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Apple should be very afraid

Today's Moto E announcement demonstrates exactly what Lenovo sees in Motorola and illuminates one major reason why purchasing the cellular device company makes so much sense. The affordable phone, at $129 unlocked, targets people who have yet to buy smartphones, but own so-called dumb ones. They make up a huge market, much of it in Lenovo's backyard and largely ignored by Apple.

Smartphones accounted for 62.7 percent of mobile handset shipments during first quarter, up from 50.7 percent a year earlier, according to IDC. But as sales shift to smartphones they also slow in many mature markets, such as the United States where the install base nips 50 percent. Looking ahead, the higher-hanging sales will be the lowest-cost phones, where unlocked matters in many emerging markets, particularly Asia.


Samsung is the global smartphone leader (30.2 percent market share; IDC), having gobbled up many markets once dominated by Nokia. The South Korean manufacturer succeeds in part with lower-cost devices selling alongside flagships like Galaxy S5. But with Moto G and now the E, Motorola courts buyers in emerging markets who want a good enough smartphone without having to (figuratively, hopefully) sell a child to get one.

Moto G already was a bargain at $179. The E is even more affordable. For example, in Great Britain, Kantar Wordpanel calls out Moto G for single-handedly raising Motorola's sales share from near nothing to 6 percent in the six months ending in February. Meanwhile, the phone is a top-seller in countries like Brazil and Mexico.

Stupid Bloggers

I cringe reading American blogs about iPhone ruling the world, when the writers clearly don't know squat about the real world -- as in outside Europe or the United States. In markets like India, buyers are accustomed to purchasing unlocked mobiles, which typically isn't how Apple sells iPhone.

In his hands-on Moto E first take, colleague +Siamak Masnavi 
smartly observes:

"If the Moto G is doing so well, especially in developing markets such as India and Latin America, why is there a need for the Moto E? The answer is that most people in developed markets already have at least one smartphone and big growth in smartphone adoption is only expected to come from developing markets and there are hundreds of millions of people in such countries for whom even $200 was unaffordable. Moto E is Motorola's answer to this problem. And what a great answer it is".

In response to one of my Google+ posts, +Bobby Situkangpoles,  who occasionally writes for Android Police, gives real world perspective from another country which name starts with I: "Here in Indonesia, the [iPhone] 5S is selling for around US $1,000 while the 'affordable' 5C is US $800. That's around twice the national average income. This is a huge problem that Apple needs to crack".

Apple courts lower price points with "refurbished iPhone 4", which "is not an solution either", Situkangpoles says. Price: $400. Strange: For years, investigative reporters slammed companies for dumping older product in countries with lower national incomes, but Apple gets a free pass.

Phabulous

"For comparison, companies like HTC and Samsung have started offering 720p, quad-core phablets for less than $350, while for the same kind of money, one can get a flagship spec device from regional players like Xiaomi", Situkangpoles says.

Phablets are a separate quadrom. Apple offers no large-screen phones and certainly nothing in the phablet category. Apple's problem: iPhone is too small and iPad is too big, and both cost too much for the majority of buyers in big-growth emerging markets. The smartphone segment to watch is 5 inches and above.

Phablet-size devices 5.5-inches or greater accounted for about 12 percent of shipments -- or nearly 29 million units -- during Q1. There is in-your-face reason why tablet shipments declined during Q1 and why iPad missed Wall Street consensus by about 3 million units. Can you cannibalization, because that's where the data points -- phablets snatching sales from tablets (and PCs) in some emerging markets.

In China, the world's largest smartphone market, during March, phablets accounted for 40 percent of smartphone sales, according to Kantar Worldpanel. "It’s clear that phablets really are changing the way Chinese consumers use smartphones", Dominic Sunnebo, Kantar Worldpanel analyst, says. "More than one in five phablet owners now watch mobile TV on a daily basis, half do so at least once a month, and this is without widespread availability of 4G".

Prepaid Boom

Circling back to main topic, Moto E is a helluva device, unlocked, for the price: 4.3-inch display (Gorilla Glass 3) with 540 x 960 resolution and 256 pixels per inch; 1.2GHz Qualcomm Snapdragon 200 processor (dual-core) with 400MHz Adreno 302 graphics; 1GB RAM; 4GB storage, expandable to 32GB with microSD card; 5-megapixel rear-facing camera; 720p video capture; global radios AWS CDMA, GSM, UMTS; WiFi A/N; Bluetooth 4.0 LE; 1,980 mAh battery; and Android 4.4 (KitKat). Measures 124.8 by 64.8 by 12.3 mm and weighs 142g. There is also a dual-SIM option, a feature that is popular in Asia.

By no means are these specs screaming, but they're remarkable for $129 unlocked and offer much more value for much less money than, say, refurbished iPhone 4. That's not just an emerging market consideration. In the United States, for example, the prepaid cellular phone market is flush with growth, while postpaid stagnates. During first quarter, prepaid growth was 35 percent compared to just 2 percent for postpaid, according to NPD. Unlocked phones are primed and ready for prepaid.

