It’s not an easy time to be a handset maker. Sony Mobile is cutting 15 percent of its workforce (around 1,000 jobs) as it refocuses its global operations. Earlier this month, Google said it is cutting around 4,000 jobs at Motorola Mobility, as it looks to “return Motorola’s mobile devices unit to profitability, after it lost money in 14 of the last 16 quarters”.
And according to a recent report, HTC is looking to cut its device costs as it attempts to rebuild its market position based on price, after its flagship One smartphone line failed to prove an effective rival to Samsung’s Galaxy portfolio. The company’s recent financials have done enough to spark concern.
With the exception of HTC, which has always been smartphone-focused, these companies have devoted an increasing amount of resources on the supposedly lucrative high-end market, scaling back their legacy feature phone operations in the quest for better margins. But what they have found is that a range of – in many cases excellent – smartphones alone is not enough to transform a company’s fortunes.
Benedict Evans, a tech analyst, summed this up particularly effectively: “If you were a sub-scale, failing handset maker, adopting Android merely made you a sub-scale, failing smartphone maker.”
The real issue for all of these companies is how to differentiate products and attract customers, when the devices they are offering are powered by the same platform (and therefore have access to the same apps and content ecosystem) and offer similar technical specs. With the touchscreen, slate form factor having become ubiquitous, vendors are even failing to differentiate significantly via this method.
Market leader Samsung is in a unique position when compared to its rivals. As the biggest handset vendor, it is in a position where its products are ubiquitous in stores and operator portfolios, and any marketing for a specific device can have a “halo” effect over its whole range. And it also has a significant presence in other consumer electronics markets, meaning a vast number of customers come in contact with its various products everyday.
Of the stragglers, only Sony is in a similar position, although with it being only a matter of months since it bought-out Ericsson’s stake in the venture, it is perhaps too early to be expecting much in the way of results. But the revelation that Apple had looked to Sony’s design cues when designing the iPhone is a clear indicator of the kind of kudos the Japanese company once earned.
As Sony Ericsson, the devices business had already gone from zero to hero – it was once a top-three player – before sliding back down the ranks again. However, it is now looking to compete in a tougher market, with a new set of competitors to battle, meaning that success is far from assured.
Motorola, too, is under new stewardship, following its acquisition by Google, but if anything this just makes its position even less clear. Google has said that its intention with the recent restructure is “shifting the emphasis from feature phones to more innovative and profitable devices”, although this has been Motorola’s plan for years – and so far the results have been uninspiring.
Should Motorola become too effective, there is a danger the Android status quo could be disrupted – a situation Google is likely to want to avoid. The issue is whether a “successful” Motorola under Google’s steerage could cause more problems than it is worth, and to what extent Google really wants to have a top-tier position as a device maker – an activity some way removed from its core operation.
HTC has its own, unique challenges. Unlike Sony and Motorola, it does not have a rich parent with deep pockets to see it through the bad times. And unlike Sony and Samsung, it also does not have a larger consumer electronics presence to boost its brand.
So far, its attempts at differentiation do not seem to have delivered results. Certainly it seems unlikely its investment in, and partnership with, Beats Electronics has reaped results. But competing on price is also a tricky proposition, with the margins much slimmer at the low-end, and the company likely to fall into competition with ambitious rivals including Huawei and ZTE.
This is all before Nokia is thrown into the mix. While sometimes it seems as if the company is going out of its way to shoot itself in the foot, its Windows Phone shipments have been increasing and with Windows Phone 8 there is the real possibility it could deliver an outstanding smartphone. But it is no longer the “go-to” choice for smartphone customers in many markets – having been usurped by Samsung.
With Samsung and Apple dominating the smartphone market, everybody else is left fighting for the crumbs at the table. But it will be interesting to see if any of the “Others” is able to break away from the chasing pack.
The editorial views expressed in this article are solely those of the author(s) and will not necessarily reflect the views of the GSMA, its Members or Associate Members