High-end device, low-end price: the race to the middle

by: Darcy LaCouveeJuly 10, 2013

Best smartphones 2013

With so much going on in the world of Android, it’s often hard to sleep  at night. Lovers of mobile tech around the world, with visions of even better devices, dancing in their heads. And why not? There is not a single other industry that is as intensely competitive, that yields massively improved technology each and every year.

Anyway, I digress.

Cannacord Genuity’s Mike Walkey recently released some findings that led him to alter up his outlook for the 2013. Whereas he had previously estimated that 2013 would yield 979 million units, he now suggests that there will be around 959 million smartphones sold in 2013. For 2014, Walkey cut his estimates from 1.29 billion to 1.25 billion.

The S4 effect

Best smartphones samsung sony lg apple 2013

Samsung’s S4 took three of the four top spots at tier one carriers like Verizon, Sprint, and T-Mobile. For AT&T, the iPhone 5 continues to be the bastion of best selling glory, most likely to the carriers chagrin due to the exorbitant costs associated with carrying it.

[quote qtext=”Samsung and Apple maintained top share of the U.S. smartphone market. In fact, our carrier store surveys indicated the Samsung GS4 was the top-selling smartphone at Verizon/Sprint/T-Mobile and #2 selling smartphone at AT&T behind the iPhone 5. Other top selling models included the iPhone 5 at all four tier-1 carriers, the HTC One at AT&T/Sprint/T-Mobile, and the Galaxy S III at Verizon.” qperson=”Mike Walkley” qsource=”Canaccord Genuity” qposition=”center”]

If you’re reading this, and I’m sure you are, then you’re likely on the very bleeding edge. The Galaxy S4 is likely old news for you at this point. What’s next? Sony’s Honami? Samsung’s Galaxy Note 3? ZTE’s Tegra 4 beast? LG’s insanely thinly bezelled G2? 

Our surveys indicated more affordable sub $400 Samsung Galaxy S IIIs and iPhone 4s continued to sell better than our expectations, while the iPhone 5 and Galaxy S4 sold below our expectations.

While we all celebrate thinner bezels, higher pixel densities, 4k video recording, HDR video and picture capture, more robust and sizeable batteries, there is a huge, like insanely huge market for devices that pack great technology and hit a price point that more consumers find easier on the wallet.

It’s a very large world out there. Indian, Chinese and African consumers alone comprise nearly 50% of the global population. Thankfully, what’s happening in the US, Canada and Europe is a harbinger of things to come. The fact is simple: smartphones are, more or less, good enough. The average consumer will never be able to distinguish anything beyond a 1080p display, and these will, by simple consequence of economies of scale, get cheaper and cheaper to produce. The same goes for SoC’s, which Qualcomm is churning out at a record rate.

At the end of the day, consumers vote with their dollars. Picture this – you’re a Mom of three kids, and they are all screaming for new devices. You go into your carriers’ store, and you see devices that, for all intents and purposes, appear to be the same. Both have ‘quad core’, both have HD displays, both have great cameras, but the price is either $99 or $249. Which one are you going to pick?

stock price

The research and surveys conducted by Cannacord Genuity’s Mike Walkey simply affirm the fact that the high end market has become saturated, and that consumers continue to opt for devices that blend compelling technology and aggressive pricing. Even though Samsung, for example, reported record earnings of 8.2 billion for the second quarter, investors were still displeased. [quote qtext=”our surveys indicated more affordable sub $400 Samsung Galaxy S IIIs and iPhone 4s continued to sell better than our expectations, while the iPhone 5 and Galaxy S4 sold below our expectations. ” qperson=”Mike Walkley” qsource=”Cannacord Genuity” qposition=”right”]Why? With billions of dollars at stake you know the world’s top financial research firms have invested heavily into being able to spot market trends before the market itself spots them. And, it is with this in mind that we can better understand why the market hasn’t lauded Samsung as it once did before. Meanwhile, savvy analysts know that Samsung’s real financial engine in its smartphone business is in its lower and mid-tier offerings.

What about Windows Phone?

It’s been a tough go for Microsoft, and for Nokia. Microsoft’s darling actually lost market share over the past several months, and it doesn’t look like the situation is going to change any time soon, despite the substantial investment Microsoft has made, and continues to make in advertising.

Despite gradual momentum for the Windows Phone ecosystem in the U.S. market, our surveys indicated consumers still mostly enter retail stores with the intent to purchase either an iPhone or an Android smartphone, resulting in Windows smartphone sales trailing these two ecosystems by a wide margin

While it’s still too early to say whether or not Microsoft has a legitimate chance of increasing its marketshare, it isn’t looking likely that they will be able to break beyond the sub 5% mark anytime soon. Achieving inertia in this business is no easy task, as we all know.

So much to choose from, how can you lose?

So much to choose from, how can you lose? 

So, where does this leave us?

