watch Series 8 focus on pro features, improved connectivity & safety
eSIM Only iPhone 14 is an Inflection Point for eSIM Adoption – Counterpoint Research
iPhone SE Gets 5G, A15 Bionic; Needs Design Revamp
New iPhone SE 5G to Open Up Mid-End Segments Across Key Regions 

The post iPhone Mini: Can it be the new SE? appeared first on Counterpoint.

Exhibit: JioPhone Next

The retail price of the phone is INR 6,499 when paid in full. The device also comes with a customized version of Android Go – Pragati OS.

Jio’s Value Proposition, Target Consumers

• India is still an underpenetrated smartphone market with over 300 million feature phone users, out of which over 60 million are JioPhone users, which represents an immediate opportunity.
• Jio is also aiming to make India 2G free and connect the unconnected. Notably, Jio does not offer 2G services, and upgrading 2G users to 4G can increase its consumer base substantially.
• Then there are existing smartphone users who are willing to upgrade. There are very few players in the entry-level market due to low margins and high distribution costs related to lower-tier cities, where most of the target customers live. However, Jio already has an extensive retail network which it can leverage to distribute the device.
• Jio offers the JioPhone Next device on easy EMIs, and a consumer does not need a debit or credit card to access the same. Almost all OEMs are now offering EMIs but consumers need to have a debit or credit card for the same in most cases.
• In terms of specs, Jio has prioritized certain aspects like camera, one of the most sought after features by consumers.
• The phone also comes with Corning Gorilla Glass covering at a low price point. The repair cost here will be a big burden and Jio understands this.
• Features like Voice First, Read Aloud and Translate Now help increase the ease of use and flatten the learning curve of smartphone usage. The phone also comes with the promise of future updates.
• While the device overall has a feature set, which reduces the barriers to the adoption of smartphones, pricing remains the most important aspect for this segment.

Pricing Analysis

The biggest value proposition for Jio is the down payment of INR 1,999, which makes it the most affordable device. The consumers will also have to pay an INR-501 processing fee, while the remaining amount can be paid through EMIs which are bundled with a service plan. Jio has a device lock software, which restricts access to the device if the EMIs are not paid on time.

Exhibit: JioPhone Next Plans

The low down payment is great for entry-level consumers, who cannot spend a large sum for a device initially but can pay small monthly amounts. However, notwithstanding the low down payment, the total cost of ownership for the JioPhone Next is very high.

The entry-level Always-on plan for Jio starts at INR 300 per month for 24 months and offers 5GB of data per month with 100 minutes of calling. Considering the data usage in India is over 14GB per month per user (Source: Ericsson Mobility Report, 2021), the 5GB per month mark is too low.

The next plan is the Large plan. It offers 1.5GB of data per day with unlimited voice calls at INR 450 per month for 24 months. When the device is bought at full price (INR 6,499), with a comparable prepaid plan of INR 199 for 28 days offering the same benefits as the Large plan of the JioPhone Next, the total cost of ownership for 24 months is reduced by 13%. The cost can be brought down further if a consumer chooses to use a refurbished device or a lower-cost device.

Also, if we subtract the data plan cost in the prepaid plan (INR 199) from the total cost of ownership of the JioPhone Next for 24 months with the Large plan, the device cost comes out to INR 7,681, compared to INR 6,499 when paying the full price. This is the same as charging interest on the EMIs for the device, which might not be a feasible value proposition in the segment Jio is targeting.

Conclusion

Jio has tried to launch a device with key features done right, which makes the transition from feature phone to smartphone easier. Overall, the JioPhone Next checks a lot of boxes except the most important one for this segment – pricing. Therefore, the overall value proposition falls short of being lucrative.

There were a lot of expectations from Jio for a lower-priced device, especially after how it disrupted the feature phone market with the JioPhone. The JioPhone Next definitely brings down the initial cost of device ownership and somewhat lowers the barriers of entry into the smartphone segment. But it also locks the users for 18 to 24 months in EMIs at a cost which is less lucrative than other available options. Unlike the JioPhone, the JioPhone Next fails to create its own market segment.

One of the reasons for more than expected pricing for the JioPhone Next is the ongoing component shortages, which are leading to price increases. OEMs that run on lower margins have no option but to pass on this added cost to consumers. Then there are other costs which have also increased, like transportation.

Jio is trying to address the difficult-to-capture lower-tier market at a scale that has not been seen before. In the process, it is building products, supply chain and mind share in the lower-tier segments. Therefore, consumers will think of Jio first when deciding to transition from feature phones to smartphones.

For a more detailed analysis on pricing, specs comparison with competitors and forecast for the JioPhone Next, subscribing clients can refer to the following report:

JioPhone Next Component Shortages Weigh Down on Pricing Strategy

The post Is JioPhone Next the Most Affordable Smartphone? appeared first on Counterpoint.

Global Premium Smartphone (>$400) Sales Market Share, Q2 2020 vs Q2 2021

Source: Counterpoint Research Monthly Market Pulse

A large part of the premium market growth in Q2 2021 was driven by Apple, which reported a sales growth of 74% YoY in the premium segment on the strong momentum of the iPhone 12 series due to the iPhone users continuing to upgrade to 5G. Apple’s supply chain was also very resilient in managing component shortages and gained from the decline of Huawei in regions like China and Europe. Apple was the largest OEM in the premium segment across all regions.

Global Smartphone Premium Market Rankings, Q2 2021

Source: Counterpoint Research Monthly Market Pulse

Although Samsung’s sales in the premium segment grew 13% YoY, the brand lost its share in the segment due to production disruption at its Vietnam unit following a fresh COVID-19 outbreak. However, with the launch of the new Z fold 3 and Z flip 3 models at a lower price point compared to their predecessors, Samsung is likely to gain share in H2 2021.

Xiaomi and OPPO both gained share in the segment driven by their premium portfolio-focused expansion in regions like Europe and China. Xiaomi was among the Top 3 players in Europe in the premium segment driven by its Mi 11 series. The OEM has been making efforts to gain from Huawei’s decline, which is now paying off. OPPO also gained share driven by its Reno and Find series in China and Western Europe.

OnePlus entered the Top 3 list for the premium segment in North America driven by its OnePlus 9 Series. The OEM gained both from LG’s exit and Samsung’s supply constraints.

Within the premium segment, while all the price bands saw growth, the highest growth (182% YoY) was seen in the ultra-premium band (>$800). This was mainly due to the strong momentum of the iPhone 12 Pro Max and iPhone 12 Pro. The Pro versions were launched later than the usual September date, causing demand to spill over to the subsequent months. Apple captured close to 75% of the ultra-premium segment, compared to 54% a year ago. This shift also indicates that more consumers now prefer high-end devices after realizing the importance of smartphones to them during the COVID-19 lockdowns. A section of consumers also had extra savings while working from home, which they invested in devices like smartphones.

Sales Market Share by Price Band, Q2 2020 vs Q2 2021

Source: Counterpoint Research Monthly Market Pulse

5G is also becoming a standard offering within the premium segment. The overall penetration of 5G within the premium segment reached 84% in Q2 2021, compared to 35% in Q2 2020. In the $600 and above price band, 95% of devices were 5G capable. The launch of the iPhone 12 series in Q4 2020 gave a boost to the sales of 5G capable devices in the segment.

4G, 5G Penetration in Premium Segment Smartphone Sales

Source: Counterpoint Research Monthly Market Pulse

Going forward, the premium segment is likely to continue its growth momentum. The sales of the iPhone 12 have been very stable in markets like the US even before the launch of the new iPhone series this month. Further, the launch of the Fold series from Samsung and the refresh of iPhones by Apple will also drive growth. With the replacement cycle for iPhone being closer to three years, there is also a significant potential of 5G upgrades in 2021 and beyond.

