The Galaxy S4 will be officially unveiled on March 14, during a New York media event that we’re going to attend in order to cover for you one of the most hyped devices of the year. But is the Galaxy S4 ready to take back the U.S. for Android, from the iPhone?
Just as very early Galaxy S4 rumors claimed, Samsung is announcing the Galaxy S4 in the U.S. in order to take on Apple on its home turf. And according to a very recent South Korean report, the company is actually looking forward to bring the fight to Apple in the U.S.
But the Galaxy S4 vs iPhone U.S. “conflict” may be a lot more important for Android itself than for Samsung this year. That’s even if Google wouldn’t like Samsung to enjoy so much influence – and by that we mean market share and profits – in the Android ecosystem.
Why is it so important for the Galaxy S4 to succeed in disrupting Apple’s home business this year? Because Android growth in the U.S. appears to be on a downwards path, and we’ll show you some very astute observations from Asymco on the Android vs iPhone battle in the country.
In a recent article, analyst Horace Dediu takes a look at Android and iPhone activation numbers overall, focusing on the U.S. market specifically, and concludes that U.S. Android activations are much lower than international ones, with the iPhone enjoying increased popularity in the country at the expense of other devices.
Dediu mentions that Google has not updated daily activation numbers in five months – in September 2012, it revealed that at the time it activated 1.3 million devices per day – and using the available data concludes that it must be activating around 2 million devices per day today.
In case the number is correct, that would mean Google has activated 800 million Android devices to date, and that it could hit 1 billion by June, faster than predicted.
What are the numbers for the U.S. alone?
Dediu looked at data from comScore mobiLens surveys that are updated every month. According to those numbers, at the end of January there were about 68 million Android users in the U.S. He then concluded that Android activations are on a downward path in the country, compared to the international trend.
The numbers seem to say that 9% of Android usage comes from the U.S., with Android activations growing by “about 13.3k [units]/day.” Comparatively, “global growth is 150 times faster than U.S. growth.”
Looking at the similar data for the iPhone – taken from Apple financial report for the fourth quarter of 2012 and the same comScore surveys – Apple activated 525,000 iPhones per day, of which 106,000 units per day were activated in the U.S., or 20% of the total number.
Dediu says that at current growth levels, the iPhone is growing at a faster rate in the USA than Android:
Even accounting for some potential error in the Android estimates, the contrast is quite stunning: 1% vs. 20% share of growth suggests something is very different about the US with respect to the two platforms.
The same pattern can’t be observed in other markets because of carrier subsidies. In the U.S., the iPhone is a wallet-friendlier proposition for subscribers that want to purchase devices on contracts – of course, on the long run they’d end up paying more cash to carriers than buying the handset out right – than in other countries.
While you may argue that Dediu is more of an Apple fan than of Google, his analyses are always backed up by math, and the numbers usually don’t lie. In fact, just recently we looked at one of his older reports in which he estimated that Samsung may have spent close to $12 billion to promote Galaxy devices last year, and the number was confirmed by a different report just a few days ago.
Of course, we have to take into account the fact that there may be errors in reporting activations for the region. Dediu mentions them himself, and it will certainly be interesting to see whether his estimates – at least the overall picture (international Android activations,) as Google won't share future activations numbers per country – prove to be right or not:
Android activation data as reported by Google includes tablets but excludes many unofficial Android builds e.g. Amazon Kindle and many Chinese phones and tablets that don’t register with Google services. comScore data includes only primary devices used by consumers and excludes corporate purchases and devices whose primary users are younger than 13 years.
Does Google have a U.S. Android activation problem?
Looking at iPhone activations for the last two quarters in the U.S. according to data disclosed by carriers, you’ll immediately notice that the three main American mobile operators stocking the iPhone have sold plenty of iPhones during the second half of 2012. In fact, Verizon and AT&T actually activated more iPhones than other smartphones during the period.
Orange circles represent USA Android users in millions.
Blue circles the precent of total Android activations for USA.
Furthermore, no other mobile device is ever mentioned in their quarterly earnings reports, as carriers keep highlighting iPhone sales. Let’s take a look at iPhone activations out of the total number of smartphone activations for Q3 and Q4 2012:
- Verizon: Q3 – 3.4 million out of 6.5 million, Q4 – 6.2 million out of 9.8 million
- AT&T: Q3 – 4.7 million out of 6.1 million, Q4 – 8.6 million out of 10.2 million
- Sprint: Q3 – 1.3 million, Q4 – 2.2 million
Unofficially, carriers would prefer users to buy anything but the iPhone, because of the huge checks they have to cut to Apple each quarter. On the other hand, not having the iPhone in stock is bad for business, just ask T-Mobile, the last of the Big Four still waiting to get the handset.