High end devices will keep improving, there’s no doubt to that. My personal prediction is that manufacturers will realize that their high end offerings are being increasingly cannibalized by their and competitors more compelling mid tier offerings, and that they will have to adopt a new approach to differentiate their highest end offerings. I predict that their will be a new class of devices, dubbed either premium, elite, or signature, and that they will contain more or less the same technology, but will be encased in more premium materials and will carry a more signature look. One important element that is often not considered in the massive multibillion dollar smartphone market is the concept of face. Face is, more or less, the notion of what others think of you, of what the public’s consensus is on you and your worth, as an individual. In highly developed economies, like in Japan, South Korea, or Hong Kong for example, HTC’s One was selling at an incredible premium of nearly 2 times its actual MSRP because of  its lack of availability and also because it was immediately evident that you owned a very premium device, to which you were accorded higher status by an ever, hyper materially focused public. Both these two factor led the market to put a near 200% premium on its actual value.


Smartphones stacked Android best iphone apple samsung LG HTC

In the end, we all win. Market forces dictate that manufacturers, in order to be competitive, must release products at all tiers of the spectrum. And, it just so happens that we’ve hit a bit of a plateau as far as specs are concerned. Sure, we could all do with better battery life, and devices with improved and more substantial batteries are on the horizon. Take Motorola’s rumoured approach, for example. Their alleged device portfolio seems to be strangely absent of an absolute bleeding edge, high end heavy hitter. Think back to Google I/O. With no new Nexii announced, Google was more keen to show what they’ve been working on, behind the scenes. And, what they’ve been working on is making our devices, our experiences, and the way we interact with our mobile tech more contextual. And this trend, and this paradigm shift in general aren’t just limited to Android and mobile technology specifically. It’s a simple fact that data is getting cheaper to crunch, and that more and more of it will be done in the cloud, and not locally on our devices. Complex associations and intelligent, preemptively determined suggestions are the new horizon for Android, for Nexus, for Google Now, and for how we interact with technology in general.

Anyway, it’s all good from here on in. High end offerings for great new smartphones will likely continue to fall in price until they hit the $500 USD mark by the end of 2013 / early 2014. Samsung and other ambitious manufacturers will likely release signature editions of their highest end offerings, and while some will be eager to lap them up, all consumers will reap the benefits of great technology at very aggressive price points, meaning we will get more for less, which is a very good thing.

And how about you? Do you care about marketshare? Do you really care what company manufacturers your device? What is the sweet spot for you, as far as price is concerned? Do Samsung and Apple deserve to be at the top of the podium? Any fan favorites in the crowd? As always, we greatly appreciate your comments. I’d love to know what you think!

  • harrold


    • Topcat488

      Windows Phone customers most likely bought the Nokia model, resulting in a gain for Nokia.

      Like anything that has a limitation, the cellphone industry is saturated, and has peaked, imo.

    • stucrmnx120fshwf

      Yes lots of Nokia unit sales, I bought one at $37, but it isn’t the same as $150 for a dual core Jelly Bean, or $ 400 for a quad core A15, 32 GB flash, 2 GB RAM, HTC One XL 4G.

  • just asking

    Ok, Droid heads, can someone tell me how many tablet optimized app are in the play store? I can’t find that information anywhere

    • Grman Rodriguez

      Do you want a number or a description? Because everyone already says there are few

      • justasking

        I just want to know if Windows 8 app count(those are all tablet optimized apps)has already passed the play store at 100,000, I know it still behind the app store at 350,000 but where are the play store numbers?

        • stucrmnx120fshwf

          Win 8 100,000 apps, Google Play 500,000 apps, Apple app store 500,000 apps, I think, but check my figures, by googling them, Windows Phone, selling very poorly, big Nokia losses.

    • MasterMuffin

      Don’t know about the number, but you could try app called Tablified market

  • YoungHermit

    I believe that Apple and Samsung deserve to be on the top. Apple started this whole smartphone ‘trend’, and when Samsung released the S3 (heck,even the S2), it showed the world that Android can surpass iOS. Great article by the way!

    • Thanks YoungHermit! Apple is definitely to be credited with ‘beginning’ what incumbents (looking at you Microsoft, Nokia, Palm, and RIM) were unable to start. And this rang true, for even longer in the world of tablets.

      Now, the race to the middle is changing the mobile technology landscape incredibly quickly. Apple can’t really proceed in this fashion, without tanking its holy share price. Beautiful irony!

      • stucrmnx120fshwf

        Not sure the technology plateaued at quad core, from Tegra 3 to 4 the graphics cores went from 12 to 72 to be UD 4k capable, cheap phones only have 480p screens, but 1080p has 4 times the pixels totaling 2MP, next year we move into 64 bit. I hope we move more into Chrome at 64 bit, as we must keep tight software kernels, to avoid the bloatware problems, like Windows, it will be a long time before UD screens are cheap at 6″, yet in 2018 there will be 4 billion 6″ 3D UD devices, for more details see my reply to Eric below.

      • On a Clear Day

        General George S. Patton said during WWII of France’s Maginot Line (which the Germans just drove around rather than committing suicide doing a frontal assault upon) that “Fixed fortifications are monuments to man’s stupidity.”