Xiaomi, OPPO, vivo and OnePlus will also continue to try to gain share in the premium segment. HONOR has also entered the segment in China with its Magic series. There is also the untapped segment of Huawei’s flagship users in China, which is a big opportunity. As the replacement cycle of these users approaches, other OEMs will gain share from Huawei.

*The analysis is based on wholesale ASP

You can also visit our Data Section (updated quarterly) to view the smartphone market share for World, USA, China and India.

Some of our other smartphone market analyses for Q2 2021

• iPhone 13 to Help Apple Grab One-Third of 2021 Global 5G Shipments
• Apple Achieves Record June Quarter Shipments, Xiaomi Becomes the Second-Largest Smartphone Brand Globally
• India Smartphone Market Stays Resilient During Second COVID-19 Wave, Crosses 33 Million Shipments

The post Apple Continues to Retain Over 50% Share of Premium Smartphone Market in Q2 2021 appeared first on Counterpoint.

Exactly 14 years ago, Apple disrupted the smartphone market as the first iPhone went on sale. There has been no looking back for Apple since then. It has emerged into a powerful ecosystem of over a billion users. It is not only the largest smartphone OEM by revenue but has also set up numerous benchmarks in the smartphone industry. The latest iPhone 12 series carries forward this legacy.

The iPhone 12 series’ cumulative global sales crossed the 100 million units mark in April 2021, according to Counterpoint Research’s mobile handset Market Pulse Service. The series was able to achieve this feat in the seventh month after its launch, which is two months earlier than the iPhone 11 series and almost the same as the iPhone 6 series that helped Apple achieve its first volume super-cycle at the cusp of 4G transition. With the iPhone 12 series, Apple has achieved another volume super-cycle after six generations of iPhones and at the cusp of 5G transition.

In the case of the iPhone 6 series, the strong pent-up demand for larger-screen iPhones drove the sales, while for the iPhone 12 series, the addition of 5G capability and a full OLED screen attracted customers. With the ASP for Apple phones being at an all-time high, the iPhone 12 series’ volume super-cycle will also lead to a revenue super-cycle breaking its own record every year.

Exhibit 1 – iPhone 6, iPhone 11 & iPhone 12 Series Cumulative Sales Comparison by Months from Launch

There has also been a shift in model preferences between the iPhone 11 and iPhone 12 series. Consumers preferred the highest version of the iPhone 12 series during the first seven months after the series’ launch. The share of the Pro Max version in the iPhone 12 series sales was 29%, compared to the 25% for the same model of the iPhone 11 series. This is also one of the reasons for the iPhone 12 series grossing 22% more revenue than the iPhone 11 series in the first seven months of its launch.

The launch price of the base variants of the iPhone 11 Pro Max and the iPhone 12 Pro Max was the same at $1,099. The notable upgrades in the 12 Pro Max were 5G capability, a higher RAM/memory, and the A14 Bionic chip. There was also a trade-off as the charger and headphones were missing from the box. However, this did not seem to be a deal-breaker for consumers, especially in the US, which contributed to 40% of the global iPhone 12 Pro Max sales till April. The upgrades, which came at the same price as that of the iPhone 11 Pro Max, supported by aggressive operator promotions, helped the 12 Pro Max sales soar to make it the highest-selling device in the US consistently since December 2020. Moreover, the iPhone 12 series was also comparatively less affected by the pandemic than the iPhone 11 series. Also, consumers who held on to their devices last year due to the pandemic, upgraded to the 12 series.

Supported by the stellar performance of the iPhone 12 series, Apple achieved a record-high market share for April. It has also consistently achieved a record-high market share in the US since October 2020 and the trend is likely to continue in May 2021.

Background:

Counterpoint Technology Market Research is a global research firm specializing in products in the TMT (technology, media, and telecom) industry. It services major technology and financial firms with a mix of monthly reports, customized projects, and detailed analyses of the mobile and technology markets. Its key analysts are seasoned experts in the high-tech industry.

Analyst Contacts:

Varun Mishra

Tarun Pathak

Follow Counterpoint Research
press(at)counterpointresearch.com

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The post iPhone 12 Series Sales Cross 100 Million Mark Within 7 Months of Launch appeared first on Counterpoint.

It is not Xiaomi alone, other smartphone OEMs are also looking to enter the EV market, which is poised for growth. For example, ZTE has announced its entry into the segment while Huawei and Chinese automaker SERES recently launched a Level 2 autonomous electric hybrid vehicle that uses Huawei’s solutions for smart cars.

Why Xiaomi and Other Smartphone OEMs are entering EV Segment?

Xiaomi, through its IoT strategy, has been investing in future growth drivers beyond smartphones, and EVs fall into this category. While on the outside, the automobile may seem like an unrelated business for Xiaomi to enter, but it is not the case thanks to two broad trends happening in the automobile segment ؘ– electrification and digitization. And the latter falls within Xiaomi’s competency.

Future cars will be more connected, will generate lots of data to be analyzed, will have greater processing power on the edge, and will have higher engagement with the driver, much like smartphones and other connected devices. And this is where Xiaomi will focus.

Over the years, Xiaomi has been building an ecosystem with smart devices, smart home and smart white goods. It will be looking to provide this digital ecosystem experience through cars as well. Further, it will be aiming to have control over the software and thus, streams of user data, on which it can build revenue models. Thanks to its smartphone and IoT business, Xiaomi has strong know-how on integrating software with hardware and building revenue models on top. It has a strong brand name with a large user base, which also gives it an advantage.

As far as the manufacturing of EVs is concerned, Xiaomi is likely to partner an ODM. Building manufacturing capabilities from scratch for automobiles would require massive investment, increase time-to-market and is outside Xiaomi’s core competence. Reportedly, Xiaomi is in talks with Great Wall (GWM) to use its plants to manufacture Xiaomi branded cars. Great Wall is China’s prominent SUV and pick-up truck producer.

On the other hand, competition in China’s EV market is heating up. GWM is facing challenges from rivals like NIO, Xpeng and Li-Auto. Established OEMs are losing share to start-ups. With Xiaomi’s collaboration, GWM has an opportunity to become an ODM and increase volumes in the segment. Besides, becoming an ODM for vehicle segments other than pick-up trucks and SUVs will give GWM an opportunity to grow scale with a less direct competition. Software and internet-based business models have not been a core strength of automakers (with the exception of Tesla), and this is another area where Xiaomi’s partnership can benefit GWM.

Xiaomi also has a long-standing relationship with Foxconn, which also announced its foray into the EV space.

Xiaomi has not revealed the price segment its EVs would cater to, but it will likely go after the mass market like with its smartphones.

China: Large Market Potential for EVs

China is one of the world’s largest EV markets. In 2020, the Chinese government imposed a mandate on automakers that at least 40% of their sales should be EVs by 2030. China has also been ahead in rolling out 5G. Close to two-thirds of the smartphones sold in China in February were 5G capable. The ultra-reliable and low-latency communication capability which 5G brings, would be suitable for the mission-critical applications like autonomous driving and connected cars. 5G will also be important in enhancing the overall digital experience of the driver. How fast the information is being transferred from sensors to car, from object to vehicle, or even from vehicle to vehicle, and how quickly it is being analyzed would be critical. This is where low latency of 5G can help. Further, 5G can help the AI in the car make faster and reliable decisions, thus enhancing user experience.

The government support, 5G availability and rising demand together make the EV segment a lucrative opportunity to bet on, and Xiaomi does not want to miss this.

