Smartphones: Commoditization looms; shakeout can't be far behind

Smartphones: Commoditization looms; shakeout can't be far behind

Summary: Bottom line: The smartphone race will look dramatically different a year from now. A shakeout is on the horizon.


Smartphones used to carry a price premium. In reality, they're starting to look a lot more like feature phones and the only distinguishing characteristic may be price.

As folks sort through Gartner's mobile phone statistics, there's one quote that sticks with you.

The smartphone market has become highly commoditized and differentiation is becoming a challenge for manufacturers.

"This is particularly true for smartphones based on the Android OS, where a strong commoditization trend is at work and most players are finding it hard to break the mold,” said Gartner analyst Anshul Gupta. “At the high end, hardware features coupled with applications and services are helping differentiation, but this is restricted to major players with intellectual property assets. However, in the mid to low-end segment, price is increasingly becoming the sole differentiator. This will only worsen with the entry of new players and the dominance of Chinese manufacturers, leading to increased competition, low profitability and scattered market share."

IT buyers know what comes next. Supply gluts---Gartner is already noting that the smartphone channel is filling up quickly---price cuts and a market where hardware differentiation doesn't exist.

The good news is that Android shops will get almost-free handsets. ZTE and Huawei are likely to blow up pricing for Android incumbents. The reality is that smartphone buyers will gravitate to the one Android player with massive scale---Samsung.

In this new smartphone world order, Apple will rake in the most dough along with Samsung. Nokia and Microsoft may garner momentum since they have a unique smartphone play that has yet to catch on. RIM's future rests on BlackBerry 10 devices. And the Android hardware players will simply kill each other.

Bottom line: The smartphone race will look dramatically different a year from now. A shakeout is on the horizon.

Related: Gartner: Samsung steals Nokia's crown as global phone leader

Topics: Smartphones, Android, Google, Hardware, Mobility

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  • Apple's Share will go down!

    Just like PCs and now smartphones and eventually tablets all devices will be commoditized. Sure there will still a place for boutique players.
    But like the Gucci's and Ferrari's of the world the bulk will go to the volume players.

    Android, Windows 8 and Windows Phone stand to gain!
    • apple + windoze share will go down

      thought for windoze standing at 0.1% it might have to go negative. ;)
      android will prosper!
      The Linux Geek
    • Had it been an actual alert

      Testing to see whether the string the censor-bot didn't like was boo-gotti: Bugatti.
      Robert Hahn
  • Samsung stands to lose out the most from ZTE and Huawei throwing cheaper

    android phones out there. Apple/Nokia stand to gain as people who dont want the bottom of the barrel start to realize android stands for crap devices and a crap ecosystem full of malware.
    Johnny Vegas
    • Price matters

      "Crap devices and a crap ecosystem full of malware" could fairly describe much of desktop Windows over the past 20 years. Remember Gateway? eMachines? The "white box" guys? In fact they did not Ruin The World for HP. Heck, even Dell didn't wreck the world, even for Dell.

      Like it or not, people will buy this stuff to save a buck.
      Robert Hahn
      • Remember Gateway? eMachines?

        I don't have to, still see them around. Walmart is full of them (in Canada at least).
      • Munchkins at work

        Note the comment above from lepoete73. Its entire content is to inform us that certain brands are still available in Canada. That's all. Yet some clown came through here and down-rated the note.
        Robert Hahn
      • But....

        Most of the PC OEM's fell by the wayside and it was only the server market that kept Dell and HP kicking along.
        Take away the server market and Dell and HP would have died a long time ago. Does Samsung have something to rely on when the consumer market is fully commoditized?
      • What?

        "Take away the server market and Dell and HP would have died a long time ago."

        HP sold almost 16 million PCs last quarter - not servers:
      • @drivellc

        Robert Hahn's comment has some experience to it.

        The two OEMs that Microsoft is really counting on for Windows 8 are Dell and HP. More than Samsung or Nokia or other smaller/nonexistent PC OEMs. Dell and HP and Lenovo too (with IBM Servers) sell their PCs and Servers in an integrated manner in America and Eurasia and other world parts (China and India are still new markets). The usage scenario is a desktop client/data center server. So part of the sales process will involve calculating the number of desktop users/PCs and part will involve computing the data center load they can create and the number of Servers the organization will need. And computing the total number of licenses for PCs/Servers to sell.

        Of course, Microsoft benefited heavily from bundling both clients and servers to large and medium enterprises from all 3 OEMs. But that trend is being upended by the new paradigm - mobile client/cloud where commodity Intel servers increasingly with Linux platform only are being used by a very small but increasing number of businesses. But this trend is still in its infancy. And the mobility part in the enterprise is still unmanaged for all practical purposes. So Microsoft still has time. And so do HP and Dell and Lenovo. But this time may be their last chance to get a cloud Windows right.
  • Cost

    as long as there are ridiculous charges for data, the actual price (and for some, quality) of a smartphone is the least of it

    as I've said before:

    1) there is not enough bandwidth for smartphone users, so the whole cost structure is a scam


    2) there is enough bandwidth and the whole thing is a scam and a ripoff

    • Like anything else, the cost reflects what people are willing to pay,

      even if the prices can sometimes be ridiculous.

      You are correct about the ridiculous prices for data, and people are getting hoodwinked, but, as long as people continue wanting to be social over a smartphone or just a phone, the carriers will continue taking advantage.
  • Wow!

    Android grew it's share by 20% compared to a 6% gain by iOS. That is phenomenal, and truly highlights the importance of emerging markets.
  • western centric commentary

    In all the commentary (much of it technically astute) I never clearly feel that the view of subscribers in the exploding Emerging Nations are represented. Do these subscribers view Android as a cesspool? Will they gravitate toward Apple excellence or even RIM security? Do they care? It's important in that their economies are growing while Europe implodes and the US borrows more.