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September 30, 2013

Will the Smartphone Market Fragment by 2018?

A new report from Juniper Research, “Smartphone Futures: Differentiation Strategies & Emerging Opportunities 2013-2018,” has uncovered findings that suggest the smartphone mobile OS market will see new players emerge, such as Asha, Sailfish and emerging HTML 5-based OS players begin to gain ground in niche areas. Even so, the overall global market will most likely continue to be dominated by Android and iOS.

Asha is a current key component of Nokia's low-end mobile device lines - though with the acquisition of Nokia's device business by Microsoft we have to wonder just how much life will be left on the Asha front once Microsoft truly takes over. Sailfish in the meantime is yet another Linux-based operating system that claims to now be the one true independent mobile OS - one that is not ruled by a single gigantic company and thus truly independent. Android used to make that very same claim!

We do have to wonder about any and all of these bottom-tier mobile operating systems - they include, among others, Tizen, Firefox's mobile OS, the platform mobile browser vendor Opera is working on, and of course those proprietary and possibly heavily modified versions of Android. Will they have a ghost of a chance of surviving? And if they do survive in the multiple niche markets Juniper believes they will, will the world necessarily be a better place because of it?

Image via Shutterstock

The Juniper report argues that these new mobile OS contenders will indeed take away important niches that are now primarily owned by low-end Android devices and some of Nokia's Asha devices. Juniper (and others) believe that by focusing on cost innovation (read that to mean "cheap or inexpensive") and - more importantly - through the idea of utilizing "local knowledge" in synergy with the next generation of consumers these operating systems may bring enough value to the table to make their survival a sure thing.

The obvious conclusion to draw from assuming that these alternatives will have a measurable impact according to Juniper is that it may begin a slow decline of the current global OS elite. Juniper is projecting that these alternatives are likely to pick up as much as 13 percent of the entire market by 2018.

We ourselves strongly suspect that these alternative operating systems will potentially find very niche markets that will not alter the current trajectories of either Android or iOS. They may, however, make significant inroads into markets where costs need to be so low and indeed so "locally differentiated" that neither iOS nor Android will find it to their advantages to worry about them.

Does this ultimately mean true "mobile OS fragmentation" - a term fraught with negative connotations? We don't think so. Another way of looking at the data is to suggest that these operating systems will not take over existing market share but will, rather, create their own niche markets - driven by that localization capability noted above - that would otherwise probably not exist for iOS or Android. Rather these operating systems won't cause fragmentation but will instead simply expand the overall global market for smartphones.

It is worth noting that these "niche" markets may in fact contain enormous numbers of likely subscribers, but from a revenue perspective these markets will likely remain quite small.

Market Leaders Will Remain Leaders

Juniper notes that either way Apple and Samsung will continue to dominate the global market, and notes that it expects 17 percent more smartphones will be shipped in 2018 than were shipped globally by all vendors in 2012. The new Juniper report anticipates that Apple's and Samsung’s global smartphone shipments will hit nearly 800 million by the end of 2018, compared with 677 million last year.

The Juniper report further forecasts sustained growth for Apple in emerging markets over the forecast period. This forecast anticipated Apple launching a diversification in its product portfolio - which Apple has since done. The report specifically notes that this brings Apple closer to the Samsung model of catering to a diverse set of markets utilizing different models which will maintain the current global dichotomy.

There is some truth to this, but Apple's next major global move will be to finally generate serious sales numbers and revenue specifically from China, which will be due much more to the iPhone 5s and 5c being able to easily operate with China's emerging LTE networks. Apple has not aggressively dealt with China because until the new iPhones emerged it was not interested in creating separate products requiring special LTE chipsets unique to China. The wireless chipset issue is no longer relevant and China Mobile itself - which ash the largest collection of wireless subscribers on the planet is quite eager to tap into what it knows to be pent up demand for iPhones - cheap or otherwise.

A complimentary whitepaper, “Smartphones: Ultra-Premium to Ultra-Economy,” is available to download from Juniper's website, along with further details of the full report.

Edited by Alisen Downey

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