Counterpoint’s Take

The EV market in China is booming, but also getting crowded. Tesla is setting early industry benchmarks, but challengers like NIO also have a head start and are gaining popularity. The first wave of growth is already underway. The market is only set to be more crowded in the future with other smartphone OEMs possibly following Xiaomi’s footsteps. Therefore, time-to-market will be crucial for Xiaomi’s success, and this is where landing the right partner will be important.

Looking at the bigger picture of Xiaomi’s IoT strategy, and its strengths in the hardware-based internet service business, we can find natural synergies with the smart automotive segment. Xiaomi has been able to build a successful business by democratizing the smartphone market by playing on lower margins and developing a software and ecosystem-based business model. It is aiming to do the same in the automotive segment as well.

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• E-Bikes are core segment in growing Low-Speed Electric Vehicles market
• Xiaomi’s IoT Move: Strategy, Investment Philosophy, Challenges and Success Drivers

The post Xiaomi Bets on Existing Strengths in its EV Foray appeared first on Counterpoint.

Lenovo Group has posted a second consecutive record quarter in October-December 2020 in terms of revenue and profit. A part of this growth was driven by the tailwinds generated by the COVID-19 pandemic. Lockdowns brought changes in consumer habits with people working from home and spending more time with their gadgets. Work from home pushed a huge number of enterprises to adopt digitization and cloud, allowing Lenovo to make the most of it with its end-to-end offerings. Some key takeaways from the company’s earnings call:

• With a 22% YoY increase in revenue and a 53% YoY increase in profit, the October-December 2020 quarter gave Lenovo its best performance ever.
• The PC and Smart Devices, and Data Centre units achieved record revenue while the Mobile unit’s revenue also improved.
• The high-margin Software as a Service business also had a record quarter. Lenovo wants to focus on the service segment in future.

PC and Smart Devices Shine

The pandemic has brought fundamental changes in consumer behavior. People have been spending more time in consuming content on their devices, something which has also resurrected segments like tablets. Work from home has increased the demand for devices associated with remote working, besides pushing the demand for one device per person. As a result, the PC and Smart Devices segment’s revenue increased 26.5% YoY, setting a new record.

Exhibit 1: Lenovo PC Volume and Revenue Growth

Source: Lenovo IR Presentation

Another key takeaway here is the growth in PC segment volumes in the China market. The volume in China for the Lenovo PCSD segment grew 30% YoY. This is another indication of recovery in China market after the pandemic. We have also seen Apple having very good China results during the quarter.

The performance comes despite the ongoing component shortages across the semiconductor value chain. Lenovo, being the top player in the PC market, has some higher bargaining power with the suppliers, and was able to somewhat manage the shortages well. However, its channel inventory in the US, Europe, China and APAC has been low. The usual channel inventory for Lenovo is around six weeks, but it was around three weeks during the October-December quarter.

The group’s smartphone revenue also increased 10% YoY. During the first half of 2020, Lenovo’s operations were hit by the pandemic as its manufacturing units are located in Wuhan, the initial epicenter of the coronavirus. However, as the supply resumed and pent-up demand across regions converted to sales, the shipments recovered.

Data Centre Unit Posts Record Revenue but Continues to Make Losses

The Data Centre unit also posted record revenue, driven by strong growth across the Cloud Services (Enterprise and Small and Medium Business) segment. COVID-19 has also increased the demand for data centres. With the work-from-home trend, the enterprise is going digital and availing more cloud services. Cloud also is more suitable for small and medium enterprises, as it is more scalable, faster and cheaper to implement than the on-premises solutions. The Enterprise and Small and Medium Business segment delivered the highest revenue in three years. The demand increased across storage, computing and services. The higher-margin product mix also improved profitability in the segment and narrowed loss for Lenovo. The company has been developing and investing in its Data Centre business since the time it acquired IBM x86 Server. Though the segment is still making losses, considering the demand for data centres is set to increase over the next decade, it will eventually turn profitable.

Margins Improve Due to Sale of Higher ASP Devices and Growth in Services

Improvement in margins was another key takeaway from the quarterly results. The group’s growth margin improved 10 basis points YoY and the Expense to Revenue ratio reduced by 0.5 percentage point to 12.1%. This was a result of operational changes, change in demand profile for hardware business, and a rise in the high-margin software as a service play.

In terms of hardware, there was an increased demand for products like gaming graphic cards with larger capacity SSD. This was a result of users consuming more content over their devices and playing more games during the lockdown. This has led to an increase in the average selling prices (ASPs) for the Lenovo hardware business.

The improvement in margins was also a result of an increasing share of the high-margin service segment in Lenovo’s revenue. The software and services segment also posted record revenue for Lenovo, growing 36% YoY and contributing to 8% of the total group revenue.

Restructuring: Services to be New Strategic Growth Focus

Lenovo is restructuring with an increased focus on the service sector. The company is aiming to leverage the end-to-end product offering and power of 5G by developing Business Vertical Solutions.

Exhibit 2: New Organization Structure for Lenovo Group

Source: Lenovo IR Presentation

Effective April 1, 2021, Lenovo will form a new business group – Solutions and Services. The new structure will be as follows:

• IDG: Intelligent Device Group will focus on smart IoT.
• ISG: Infrastructure Solution Group (renamed from Data Centre group) will focus on smart infrastructure.
• SSG: Solutions and Services Group will be responsible for the Smart Vertical and Services. It will integrate all the existing service and solution teams across the company into a single unit.

The services business for Lenovo has grown and it now contributes over 8% of the revenue. It also fetches higher margins and contributes to recurring revenue. The 5G capability brings a large opportunity for a solution-driven strategy. Therefore, it makes strategic sense to create a new vertical for services, which would be an important growth avenue once 5G share starts picking up pace.

The new services group will focus on developing vertical solutions like smart manufacturing, smart education and smart healthcare. Lenovo will have an edge as it can integrate these solutions to run seamlessly on its existing infrastructure, giving the company an advantage against competition during deployment. These deployments will also give a boost to its managed services business in future. Lenovo is a unique player providing a full range of IT infrastructure, from the data centre to the cloud and devices. Developing a service prowess and leveraging the capabilities of 5G by providing end-to-end solutions will future-proof the company’s growth in the next transformational phase.

The post Lenovo: Riding the Tailwinds appeared first on Counterpoint.

The iPhone 12 also entered the top 10 bestseller list of 5G devices for January-October 2020, attaining the seventh position. This is a big achievement, considering the new iPhone series was available for only two weeks in October. Samsung’s Galaxy Note 20 Ultra 5G, which was the best-selling 5G device in September, slipped to the third position.

Several factors drove this huge initial uptick for the iPhone 12 series.

There is a large pent-up demand for 5G upgrade, especially within the iOS base, which is now getting converted into sales. This was complemented by strong carrier promos, especially in the US, which accounted for over one-third of the iPhone 12 and 12 Pro sales for the month. All carriers were offering the iPhone 12 for $0 through a mix of the trade-in and unlimited plans.

China and Japan also saw strong initial demand for the iPhone 12 series. Compared to most of the other 5G models, which have a regional presence, the iPhone 12 has a wider market coverage – it is available in over 140 countries, thus helping sales.

The iPhone 12 series has also given a push to mmWave. The iPhone 12 and 12 Pro for the US are capable of mmWave support. As a result, the penetration of mmWave capable smartphones increased to 12% in October compared to 5% in September. The popularity of the iPhone 12 also means that there will be a large installed base of mmWave capable devices in the US. This is important because it gives operators an incentive to deploy mmWave infrastructure rapidly. The high throughput and low latency provided by mmWave will help unlock the true potential of 5G. With the mmWave network and devices in place, it would lay a solid foundation for Apple to leverage the power of mmWave in segments like AR/VR.