We’re not going to feel bad for carriers though, as they make up for their “losses” on the long run, as they do tie those buyers that choose subsidized devices into two-year contracts that have to be honored one way or another.
Since we did mention T-Mobile, it's also important to consider the fact that the nation's fourth largest carrier will also officially have the iPhone in stock sooner or later, and become an other influencing factor in the Android vs iPhone U.S. activations race.
Is the Galaxy S4 the solution?
The fact that the Galaxy S4 is being officially announced in the States is definitely a great publicity stunt that will get Samsung plenty of attention. But will carriers – who reportedly have influenced Samsung’s decision to host the event in the country – launch the handset in a timely fashion?
Let’s remember that the Galaxy S2 started selling in the USA a lot later than in international markets and the Galaxy S3 took a while to hit America as well.
Historically though, Galaxy S series sales have been strong in America, although they have never been comparable with iPhone sales. Will the Galaxy S4 change that this year?
Samsung is rumored to mass-produce plenty of Galaxy S4 units, 100 million being mentioned by one report. Whatever the number is, we’d expect plenty of units to ship to quite a few U.S. carriers that will launch the device – in 2012 five carriers released the Galaxy S3 more or less simultaneously, including Verizon, AT&T, Sprint, T-Mobile and U.S. Cellular.
And the Galaxy S4 will surely help Google with overall daily Android activations, but will it be enough to bring back significant growth in the U.S. – if indeed that’s a problem for Google?
The Galaxy S4 is not the only exponent in the Android vs iPhone fight. There are a variety of other flagship Android devices that will compete against the iPhone, but they’ll also fight against the Galaxy S4 at the same time. The list includes handsets like the Sony Xperia Z, the HTC One, the rumored Motorola X Phone, all of them still unavailable in U.S. stores or not even official (the latter).
The iPhone problem
As we said before, according to Dediu’s detailed graphs and analysis, the iPhone is doing well in the U.S., much better than in other markets where it’s more expensive:
My suspicion is that it [iPhone growth] has something to do with the fact that the US is one of the few (but largest) market where the iPhone is available as a “low end” offering. At a minimum price of $0 (with a contract) many consumers are finding the iPhone attractive relative to a $0 (with a contract) Android phone. This price parity (illusory as it may be) allows iPhone to grow even faster than Android in this particular market.
But he ends his article with a phrase that could be important for this year’s Android vs iPhone battle:
One wonders what would happen if such price parity were present globally.
Apple is rumored to finally launch a cheap iPhone this year, which could become a more important threat to Android in other markets, maybe an actual serious problem for Google. After all, Google may not be that affected by an Android activation decrease in the U.S. as much as it would be affected by an overall Android activation issue in other markets. But we’ll talk more about this potential cheap iPhone threat when and if it becomes reality.
How much growth can there be anyway?
We keep talking about smartphone sales and activations for the U.S. and the world, but how much sustained growth can we keep seeing from year to year? Sure, more and more buyers are choosing smartphones over featurephones and dumb phones, but the base of existing users (many of them tied into lengthy contracts) is larger and larger, which means there’s only so much growth we can see.
And the U.S. is one of the most active smartphone markets, and most likely one of the most saturated ones, so we shouldn’t be surprised not to see significant growth when it comes to smartphone activations in the future, no matter what OS we’d be talking about.
International markets on the other hand, especially large ones such as China or India that have plenty of untapped potential when it comes to smartphone sales, are regions of the world in which there’s plenty of room left for that growth everyone is looking for.
With all that in mind, we can safely say that the Galaxy S4 will definitely be one of the main iPhone adversaries this year, both in the U.S. and internationally. But unless Samsung manages to sell somewhere in the low hundreds of thousands of Galaxy S4 units per day in the U.S. alone, it may not be able to single-handedly bring back consistent Android growth in the U.S.
That doesn't mean iPhone growth will continue to outshine Android growth in the region, for the same reasons mentioned above. We're looking at a competitive smartphone market, but also a saturated one. Just as there are plenty of Android handset buyers locked into contracts, there are plenty of iPhone users that are also locked into similar contracts.
What will be interesting to see in the coming months is what kind of device would most influence the Android vs iPhone balance in the USA, a high-end Galaxy S4 that will surely launch with a variety of local carriers, or the promise of a cheaper iPhone that could become an attractive option for some smartphone buyers.