Moto Metaphor

I don't suggest that Apple should worry about Moto E so much as what it represents: The major growth market the fruit-logo company refuses to tap. Canalys reveals some startling data for the high-end smartphone market -- devices selling for $500 or more: 47 percent of shipments during Q1 had 5-inch or greater screens. "Of the remaining 53 percent of high-end smart phones, 87 percent were iPhones", Canalys analyst Jessica Kwee says. That's great for margins now, but the locked phones face increasing sales resistance in many emerging markets -- despite prognostications made by CEO Tim Cook during last month's earnings call.

Moto E and the G are metaphors for Apple's weakness where there are first-time smartphone buyers to gain. Already Lenovo ranks fourth in global smartphone shipments, closely following Huawei.

Moto G's sales success "highlights the speed at which a quality budget phone can disrupt a market", Sunnebo says. "The same pattern can be seen in France with Wiko, which has 8.3 percent share, and Xiaomi in China with 18.5 percent".

Xiaomi is an Apple rival to closely watch, particularly in emerging markets. "Xiaomi is coming to 10 countries in 2014! Malaysia, Philippines, India, Indonesia, Thailand, Vietnam, Russia, Turkey, Brazil and Mexico", the company tweeted last month. Just two years following the launch of its first phone, Xiaomi smartphone share shot past Apple in China during late 2013.

"Markets like China and India are quickly moving toward a point where sub-$150 smartphones are the majority of shipments, bringing a solid computing experience to the hands of many", Ryan Reith, IDC program director, says.

Note: To see links, click through to the story.

#motoe   #motorola   #apple   #lenovo   #emergingmarkets  
Today's Moto E announcement demonstrates exactly what Lenovo sees in Motorola and illuminates one major reason why purchasing the cellular device company makes so much sense. The affordable phone, at $129 unlocked, targets people who have yet to buy smartphones, but own so-called dumb ones. They make up a huge market, much of it in Lenovo's backyard and largely ignored by Apple.
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12 comments
 
+Uncle Spongehead The publisher took down Disqus, which started inserting ads into comments.

Betanews searches for a new commenting system. I recommended today reviving Disqus -- better to have something less desirable than nothing at all during the transition. I don't know what will happen.
 
That's a shame...

I hadn't seen the ads yet.

I'm with you, something is better than nothing. I sense a knee jerk reaction.

p.s. You may know me as Info Dave on Disqus.
 
Yea, something is better than nothing but if the ads were inserted without permission or warning then I would do the same thing. You can't have your platform forcing its' agenda down your throat or trying to co-opt your popularity for its' own uses.
 
+Uncle Spongehead Wow. It's wonderful to really connect, in this ghost town (as proclaimed by TechCrunch).

I stopped writing stories when comments went down. This is the first since. What's the point if people can't respond?
 
Apple's smugness will eventually backfire on them.
 
Let me rudely derail the comments topic for a bit ;)

Another reason why Apple should be concerned is because cheap good quality off-contract phones undermine the carrier subsidies system by which Apple lives and dies.

In the eyes of most people in the US an iPhone costs between $0 and $199, the remaining $450 are hidden.

Once the phone price is separated from the data/voice plan a lot of people will wonder whether they should pay $650 and upwards for a new iPhone or get a Moto G for $179.

That, and the fact that Apple is very much dependent on phone carriers for its revenue, are ignored too often.

There, end of screed, now please carry on with the Disqus reunion ;) 
 
Nothing new here...Your just repeating Nathan Myhrvold's 93 memo "Road Kill on the Information Highway" in which he wrote

"It is extraordinarily difficult for people to really grasp the power of exponential growth. No experience in our everyday life prepares us for it. The numbers become so astronomically large so quickly...that it is easy to either dismiss them outright, or mentally glaze over and become numb to their meaning. It is incredibly easy to fool oneself into thinking that you do understand it, but usually this just means that you've mentally done a linear extrapolation from the recent past. This works for a little while, but then rapidly becomes out of date.

Exponential growth had allowed minicomputers to edge by makers of mainframes who didn't make the "exponential extrapolation" and act on it fast enough. Exponential growth similarly allowed microcomputers - personal computers - to blow by minis, enriching Microsoft, which soon become the dominant maker of PC software. "The growth curve of Microsoft is unprecidented in the annals of business, and seems quite miraculous until you realize that what we have done is ride the exponential growth curve of computer price/performance,"

Exponential growth will always allow the "low end" to catch up to the previous high end in price/performance.  When Apple created the smart phone category, they had no competition.  Now they have competition and exponential growth means the price/performace of the low end will always chase them and slowly eat into their product appeal unless they can keep coming up with new ways to justify their price differential.  It's Apple's move, the market doesn't sit still.  Apple will grow more slowly for a few years because their installed base is loyal but they need to continue to differentiate themselves from the low end which is getting harder to do every year.
 
+Joe Wilcox thank you for sharing this and bring this interesting discussion to more people. To be honest, when I talked about this and the rise of MediaTek powered cost-high-performance devices in the past, some (understandably) thought that I had a vested interest due to where I live. But now it's as clear as day that manufacturers have no choice but to shift their focus to the unsubsidized emerging markets if they want to find growth. Oh, if I may add one more thing, I write for Android Authority :)

+Irina Ivanova you're spot on there. Been saying this for years, I've always wondered about how could many journalists failed to observe how the iPhone's marketshare had never reached double digits outside of heavily subsidized mature markets like the US or Japan, the numbers have been out there for years.

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