        The same could be said of Apple’s fixed business model, which works as long as people are willing to buy into you being the best and only choice because your marketing machine and spin are still doing their job, but alas, once they are not – well – plummeting market share and stock price can’t be too far in the offing can they?

  • ntd

    Love the interactive chart, but it has TWO different Sony Moble Communications on there. Please differentiate (Is one Sony/Ericsson or Motorola perhaps?).

  • Piyush

    title should be “race to the bottom”.

  • najiy91

    american carrier only? ..duhh,go to asian major carriers,arabian,european and others..look which phone is selling fast..sony is the best!

    • YoungHermit

      But Samsung and Apple remain on the top…

    • Raaj

      Which market are you from? Arabian? European? Or others?

      Please provide facts.. As Younghermit says.. In all the markets you mentioned.. Samsung and Apple are on top!

      Of course everyone’s views are to be respected bit get your facts straight first!!! :-D

      • najiy91

        i just support for sony!cheers!(“,)

        • Raaj

          Fair enough! Cheers!

  • Endinsight

    OK. Here is a question for you all: if you could run Android on an idevice, would you pay the extra money for Apple hardware?

    Probably most of us here would say, “no”, right?

    But I suspect that there are a number of folks in the world who would jump at the chance. And THAT is the kind of thing that probably keeps Tim C awake at night. I mean of course Steve J would turn over in his grave at the thought, but as you said, Darcy, Apple is stuck: how to keep your stock price up, and your profits up, and your perception of high end hardware when the market demand is moving towards cheaper and cheaper devices?

    I actually believe that Tim, et. al., are considering the ramifications of a dual boot iPhone and iPad…that could run both iOS and Android. At the end of the day, Apple is a hardware company (which also has made some very popular software). But if it means they sell more hardware by tossing in android as dual boot, maybe Tim would consider it.

    The problem with Apple’s business model is that it they release (first) new industry defining hardware. But what have they got left? Watch? Glasses?

  • Ruz

    People dont want to spend $600+ on a smartphones so if they can get something good in $400 then why not

  • Jaun Lombard

    tHAT IS WHAT sAMSUNG IS DOING…MEGA, MINI, 4 different NOTES and ACE range of phones…not S4 spec but still good spec. As I said….all smartphones will be the same by middle next year because they all use the same hardware…nothing special about a single smartphone, which others can copy! The only way Samsung, Apple HTC can stay at the top positions of premium smartphones is to actually do something new…not a faster chip, better screen or better sound…something different otherwise the phone market will become like the computer and TV market (you can buy any product and know it is good..yes the one TV is better with sound and the other better color, but the cheap one is only 10% less better but cost 50% less)

  • mirza naqi

    tremendous article ,loved it , read it all :) but too bad nobody acknowledges the true potential of NEXUS 4

  • nonsense

    This is why we are getting the Moto X with mid-high range specs. The high-end market is oversaturated and pretty expensive. Google and Motorola have figured out that the middle market is the best way to go right now. Bring these phones to millions at an affordable price and good hardware/software and they will never look at 650$+ phones again.

  • Eric

    Great article. I agree, Going past the 1080p resolution will be unreasonable even at a company’s standpoint. I think the introduction of full HD displays for smartphones signals the coming and crossover to different yet superior display technolgy.. perhaps a 720p 3D display to begin with then proceed to 1080p 3D display of the same type.

    • stucrmnx120fshwf

      In 2018 there will be 4 billion 6″ 3D UD phablets, but there will be little incentive, to go for interim measures, because of lack of content. Already mobile phone processors can handle UD, cameras can not only handle 4k UD at 8 MP, they can handle 8k at 32MP, Samsungs 13″ tablet, is only 600p off 3,800p (4k UD,) at 3,200p; 39″ UD TVs will soon be on sale for $ 700, even 50 GB 3D Blue Rays, can store just enough for a UD movie. 1 TB Green Rays can store 20, 4k UD movies, 5, 8k UD movies, WiFi ac can at 1GB/s load a 4k UD movie, to a mobile device in 4 minutes, developed world citizens, will need reading glasses, but as the emerging economies, are worth more now, their younger eyes mostly, won’t need glasses.

  • rabidhunter

    I welcome this strategy. It’s going to be more effective in the long run. Having seperate signature models works great for cars. People still buy them. But more buy the affordable models.

  • On a Clear Day

    One of the measures of a man or woman’s maturity is how much they allow themselves to be directed by the opinions of others. A truly mature individual takes into account others feelings and is sensitive to the impact of his actions, dress, demeanor etc upon others – but realizes beyond a shadow of a shade of a doubt that in the end people are most of the time virtually unaware of them and focused – self-centeredly – on themselves and their own problems to the exclusion of awareness of most of what goes on around them.

    Be that as it may, since most people do actually foolishly care about how strangers they don’t know – and probably if they get to know them wouldn’t want anything to do with – think of them, it is not surprising that status conscious people and societies would place a premium on appearing to be “successful” and savvy and want to sport the accoutrements of apparent success, rather than focus on the substance thereof.