Going forward, the demand for the iPhone 12 series is likely to remain strong through Q4 2020, especially during the festive season in December. Strong sales for Apple will also drive the volumes in the premium segment, raising the global ASP. Due to the late launch, some of the sales will be pushed to subsequent months, thus maintaining the momentum of the iPhone 12 series in early 2021 as well. Through the iPhone 12 series, Apple has also given a much-needed push to the 5G smartphone market, which cornered its highest ever share of 24% in the global smartphone sales in October.

Related Posts

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2. Apple iPhone Market Share: 2007 to 2023
3. Apple: Thinking Inside the Box
4. Five Observations from Last Week's iPhone 12 Launch
5. MediaTek Becomes Biggest Smartphone Chipset Vendor for First Time in Q3 2020
6. Podcast: iPhone 12 to Make 5G Mainstream in Europe
7. Samsung Galaxy Note 20 Ultra 5G Review: Pinnacle of Android Flagships
8. Three Improvements Apple Made for Cameras of its iPhone 12 Pros

The post iPhone 12 Becomes World’s #1 5G Model Within Two Weeks of Launch appeared first on Counterpoint.

In a unique and courageous move, Apple has disrupted the legacy packaging of smartphones by removing chargers and earphones from the boxes for its new iPhone 12 series along with the iPhone XR, iPhone 11 and iPhone SE. Most of the other OEMs provide fast chargers as a standard offering inside the box.

Apple’s Reason for Removing In-Box Accessories

Apple says the above-mentioned decision has been taken to meet its environmental goals. The company wants to become carbon-neutral by 2030. Removing chargers and earphones would mean smaller and lighter packaging, allowing “70% more boxes to be shipped on a pallet. Taken altogether, these changes will cut over 2 million metric tons of carbon emissions annually, equivalent to removing nearly 450,000 cars from the road per year”,  according to Apple. This is great from logistics and environmental standpoint and probably makes sense for Apple users who are going to upgrade and already have older iPhone accessories that work well with the current models. However, there are a few other aspects to be considered here.

Cutting Corners to Maintain Reasonable Pricing

Apple has added 5G, mmWave and OLED screens across the iPhone 12 line-up. There are improved cameras as well. This is an added cost, which normally translates into an increase in price to maintain margins. However, any big increase in the latest iPhones’ prices would have negatively impacted the demand, especially in these COVID-19 times. By removing chargers and earphones, Apple was able to price the devices reasonably, increasing the price by just $100 for the iPhone 12 as compared to the iPhone 11 last year. It also launched the iPhone 12 mini at the iPhone 11 launch price. Stacking of 70% more boxes in a single pallet would likely also lead to a reduction in logistical costs, thus helping margins.  Reasonable pricing and a significant pent-up demand for 5G will help Apple’s October-December 2020 line-up sales exceed the iPhone 11 family’s September-December 2019 sales by 1% (Source: Counterpoint Market Outlook). Reducing the iPhone 11 price has also strategically placed Apple at another price point while maintaining some margins after the removal of accessories.

A Cost Burden on Users in the Emerging Markets

The removal of accessories makes more sense in regions like the US,UK where the installed base of Apple is high (Source: Counterpoint Installed Base Tracker) and over time these accessories have become redundant. However, this might not be the case in emerging economies like India and LATAM. Apple devices are already priced higher in a lot of countries outside the US due to complicated distribution and higher taxes. Removal of accessories will be an added cost for users, especially if they are switching from Android.

Another factor to consider here is the mode of the upgrade. The advanced economies are operator-driven with a mature refurb ecosystem in place. Users generally upgrade their devices by trading in their older ones. These trade-ins generally do not provide extra value for chargers or earphones, and a user ends up keeping them. However, in the emerging economies, according to Counterpoint Research Refurbished Handset Tracker, the “sold as is” is much higher than the trade-ins. Users generally sell their devices consumer-to-consumer. In the “sold as is” scenario, the buyers in some cases expect the accessories along with the device, especially if the buyer is coming from Android. In this case, one of the parties will have to bear the cost of accessories.

Encouraging More Users to Go Wireless?

If we delve into each of the accessories separately, in terms of earbuds, Airpods have been leading the TWS category, according to Counterpoint Global Hearables Tracker. Apple pioneered the segment and now it is gaining popularity, which, unlike the smartphone market, is likely to grow in 2020. The removal of the headphone jack by Apple was probably more of a decision to increase the development of the TWS and earbud ecosystem, which is led by Apple.

Removing Charger – A Step Closer to Increasing Adoption of Wireless Charging?

A charger is a more critical need for a smartphone user. Removal of the charger means these premium devices are now not capable of functioning out of the box. Apple is providing a USB C t0 lightning cable with the 12-series. Only the iPhone 11 Pro and Pro Max are the ones that have shipped with the supporting charger. For all other devices, the user’s charging brick will not support the cable. Removal of the charger could also be potentially a move of Apple to develop a wireless charging ecosystem of its own.

How Soon Will Android OEMs Start Following Apple?

Now, another important question here, which is probably the most important one, is whether the other OEMs will follow Apple in removing the charger. We have seen this before when Apple removed the headphone jack and others followed. However, removing earphones and especially charger is a much trickier decision. While removal of the headphone jack was a modification of an existing product feature, with the functionality and earphones being retained, this is not the case with the removal of chargers and earphones. This is straight out taking away the accessories from consumers, which had become an industry standard.

Key growth markets such as India and the MEA are Android-dominated. There is also a large base of feature phone users who will eventually upgrade to smartphones. Removing the chargers across the portfolio will be an extra added cost which will impact the entry- and mid-level segments in particular. These markets are also very price sensitive. If OEMs decide to remove accessories, it will only make sense if they reduce the device cost, especially in the lower price bands. Price sensitive users would also probably start buying cheaper third-party chargers if the chargers are removed.

Then there is product differentiation. While the specs have become standardized across the industry, we have seen Android OEMs launching large marketing campaigns to promote various competing fast-charging standards to differentiate their products. Different models from different OEMs are packed with chargers having different charging speeds. Therefore, it will be harder for the Android ecosystem to remove the chargers. A charger from one OEM might not be optimized to perform well on a device from other OEM. On the other hand, everything is optimized in the Apple ecosystem.

Overall, it will be a more challenging task for Android OEMs to remove these accessories from the box even if there are cost reductions to be gained.

Related Posts

1. Apple to Outperform Global Smartphone Market in 2020; iPhone Refresh to See Significant Upgrade Cycle in Q4
2. Podcast: iPhone 12 to Make 5G Mainstream in Europe
3. Three Improvements Apple Made for Cameras of its iPhone 12 Pros

The post Apple: Thinking Inside the Box appeared first on Counterpoint.

 Exhibit 1: Smartphone Wholesale ASP ($) by Regions*

* These ASPs are for Shipments

The ASPs for all the regions increased except Latin America. There are several reasons for this increase. While the COVID-19 pandemic had its effect on the overall smartphone market, the premium segment was much resilient, declining at a modest 8% YoY during the quarter as compared to the highest ever global smartphone market decline. The economic impact of the pandemic on the potential user base of the premium segment was less when compared with other customer segments. This is also indicated by the demand for Apple, the largest player in the premium segment. While shipments for most of the OEMs declined in Q2 2020, shipments for Apple increased 3% YoY and iPhone revenues increased 2% YoY.

There was also an increased dependency on mobile phones during the lockdown, with work from home, study at home, productivity applications, gaming, entertainment and other content consumption happening through mobile phones in varying degrees. This also propelled some consumers to upgrade their devices for a better overall user experience.

