Posts Tagged ‘IHS’

Happy New Year, everyone. Welcome 2015!

After taking a break in Dec, I decide to start the year with a casual discussion about 2015 predictions in wireless, IoT markets. Some are my interpretations of other people’s predictions.

1. T-Mobile CEO Shots at Rivals in His 2015 Predictions

source: T-mobile newsroom

  • “AT&T will find new ways to cause their customers pain [in 2015] – especially those still on grandfathered unlimited plans,” predicts T-Mobile CEO John Legere, feisty as ever while making his 2015 predictions. The FTC recently sued AT&T for throttling the data speeds of unlimited plan users. Legere said, AT&T will continue to miss the important step – “which is to stop punishing their customers with domestic overages and instead get rid of them.”
  • He isn’t any kinder to Verizon, predicting Big Red will “keep trying to baffle American wireless customers with BS promos, like the one they did this year telling customers they could get a free iPhone 6 (don’t forget to read the small print!), as well as misleading advertising about everything from coverage maps to device trade-ins.”
  • As for share-losing Sprint, Legere sees them “continue throwing out campaigns, offers and promotions – anything to see if it sticks.” By mid-year, he expects the carrier to “realize they can’t slash their way to growth and start to invest in their network and customer care.”
  • One positive prediction for the industry in general: Legere forecasts 2/3 of devices sold next year by carriers will be subsidy-free, up from 41% in 2014. The margin improvement that has come from moving customers from subsidies to early-upgrade and installment plans has been a silver lining for the industry during its price war.

Original post by Legere on T-mobile: link

2. Significant Slow Down in Smartphone Shipments

Research firm IDC published a report (Dec 2 2014) which expects total smartphone shipments in 2014 to reach $1.3 billion units, representing an increase of 26.4% over 2013 (good news). But slow down to year-to-year 12.2% growth in 2015 with only 1.4 billion smartphones to be shipped. Some analysts even predict single digit growth in 2015.

Per IDC, this slower growth will continue for the next several years, with unit shipments approaching 1.9 billion units in 2018, resulting in compound annual growth rate (CAGR) for 2014-2018 to be 9.8%. Smartphone revenue will be hard hit by the increasingly cut-throat in pricing. Worldwide average selling price (ASP) will drop from US$297 in 2014 to US$ 241 by 2018.

This slow-down is bad for every smartphone manufacturers, more so for Android OS phone manufacturers.

IDC analyst Ramon Llamas said in a statement. “Apple’s approach with premium pricing ensures a growing portion of overall revenues despite its declining market share. Meanwhile, Android’s multi-faceted approach–with forked versions and low-cost Android One strategy–will produce mixed results, yet it allows deeper penetration into emerging markets. That can lead to additional pressure on its vendor partners, who will need to seek greater differentiation in terms of devices and experiences in the hyper-competitive smartphone market.”

As shipment volume slows, chip and smartphone components suppliers will get impact in 2015. IHS estimates global chip sales to be 3-5% growth in 2015 after it rose 9.4% in 2014 ($353B).

For those exposed to Apple and rising Chinese 4G phone sales (tailwinds), revenue should still be trending up. However, investors should concern about a ‘coming deterioration in pricing and/or margins’ for most smartphone components suppliers. Bankruptcy filing of GTAT, a supplier for Apple’s sapphire glass, hopefully is just an one-off bad example.

(I wrote about the key iPhone suppliers in my previous post — link)

3. Marriage of IOT Software and Hardware

2014 is a year for IoT and wearables. Many smart device (healthcare, infotainment, home security, remote control) startups emerge and doing very well, such as Jawbone, Fibit, Misfit, Nest (acquired by Google).  But we haven’t yet begun to see the potential of this category.

Transparency research says global wearable tech market will grow to US$5.8 billion by 2018.  And though we won’t see its full impact in 2015, I believe that the key winning IoT strategy is to build an ecosystem combining software and hardware together.


It makes lots of sense because business with hardware alone cannot generate decent profits, missing the downstream revenue and customer interactions. For example, the world third largest smartphone manufacturer – Xiaomi — is expanding its footprint into more profitable Value-Added-Services (VAS) such as mobile security, well & fitness, media content, and cloud/IaaS areas. Xiaomi claims that it is selling phones at costs while making good portion of its profits from accessory and VAS.

On the other hand, business with software alone does not always own the end-customer experience beyond apps. Customer retention, stickiness is an issue. Imagine end-users can easily switch their default search engine, browser, and payment apps on their phones. Therefore, giant software companies such as Google, Facebook, Baidu, Alibaba, Amazon, have been acquiring (or developing their own) smart device, IoT hardware, robotic/drone companies.

Without a doubt, Apple is the best company which has built a harmony of hardware and software together.  Apple Pay will bridge the gap between online and offline world commerce while Apple Watch will mark the tipping point when wearables go from niche to mainstream.

IDC estimates Apple iOS share will stay around 13-15% worldwide in 2015. Mobile payments, Apple Watch, and IBM/Apple partnership are the driving forces for Apple in 2015.

(I discuss in detail about the implications of Apple Pay and Apple SIM in my blog)

I do look forward to the CES 2015 event next week. Besides seeing what’s new and cool tech trends for this year, it kind of sets the stage for the area of growth and investments for the rest of the year. Hope to share more insights from the show.


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