It's been quite a week of announcements for smart devices – final earnings numbers from the last quarter of 2014 (4Q14) are coming in and new spring releases are being leaked. While not everyone's announcements have been great news, there is a theme across the information and that is the continued expansion of mobile devices whether smart phones or wearables. Also, we are seeing that there is real traction to the PC positive trendPC positive trend, nothing like in the laptop heyday, but also the downturn in demand has been corrected. Along a similar line, tablets are showing their cycle differences now that they've been out on the market longer, and even Tim Cook confirmed this week that tablets are on a longer refresh cycle than smartphones (see the Wall Street Journal, tiered subscription, for full breakdown).
Smartphones offer biggest growth ever
Sure, there has been a lot of talk over the past few quarters about whether or not penetration rates mean a slowdown is coming this year for smartphones (penetration is reaching or has reached very high levels in the US and Europe and gaining globally). What we saw come out on Wednesday in Apple's latest earnings reports pretty much slams the door on that question with a loud "No!" for this year. Let's face it, Apple took the lead story this week with record 4Q14 sales as having had the biggest profit of any company ever in any industry. That's huge. And, they did it on smartphones. That's huge too. I've certainly spent quite a bit of time watching what is going on in this hot market segment and I would not have guessed these incredible numbers (even though I was one of the people setting an alarm last fall to get up in the middle of the night to order my new iPhone 6 Plus and fought with the massive online traffic causing ordering delays).
There is a lot of talk in the financial and business press this week about the sales number of 74.5 million iPhones sold in 4Q14 giving the company a 38% quarterly profit rise of US $18 billion – or, as the Wall Street Journal puts it, "The total equates to more than 34,000 phones an hour, around the clock." That's just an unbelievable quarter, period.
Nice for Apple, what about the rest of the industry?
So, let's think about what's going on in the bigger industry picture for all of us. Clearly, while many, including myself, have said that price is becoming a key factor in smartphone sales, obviously that didn't really hold, did it. So what's going on?
Clearly, Apple has a device line that withstands high-pricing. They also have an operating system that continuously draws new consumers to switch – Tim Cook made clear in the statement this week that not only were these high iPhone numbers due to many current Apple customers refreshing and upgrading, but there were many switches from Google's Android operating system, especially. Meanwhile, we've seen Samsung pulling in their market strategy and addressing how to handle what they reported yesterday as the third straight quarter of profit falls, 4Q14 falling 27% year-over-year, also reported by the Wall Street Journal. But, as theKorean Real Time WSJ analyzes the toe-to-toe competition between these two global giants, the numbers differences are nowhere near as great. It's tough because Samsung doesn't disclose actual smartphone sales numbers, so you have to piece it together. Korean Real Time WSJ puts the Samsung smartphone sales number somewhere around 71 to 76 million for the same quarter – yes, that gives the global bragging rights to Apple, but not by as much as you might think by the titles of articles across the news this week.
For Samsung, while the mobile business is still sliding back to the 2010 levels, the semiconductor business is picking up steam – helped, of course, by Apple's significant market success. Because at the end of the day, these smartphone sales numbers are benefitting the wider semiconductor and electronics industry.
Got mobile chips?
Mobile chips are gaining in demand not only due to the strong global demand for smartphones, but also now with the expanding wearables segment (from medical to fitness) and the rising SmartLife segment which is the Internet of Everything (IoE) (e.g., automotive, home lighting, security, municipal, you name it). Not only is this where Samsung is really picking up their profit steam in this week's earnings reports, mobile chips are also driving the strategies of giants like Intel and Qualcomm, to name just two in the news this week also.
The point? Well, it's always great to see fantastic numbers for companies in our industry because that signals strength and that is good news for parts of the supply chain. When we see the opportunity for category growth, like mobile chips and especially improved mobile processors, that leads us to be even more positive about outlooks for devices, components and volume/profit growth for wider sections of the supply chain.
This week's amazing news from Apple as well as news from Samsung, Qualcomm and Intel gives us a rounded picture that the competitive landscape remains tight, even for some of the global giants in the industry. There is more going on than just the Apple-Samsung market share battle in smartphones. With improved smart mobile devices, there's a place for improved laptop PCs as well as a new range of portable/wearable devices for consumers plus the attention of SmartLife and IoE growth – all depending on similar classes of components and processors dedicated to these end-device categories. Diversification is healthy and that promotes innovation, alternate supply chain and sourcing solutions and new market competition. The competition for smartphones is fierce and there is a real battle in the smartphone space from high-end to mid- and lower-end priced devices, as further discussed in the most recent Smith Market Watch Quarterly out yesterday to the public. For component manufacturers of all types, there is a lot of opportunity in the market for new solutions, both for mobile and for enterprise PCs.