unwired view: Did Google manage to stop gradual Android take-over by Samsung? Q3 smartphone numbers say maybe
The rise of Android over the last 3 years was nothing short of amazing.
Coming a year after the iPhone, it had crushed the incumbents – Nokia, Microsoft, RIM, etc; – and now dominates the smartphone market, with Apple as a distant second.
It was also a boon for consumers, who can now get a quality smartphone for as little as $200, pre-paid.
But as a business, Android was a lousy proposition to almost everyone involved, so far. After years of losses, two of the biggest Android champions and former mobile device stars – Motorola and Sony Ericsson – ceased to exist as independent companies, and now rely on the largess of their parents to remain relevant. Former world’s #3 mobile phone vendor – LG – went into multi-year period of losses, and only now is showing first signs of a turn-around. HTC, the company that rose to prominence on the back of Android, lost its way a year ago and is now rapidly heading into the abyss.
Even for Google, Android has been nothing but a huge money sink funded by the search/Adwords monopoly profits. Yes, I know that it’s a strategic long term investment. That Google needed Android to make sure smartphone platforms remain open to its services. That Google is supposed to recoup all the investment via ads on mobile, eventually. And it is a valid argument. But the opposite POV – that mobile advertising model that funds Google on PC/Web will never work as well in mobile – is just as valid today. Google may find a profitable business model in mobile eventually, or they may not.
The only company that has been making serious and sustainable profits with Google’s mobile OS – is Samsung, which has been taking over bigger and bigger slice of Android shipments each quarter. And I can’t imagine that folks in Mountain View are happy about this.
When Samsung launched its first major Android flagship – Galaxy S – it very quickly established itself as a major player, with about 20% of overall Android shipments. And since then Samsung has been rapidly increasing its market share. With the launch of Galaxy S2, Sammy took over ~40% of Android shipments, by the end of Q2 2012, when Galaxy S3 came along, it got to about 49%.
This puts Google execs in an awkward position. On the one hand – they must be happy that Samsung is so successfully pushing Android on all continents and at all price ranges. On the other hand – they can not be not worried about how dominant Samsung becomes. If no one else can make money with Android – how long OEMs will continue to invest in it, before inevitable shake-up happens? HTC is already trying to diversify away from it and is betting heavily on Windows Phone. What if the bet pays off, other Android vendors follow suit, and Samsung’s Android market share climbs to 60%, 70% or higher?
Samsung has been dabbling in mobile platform and software for years now. Bada, TouchWiz, Tizen – nothing much has come of those efforts, yet. And it’s an open question whether anyone else outside U.S. is even capable of creating a globally competitive consumer software platform anytime soon. Decades long U.S. dominance of software industry suggests otherwise.
But if anyone can do it – it’s Samsung. Earlier this year it made mobile software and services a major strategic direction for the future. Samsung’s previous strategic bets? Semiconductors (memory), TV’s and other consumer electronics, mobile phones. In every one of them, at first, Sammy was a scrappy underdog few incumbents paid attention to. I bet former Elpida, Sony and Nokia execs are still wondering what the heck happened. If, in a few years, Samsung is able to pull something like that with its software assets, while shipping 70% of Android devices, Google may be in for a rude surprise.
Imagine Samsung owned, Tizen based mobile platform, fully compatible with all Android apps. Then imagine that for some reason Sammy decides to go its own way sometime in late 2014. One day it just leaves Open Handset Alliance, and switches to Tizen on all of its new smartphones. If you are an average smartphone user, and if all your apps still work on the next Samsung phone, would you even care that it now runs Tizen and not Android? I thought so. 2/3ds of Android shipments gone in a flash.
Thankfully, this nightmare scenario seems a little bit less likely now, that Q3 2012 numbers came in. Samsung’s gradual take-over of Android may has been checked, at least for a little while. For the first time in many months Samsung’s share of Android shipments has seriously declined. From about 48-49% (depending on the source you use) to 41- 42%. And, what’s even better – we are starting to see some good signs of life from the rest of Android ecosystem. Sony was finally able to show some good sequential growth in Q3; LG grew Android shipments, eked some profits and promised more good news in Q4; big Chinese OEM trio – Huawei, ZTE and Lenovo – did even better.
Granted – sustainable profits for any smartphone OEM not named Samsung or Apple are yet to come. And one quarter does not make a trend. But it all starts with healthy growth.
Here’s to a renewed and profitable competition in Android land.