The uptick in 5G shipments also contributed to the growth of ASP. During the quarter, 5G contributed to 10% of the total global handset shipments but contributed to 20% of the total handset revenue since most of the 5G devices in Q2 2020 were in the premium segment. China was the largest contributor to 5G sales. 72% of the global 5G handset revenue came from China. Most of this was driven by the push from Huawei. Overall, the smartphone ASP in China increased 12% YoY and the region contributed to over 34% of the global smartphone revenue, highest since 2016. This was also because while all the other major economies were still suffering from the severe impact of COVID-19, China was already on the path to recovery.

On the flip side, the demand for lower price tier models was severely impacted. Entry-level devices are usually bought offline, and most of the global markets were in some stages of lockdown during Q2 2020. Consumer sentiment was also low, with users in the low-middle class avoiding discretionary purchases.

Overall, the reduction in demand for lower price tier devices due to economic impact and offline retail closure, the resilience of the premium segment, and the uptick in 5G sales, especially in China, contributed to the rise of smartphone ASP during the quarter.

Exhibit 2: Global smartphone Shipments Revenue Share by OEMs

Within the OEMs, Apple led the global smartphone revenues, capturing one-third of the pie, followed by Huawei and Samsung. Notably, Apple also captured around 59% of the global smartphone industry profit in Q2 2020.

Huawei (including Honor), driven by the China market, reported its highest ever global revenue share at 20% in Q2 2020. This was the first time that Huawei surpassed Samsung both in terms of shipments as well as revenue. This was because of Huawei’s continued push in China, the first country to recover from COVID-19. But as markets outside China recover, it will be difficult for Huawei to maintain this lead in coming quarters.

The analysis is from Counterpoint’s Market Monitor Service, tracking shipments for 140+ brands in 60+ countries.

The post Global smartphone ASP up 10% YoY in Q2 2020 even as shipments see highest ever decline appeared first on Counterpoint.

Reliance now has a net debt-free balance sheet, well ahead of its targeted date, which is impressive for a company of such a big size.

As of March 31, 2020, RIL’s total debt stood at $21.41 billion while Jio Platforms alone had raised $15.38 billion (excluding Google), funding over 70% of the total company debt. Reliance has a market cap of over $150 billion and Jio Platforms is close to half of this if we go by the current round of investments.

Jio has been a masterstroke for Reliance. Penetrating the market through affordable data plans and devices helped it build quick scale and value, which is now being realized. Starting as a telecom operator, Jio is now moving towards becoming a tech solutions company. Under its digital business, the Jio telecom arm will provide digital connectivity (wireless broadband, NBIOT, fiber for home and business), which can be leveraged by building solutions on top of it for consumers and enterprise, thus enabling new revenue streams and future-proofing the growth in a country which is at the cusp of digital transformation. Currently, Jio has a 4G network covering 99% of the population and the largest customer base. It has the largest data traffic in India with an average per user consumption of 11.3GB per month (smartphone and JioPhone combined) with approximately 5 hours of engagement per day. This scale, user engagement, robust balance sheet, the app and solutions ecosystem and the fact that Jio is now 5G ready will help it deploy these services and solutions even more effectively.

Exhibit 1: Value Creation Strategy of Jio

Source: Reliance Integrated Annual Report 2019-20

Over the last few months, there have been some big names like Facebook that have invested in Jio. One of the new investors, and probably one of the most important ones, is Google:

Google Investment: Potential for disruption

• Google and Jio have entered a binding agreement under which Google will invest $4.4 billion in Jio, from its $10-billion India digitization fund.
• Together they will develop an Android-based operating system for smartphones, committing to bring affordable 4G smartphones to propel upgrade of 350 million feature phones.
• There is also a ready base of Jio Phone users which can upgrade to affordable smartphones.
• This will also help bring users online and enhance the experience and monetization opportunities of a host of Jio platform applications and services.

Exhibit 2: Investments in Jio, Including Google

With this partnership, Jio has hinted at targeting the 2G users and upgrading them to 4G. This will become even more lucrative when it comes to Jio’s hardware offering. Hence, Jio will be taking another shot at entry-level smartphones, partnering closely with Google. Google’s partnership will give it more flexibility to offer stable hardware and software experience. Individually, both Jio, with its initial 4G smartphone launches, and Google, with its Android One program, tried in the past to capture the entry-level smartphone userbase but didn’t succeed. India is the second-largest smartphone market in the world and still underpenetrated relative to many other markets (40% smartphone penetration). This presents a big opportunity for ecosystem players and companies including Google are eyeing growth opportunities in this market. Google’s investment in Jio is surely not a surprise considering the underlying opportunity. This can be leveraged in many ways, especially with a partner like Jio which has strong platform ambitions to scale up not just in India but globally as well.

Jio was able to disrupt the 4G ecosystem in India with affordable data and devices. With its partnership with Google, Jio has the same potential in 5G as well. It is already ready with its 5G solutions and probably will be the fastest in India to launch a 5G network with scale. This combined with an affordable 5G device has the potential to take significant share away from brands as well as operators eying the Indian 5G market in 2021-2022.

Apart from this partnership, there were some industry and consumer applications and solutions also displayed by Jio during the AGM. This is in line with its strategy to be a platform player in the future. Solutions showcased during the AGM included Jio Set Top Box, Jio Glass, Jio Meet and Jio Mart.

Jio Set Top Box: Content aggregation, voice search and more

Jio Set Top Box now aggregates content from 12 providers and users can do voice search through genres, actors, mood, and other categories. Since there are multiple apps, which means multiple logins, Jio has gone for a single sign-in, thus making the interface more user friendly.

There is an increasing demand for content and aggregation of OTT players in the market. With movie halls closed due to the COVID-19 pandemic, there is also an increase in the number of movies being released on OTT platforms. Users are staying home and consuming content, which can work in favor of Jio Set Top Box.

Jio Glass: Display of capability

Jio also unveiled its mixed reality glass, which weighs only 75 grams. It offers support to 25 apps, personalized audio, cable to attach to smartphones, holographic call, and support for the presentation. There are several opportunities and use cases for Jio Glass, some of which are listed below:

• Integration with Jio Meet
• Integration with Embibe (online education app from Jio) to provide classroom experience at home and innovative learning approaches using holograms.
• Jio Glass also has the potential to be integrated with the solutions Jio may bring out for the manufacturing segment.

Virtual reality has been the buzz word and potentially one of the most disruptive technologies being talked about now. The experience of VR Glass will be much holistic with 5G at the back end, which remains elusive in India. While this shows what Jio is capable of, the commercialization of Jio Glass could well be two to three years down the line.

Exhibit 3: Virtual Meeting Using Jio Glass 

Jio Meet: Bringing online collaboration and use cases

Jio Meet is the online meeting platform from Jio. The platform offers no limit on the number of participants and the duration of the call. Several use cases were shown for education and healthcare. The ed-tech sector is growing substantially in India and Jio can leverage this by the integration of Jio Meet with Embibe. Another opportunity is the integration of Jio Meet with Jio Health Hub for online consultation.

 Jio Mart: Digitizing retail with scale

Jio Mart is an O2O model (Online to Offline) which will connect the local grocery retailers directly with the consumers and replace the cash-rich business model. The omnichannel tech platform has already registered 250,000 orders a day in 200 cities through its beta version. Jio now plans to expand this both in scale and new offerings (will scale to electronics, fashion, pharma, and health). Jio Mart holds one of the largest potentials for Reliance, especially after investment from Facebook. We have analyzed this in a previous blog (read here). Reliance is the biggest retailer in India and two-thirds of the Reliance retail stores are in Tier 2 and Tier 3 cities. Jio Mart can act as a single platform for its own retail business to come online and to extend the reach into smaller cities with huge untapped potential.

