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The Next Wave of Attack: Smartphone wars heat up as unit volume increases


Late last week Verizon launched the sale of its iPhone 4.  This was a long awaited event by many consumers and sure enough, before the end of the first day, sales were stopped as stock has reportedly run out.  Sales are set to resume Wednesday of this week (2/9/11).

Verizon has released to numerous agencies that first day sales of the iPhone 4 has surpassed that of any other handset in Verizon's history (cf. this Computerworld report).  However, exactly what that number is, remains speculative as no actual data have been released.  Guesstimates put the sales of the Verizon version of Apple's iPhone 4 at roughly 100,000, leading market analysts to forecast Verizon iPhone sales for 1Q11 to hit 2.9 million units and to reach 11.6 million units for the year 2011 (cf. this CNNMoney report).  Of note, a survey of forecasts shows extreme variability in unit volumes, according to this Manufacturing Business Technology report, with a range of 5 million to 13 million units this year.

All good news for Apple unit sales,  generally speaking.  However, pulling back to examine the dynamics of the smartphone market, the opportunity for Verizon sales comes with increased competition.  An important development in the market ecosystem for smartphones is that no longer is the competition based on device features and capabilities alone, the service carrier and the operating system are playing increasingly important roles (cf. our recent analysis of this market development in this recent MarketWatch Quarterly report).  So, while Apple now has two service providers to increase the adoption rate of the iPhone, AT&T, now has to consider their competitive landscape, which affects the OEMs it deals with.

One result? AT&T has begun working closely with Motorola in marketing and promoting Motorola's new Atrix 4G smartphone that runs on Google's Android operating system (cf. this report).  Another interesting event is the recent release (cited here by Computerworld) by AT&T that it will soon (no firm date provided) "allow tethering of multiple devices to Apple's iPhone."  This feature will allow Apple's iPhone owners to create a personal Wi-Fi hotspot connecting their SWD devices (i.e., notebooks, tablets and smartphones), much as Verizon has allowed and is going to provide for the Verizon iPhone 4.  Similarly, AT&T will provide a tethering solution through an Android app (Mobile Hotspot) for Android-based smartphones; also in synch with competitor Verizon's plans (cf. the same Computerworld article).

Meanwhile, Nokia and Microsoft are rumored to be preparing an announcement regarding their pairing, set for release the end of this week (cf. this blog from Computerworld).  With Nokia continuing to loose ground in the high-end handset turf wars, and Microsoft similarly in need of a good match to propel its market position against stiff competition, there is talk of a pairing of Nokia and Microsoft.  This could be an important boost to Windows Phone 7 to compete against Apple's iOS and Google's Android platforms, as well as a boost for Nokia to get back into the heat of the competitive smartphone marketplace.  Nokia will certainly be releasing important news this Friday, whether or not that news includes word of an agreement with Microsoft.  The once leading OEM in handsets, Nokia has been loosing market share steadily and is announcing their new management shake-up (cf. this report from

What does all this mean to the semiconductor and electronics industry?  Well, simply put: unit volume is strong; competition and new handset sales (Verizon iPhone 4, and AT&T's new push of Motorola's Atrix 4G) is good for business along the supply chain.  What the alignment wars will mean in the end, and what the impact of service and software as features to be considered alongside device feature sets for OEMs is still an open, yet quite critical question for our industry.  We'll be exploring this more closely at the end of the quarter in our next MarketWatch Quarterly.

Lisa Ann Cairns, Ph.D.
Written on Tuesday, 08 February 2011 11:55 by Lisa Ann Cairns, Ph.D.

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