 Conclusion

In this AGM, Jio has showcased its ambition to transform itself into a tech ecosystem player with an approach to provide industry solutions, some of which were showcased during the event. With the scale and user engagement achieved, the readiness of 5G and strategic partnerships with the likes of Microsoft, Facebook, Google, Qualcomm and Intel, Jio has laid a solid foundation to achieve its ambition in the coming years. The roles of telecom operators and internet giants have been converging over the last few years and Jio is a prime example of this. The telecom operators are now pivoting from being connection providers to transforming themselves into end-to-end players. Jio is transforming into a “Super Operator”.

The post Reliance Jio: From Telecom Operator to Solutions Provider appeared first on Counterpoint.

Apple led the premium segment with a 57% market share, followed by Samsung and Huawei. While most of the brands declined, OPPO grew 67% YoY (from a low base) driven by its Reno 3 and Reno 3 Pro 5G series, and Xiaomi also grew 10% from a small base driven by the Mi 10 5G and Mi Note 10 series. This is the first time since Q3 2018 that Xiaomi has entered the top 5 players in the Premium segment, globally. Compared to the other price bands, the premium segment remains the most consolidated. The top 3 players together captured 88% of the segment during the quarter.

Within regions, Apple and Samsung remained in the top 2 spots in all the regions except China, where Huawei was the market leader in the premium segment. Notably, over 90% of Huawei’s premium segment sell-through in Q1 2020 were in China. Driven by the popularity of OnePlus 7 series, OnePlus also featured in top 5 players in the premium segment in all the regions except LATAM and China.

Exhibit 1: Premium segment market share (sell-through) by OEMs and Regional Rankings, Q1 2020

Within Models, iPhone 11 continued to do well and was the highest-selling model in the premium segment for 2020 Q1. Top four out of five highest selling models in the premium segment were from Apple. This was also the first time that a 5G device entered the top 5 bestselling models in the segment.

Exhibit 2: Best Selling Models in the Premium segment, Q1 2020

5G devices cornered one-fifth of the total premium segment during the quarter. Huawei with its strong push in China captured close to 42% of the total 5G device sell-through in the premium segment. The 5G portfolio is also trickling down the price bands, which is helping to drive growth.  39% of all 5G device sales are now in 400 to 600 USD price band, up from 35% in the previous quarter. Within the regions, 63% of all 5G devices in the premium segment were in China.

The overall premium segment declined but within the price bands that make up the premium segment: the 600 to 799 USD grew 47% YoY capturing over 42% of the premium price band sell-through. This was driven by the iPhone 11 series, which captured three-quarters of this price tier. The price segment has been growing steadily since 2Q 2019, first driven by the popularity of iPhone XR and now iPhone 11. This is now the strongest price band for Apple. Apple has tested its price elasticity and realized that marginally aggressive pricing can potentially generate a much higher “customer lifetime value (CLV)” over 24-30 months

Exhibit 3: Premium segment share by wholesale price (US$) tiers and YoY Growth, Q1 2020

Going forward, the launch of 5G devices by Apple will play a key role in the growth of the premium segment. We also think the premium segment is likely to remain the most resilient from the COVID-19 impact.

The post Four Out of Five Best Selling Models in the Premium Segment Were From Apple appeared first on Counterpoint.

Work from home has now become a norm and CEOs and CTOs around the world will have to embrace more digitalization and implement robust remote working capabilities across their organizations to sustain through uncertain situations like these. COVID-19 will accelerate the digitalization of services across the Globe and adoption of products which will help stakeholders access those services seamlessly. Some of the products/industries which could gain more traction after the COVID-19 dust settles will include:

Smartphones and associated ecosystem:

• As users are staying at home, the use of smartphones and their application ecosystem will see a sharp increase and potentially, some new users as well. With the closure of offline retail, smartphones are now crucial to access essential services like delivery of groceries, food, news, hyper-local retail, and mobile payments. Users of these services are likely to be more habituated to their use even after the lockdown ends. This will also make some feature phone users realize the important role a smartphone now plays and could drive them to make the switch. The global smartphone market already showed resilience in February, declining only 14% YoY, somewhat less than expected.

Mobile gaming and OTT platforms:

• With entertainment options outside the home now closed, mobile gaming could also see accelerating popularity. Users are likely to download newer games or increase usage of existing games and could hook up to some of them for longer. Online game streaming services like Hatch will have a more viable business case now.
• People are also heavily using OTT services like Netflix, Amazon Prime, YouTube, and Hotstar. The usage has been so high that some of these platforms have had to limit the viewing quality. These platforms have the opportunity to retain these users for the long term.
• The increase in usage of these applications also means large amounts of data generated, which can be analyzed to recommend more curated games and streaming content to customers and increase their stickiness. With such high traffic, this is also a testing time for these platforms. Product managers can use this “usage peak” time to take consumer feedback, analyze data, reduce downtime and improve these platforms to enhance the overall user experience.

Digital transformation of Enterprise:  Cloud Computing, Collaborative tools, Remote working capabilities

• Digital transformation is almost inevitable for enterprises that want to be resilient to uncertain situations like COVID 19. This is also crucial for public services, health care systems and even education. Governments around the globe will have to embrace digitalization for seamless access to these services with faster responses and more efficient resource management, especially in times of emergency. As companies will prepare for times like these, it will require more applications to be hosted online, which will drive additional business for cloud service providers. The reliability and scalability which cloud offers can help organizations deal with uncertainties like unplanned demand. Cloud will also be a viable option for small and medium enterprises as it is more cost-effective.
• Remote working will also lead to an increase in usage of collaboration tools like Teams, Zoom, Skype and Asana. Since work from home is often the only way for office and clerical functions to work, companies will have to think about replacing their desktops with laptops to be prepared for such situations in the future. This will increase the demand for laptops. Small enterprises can also buy refurbished laptops to save costs. It will also underscore that some businesses can manage with less office space while supporting home and flexible working.

Robotics and Autonomy:

• One of the worst-hit sectors during COVID 19 is manufacturing. The unavailability of the workforce has led to a complete shut down of the manufacturing facilities of some of the most advanced ODMs/OEMs of the world. Robotics, machine to machine communications, IoT and complete autonomy of assembly lines can help deal with a crisis like this more efficiently by reducing the human intervention to a minimum. COVID 19 can accelerate the path to Industry 4.0.

Telecom Operators:

• All these services mentioned above require the base of good internet infrastructure in the background. The increased usage of mobile internet and broadband can help drive ARPU for telecom operators which are significant especially in fast-developing countries like India, where operators are facing high debts and competition. Bundling of some of these services can also help operators increase revenue.

COVID-19 came as a sudden disruption to organizations across the globe. While a shock to the system, this type of disruption will inevitably bring about changes; one of them will be an acceleration toward a more digital world.

The post COVID-19 Will Further Cement the Road to a More Digital World appeared first on Counterpoint.

Apple is followed by Samsung with three models, all from its A series, among the top 10. The mid-range A series with features like OLED display, multiple cameras, in-display fingerprint sensor, coupled with the brand power of Samsung created an excellent value proposition for buyers. The revamp of A series has paved the way for a successful mid-tier strategy for Samsung.

Exhibit 1: 2019 Global Smartphone Top 10 Model Sales Market Share

Oppo replaced Xiaomi’s position from 2018, with its A5, which was also the top-selling model in China.

Within the regions, the top selling models in APAC were from OPPO. In EMEA and LATAM they were from Samsung, and in NAM they were from Apple – highlighting the regional popularity of these brands.

Apple captured all the top five places in North America, while Samsung captured all five in the Middle East and Africa. However, the combined share of the top five models in NAM nearly 30%; the highest among all regions, and an indication of market consolidation. iPhone XR was the only model to capture double-digit market share in any region.

Exhibit 2: Global Smartphone Top 10 Model Sales Market Share

Huawei the second-largest player in the global smartphone sales, had no models in the top 10 Globally. The company, which has concentrated its efforts in China after the trade ban was imposed, had its Huawei P30 in the top five models in China.

realme entered the top five in RoAPAC for the first time ever with its C2. This was driven by strong growth in the India and SEA market. In fact, realme was the fastest growing brand globally for CY 2019 (426% YoY).

The top 10 models alone captured approximately 15% of the global smartphone sales. 5G still contributed to only 1% sales in 2019 hence, there were no 5G models among the top 10. However, this might change in 2020, as the networks roll out, Apple launches its 5G iPhones and 5G devices enter lower price tiers.

The post iPhone 11 Second Best Selling Phone of 2019 After Less Than Four Months appeared first on Counterpoint.

Exhibit: 2019Q3 Global Smartphone Top 10 Model Sales Market Share

Samsung had 3 models in the top 10, all from the A series. Samsung discontinued its J series and brought the A series to lower price tiers. A series had a more premium perception than the J series. The new devices came with competing specs and design features, affordable price and Samsung’s strong brand perception (especially in the mid-segment) which provided an excellent value proposition to consumers. This was also strategically aligned with global trade-up trend. The A-series also gained some share from HONOR. However, there were no flagships from Samsung in the top 10 list.

OPPO also had 3 devices as the A series continued to do well in China and other regions. A9, A5s, and A5 became the hero models in the slim portfolio of OPPO. Huawei P30 featured in the top 10. The device also comes with Google Mobile Services, which makes it relevant for users outside China as well. However, going forward, in the absence of GMS, Huawei devices might slip out of the top 10 models. Xiaomi had Redmi 7A in the top 10. This was driven by India, which contributed to over half of the total sales of the model during the quarter.

The volume contribution in total sell-through for the top 10 models combined, increased by 9% YoY to capture 17% of the total sales compared to 15% in Q3 2018. However, the combined wholesale revenue of the top 10 models declined 30% YoY. This is because the mix of mid-tier devices in the top models is increasing. There were five flagship devices in the top 10 in Q3 2018 but only three this year. And part of the reason for this is the improving capabilities of devices in the mid-tier over the last year. Premium segment features are trickling down to the mid-segment at a faster rate. In fact, in some cases, smartphones in the mid-tier segment are now equipped with features that were absent in some premium segment products as recently as a year ago. For example, Samsung’s Galaxy A50 features a triple camera (25MP – 8MP – 5MP), 25MP front camera, 6.4 inch display and an in-display fingerprint sensor, while the Samsung Galaxy S9, the flagship from a year ago had a single 12MP rear camera, 8MP front camera, rear-mounted fingerprint sensor, and a 5.8 inch screen. Mid-tier devices therefore often offer an excellent value proposition compared to older flagship models.

However, the increased mix of mid-tier products has also led to the fall in revenues for key smartphone OEMs during the quarter. The overall global handset profits declined 11% YoY during Q3 2019.  Going forward, as 5G deployment gains further momentum, we will likely see 5G variants of devices in the top 10 models. However, the mid-tier models will likely continue to gain momentum.

The detailed analysis for top selling models by Revenue can be found  here

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All major OEMs in the premium segment now have 5G-capable devices, except Apple. Still, Apple alone captured over half of the premium market in Q3 2019. Apple grew 1% YoY increasing its market share from 48% a year back to 52% during the quarter. This was driven by both the initial, strong demand for the iPhone 11, as well as the continued success of the iPhone XR. iPhone XR was the top-selling model globally in the premium segment.

Exhibit 1: Premium segment market share by OEMs, Q3 2019

Huawei remained in the top three OEMs in the premium segment driven by the popularity of the P30 series, especially in China. China contributed to over 80% of Huawei’s sell-through in the premium segment as compared to 73% in the year ago quarter. The trend is likely to continue. It will be difficult for the newly launched Mate 30 series to create any progress outside China because it lacks Google Mobile Services (GMS). GMS is an important enabler for Huawei to continue its success outside China.

OnePlus recaptured its position among the top five OEMs in the segment. It also led the India premium segment, which reached a record high shipment level during the quarter. With the launch of OnePlus 7T and 7T Pro, the OEM now covers a wide portfolio across different price bands in the premium segment targeting users at various price points to upgrade.

LG also captured a spot in the top five, driven by the V50 ThinQ 5G. LG grew 20% YoY in the premium segment. This is in contrast with LG’s overall smartphone shipments, which declined over 30% YoY during the quarter.

Overall, within the price bands, driven by the iPhone XR, the US$600-799 wholesale price band continues as the most volume-centric, capturing 43% of the entire premium segment. The US$800-999 wholesale price segment grew the fastest, as Samsung grew 145% YoY in the segment driven by Galaxy S10 and Galaxy Note 10 Series.

Exhibit 2: Premium segment share by wholesale price (US$) tiers and YoY Growth, Q3 2019

Going forward, the adoption of 5G will play a key role in the growth of the premium segment as well as the overall global smartphone market. Apple will be launching its 5G devices in 2020 driving upgrades among Apple users and potentially pulling in some previous Android users. Currently, all the 5G phones available fall within the premium segment, but this will also change in 2020. Major Chinese OEMs will launch 5G-capable devices in the sub-US$ 400 price band. China will drive the 5G segment followed by other key markets like the US and Korea. The uptake of 5G will also push the overall global smartphone market to grow in 2020.

Note: The analysis above is based on wholesale price (US$) and the premium segment is US$400 and above.

The post 5G Captured 5% of the Global Premium Market in Q3 2019 appeared first on Counterpoint.

While 5G, IoT, and other technological advancements are rapidly entering the market in many nations, there are still over three billion people who don’t have access to the Internet. A majority of those without access are in developing regions where concomitant factors of poor national governance, a dearth of relevant infrastructure, and lack of inward investment, serve to limit the populations’ access to basic connectivity.

Closing the digital gap in the global economy is a significant opportunity for the entire telecommunications value chain. But doing so sustainably is not easy. To increase Internet access, the following issues need a resolution: –

1. Availability – One of the biggest reasons why many people don’t access to the Internet is due to the lack of adequate infrastructure. All other issues don’t even come into play without the availability of network and other infrastructure, such as regular electricity supplies, to provide Internet access.
2. Affordability – refers to the cost of service, the cost of the handset or device used to access the internet. Also, access to affordable electricity is necessary for running and recharging devices.
3. Applicability – are there good quality, localized content and services available to support consumers gaining access for the first time? Much of the Internet content is developed for and consumed by relatively affluent global audiences. For marginal communities, this content is irrelevant and unreadable.
4. Capability – Government policies need to support digital development as well as people’s ability to take-up services based on aspects including awareness of the value of internet services, literacy etc.

            Exhibit: Counterpoint Research – Barriers to Connectivity

Conventional telecommunications business models will not provide the solution. The cost to cover the unconnected far exceeds the potential returns on the required investment. Nevertheless, telcos can contribute by using innovative infrastructure solutions. And there are alternatives, including shared network models that allow telcos to offset some of the risks and provide smaller businesses with opportunities to develop regional or even community-level solutions.

We have analyzed multiple initiatives around the world and found relatively few, sustainable, attempts to build Internet access for users that have otherwise been denied access due to issues of affordability or access to infrastructure. The leading examples include Reliance Jio in India, MTN across several African markets, and Telefonica in several Latin American markets.

Each operator was facing a distinct set of issues, and each is solving those issues in a range of different ways. For example, Reliance Jio has pioneered a new device type – the smart feature phone – and is using deeply discounted data services and subsidized handsets to build a large subscriber base rapidly. It can monetize this subscriber-base through an Internet-like business model. MTN is segmenting the unconnected population and is developing new, low-cost infrastructure that radically changes its cost profile. This enables it to provide sustainable and affordable Internet access. Telefonica is pioneering a partnership approach to overcome difficulties of geography to provide access to previously unconnected communities. These approaches need not be unique but do require concerted efforts by telecom providers to reach across the digital divide and provide access to a large section of the population that would otherwise be unable to connect to Internet-based services.

Nevertheless, not all the unconnected will be able to obtain benefits from Internet access in the foreseeable future. This is because of issues related to the applicability of content and services to the current situation of some populations. Also, the capability will hinder a section of the population from reaping the benefits of Internet access. A collaborative approach from all the ecosystem players is needed to connect the next billion.

The analysis is an excerpt from the detailed report “Achieving the Sustainable Internet Access for the next Billion”. The report analyses multiple initiatives around the world to find sustainable attempts to build internet access for users that have otherwise been denied access due to issues of affordability or access to infrastructure.

The post Connecting the Next Billion: Challenges and Initiatives appeared first on Counterpoint.

Exhibit: 2018 Sell through Growth by Price band

OEMs are increasing their ASPs with each iteration of flagship launches. In 2017, the first smartphone priced above US$1,000 entered the market with the Apple iPhone X. The iPhone XS and XS Max have taken this even higher in 2018. As iPhones become more expensive, an opportunity has opened up for other OEMs to enter higher price bands. This is, at least partially, the reason that 2018 flagships from key Android OEMs like Samsung, Google, Huawei, OPPO, Vivo, OnePlus were priced higher than earlier years. There is also a material cost increase pushing up prices. For example, increased memory, higher quality, faster processors, curved displays, more cameras, new features like Artificial Intelligence (AI), bezel-less display, innovative industrial design or color-material-finishing, are some of the costlier new features on the latest flagships.

While the premium segment remains niche and a more relevant for developed economies, it is the mid-segment which is more volume centric and driving up ASPs in emerging economies. There has been a rapid diffusion of features from the premium segment to the mid-segment, which is giving users enough value proposition to upgrade. For example, premium design factors like punch-hole display, pop up cameras, triple cameras, high megapixel cameras, in-display fingerprint sensor, and more, have already proliferated the mid-segment. With prices of the phones below US$300, these feature-loaded devices have become attractive to a big bulk of consumers who value device utility and value for money rather than the exclusivity of the latest flagship models.

The increasing ASP trend is also similar to consumer behavior. According to Counterpoint’s Consumer Lens Survey, although users are holding on to their devices for a longer time, they are willing to spend more on their devices.

As we enter the second half of the year in 2019 and OEMs refresh their flagship portfolio, the ASP in the premium segment will recover. However, with Apple decline, the collapse of the premium segment in Q1 2019, the trade ban on Huawei, and lengthening replacement cycles – the focus on the volume centric mid-segment with shorter replacement cycles also becomes extremely crucial for OEMs to drive ASP growth. Consumers’ expectation for better performance will continue to drive up the demand for high-spec devices. ASPs will continue to grow in 2019 and beyond. Although after 2019, the rate of adoption of 5G will be a crucial factor in driving up smartphone ASPs.

The analysis is part of Counterpoint’s Market Monitor service. The report series provides detailed analysis of the vendor activity and performance, measuring both volume and revenue by sell-in by major regions and key countries (55+) and top (130+) vendors covering close to 95% of the global handset shipments. It answers the questions of which OEMs, brands and models are performing well, in which markets and why. It also addresses the main derivative impacts to the supply and distribution chains.

The post Smartphone ASP Growth to Continue in 2019 and Beyond appeared first on Counterpoint.

India remains the largest market for KaiOS. However, the smart feature phone segment is now saturating in India. The growth rate is slowing down, and Reliance Jio’s focus may also shift to smartphones, to capitalize on the upgrade ready user-base. Therefore, a natural step for KaiOS is to expand into other emerging markets, especially those that have a similar demographics/economy.

Africa and LATAM are such markets. In LATAM, KaiOS entered the Brazilian market through the launch of Positivo P70S and Multilaser ZAPP. Later this year, it is likely to expand to other markets like Mexico. However, Africa offers a more compelling proposition.

According to Counterpoint, nine out of the top 20 countries with the highest potential for smart feature phones are in Africa. Earlier this year, KaiOS announced MTN Smart, marking its foray into the African market. Soon after the MTN Smart, it launched the Orange Sanza. Launch of both devices was through operator partnerships, something that KaiOS prioritizes. Not only is Orange partnering KaiOS to launch smart feature phones in Africa, but the operator has also participated in a Series B funding.

Partnerships with operators will help KaiOS make further inroads in African countries. In fact, through operator partnerships, KaiOS devices are already available in 22 countries across Africa. Clearly, Africa will be the next most important market for KaiOS after India. However, it might be a bit more challenging for KaiOS to replicate the scale and success it gained in India.

Among other use-cases like elderly population, and users looking for easy form-factors, the primary target consumers for KaiOS are the first-time high-speed internet users. These are mostly bottom of the pyramid population, which either has never experienced a mobile phone or are using traditional feature phones with limited data connectivity. Such users need to be shown the positive effects of data services to prepare them for monetization. Data needs to become a habit for the consumer before it opens up revenue opportunities. Hence, keeping the initial cost of accessibility low and developing relevant content should be the prime focus, and if successfully achieved, it will be pivotal for growth.

In India, the JioPhone’s launch price was US$20, which was refundable if the user returned the device after three years. This made the device almost free. It was also coupled with dirt cheap data rates. Further, there were a host of services at cheap prices which democratized internet usage in India.

Exhibit: Reliance Jio Ecosystem

The vertical integration of Reliance Jio and the application ecosystem played a key role in customer stickiness. This translated into an increased average revenue per user (ARPU). The same will be very difficult for any other operator around the globe to replicate.

In order to achieve scale in the African market, smart feature phones need to be cheaper than even US$20. Entry-level smartphones, available at a marginally higher price in Africa, can be a viable alternative. Also, smartphones remain a more aspirational product for Africans. KaiOS powered device has been launched at a lower price in other countries like Indonesia, where the device was launched as US$7 offering a much higher value proposition to consumers.

There is also a need for content and productivity applications to build user stickiness for the system. KaiOS has already been successful by striking the right partnerships across many players in the value chain and key partners. For content and productivity applications, developer partnerships are equally important. Many users are new to the app ecosystem. This offers a promising new market for developers – especially if they can develop relevant local content and services, something often missed by larger app developers in the mainstream app stores. Mobile payments could be one of the avenues which can be explored, especially in Africa.

The smart feature phone has carved out its place between a feature phone and a smartphone, as an affordable solution for high-speed internet access. With the success of JioPhone in India, many mobile industry stakeholders have renewed interest in tapping into the potential opportunity of upgrading feature phone users with a smart feature phone. The success of the segment depends on the balance of the three most important factors – device affordability, internet affordability, and relevant content. Partnerships among device OEMs, operators, KaiOS, and other ecosystem players will remain a key to achieve this balance. The smart feature phone ecosystem represents a US$28 billion revenue opportunity over the next three years – a number too significant to be ignored.

Please click here for our in-depth analysis of the smart feature phone segment.

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