2019 was a very busy year for telcos and device manufacturers. With the debut of the first 5G service and device marking the beginning of the long-awaited new network generation, let us now look back at the most significant moments that shaped the smartphone market in 2019.
In April, Swisscom partnered with OPPO to bring a new offering to the market. By not charging a premium for the service, Swisscom set price expectations and standards for other carriers in the region, and no less important was the choice of OPPO for the launch event. This was a turning point for the Chinese manufacturer, which had already been in the market since 2018 but without a clear strategy.
From that moment, the shift in its market approach was clear, with OPPO expanding its footprint in Europe as well as its device portfolio and sponsorship partnerships, which now include the biggest names in the region.
EE and Vodafone: Early Adopters of 5G in the UK
Several carriers followed the Helvetian example and in May, EE, the mobile arm of the incumbent BT Group, launched the first 5G service in the UK. Vodafone levelled up the game by introducing the first 5G roaming service in its markets.
The maintenance of 4G prices is linked more with the unavailability of service rather than just trying to bring clients to the network. Challenges around deployment costs and maintenance of legacy networks led some carriers to mark a date for 2G and/or 3G switch-off.
This again triggered the discussion around IoT and how things could also benefit from coming to newer generations. Adding governmental systems that use the wide coverage of 2G to reach more remote areas raised the issue of rollouts in less profitable areas and the supply of universal services, as connectivity is now seen as a commodity.
There are still differing voices on the issue, with some politicians promising to nationalise the network infrastructure and companies looking to share the investment burden with their own competitors.
Samsung Saw the Light Again
Samsung had a stellar year after several darker quarters. A more comprehensive and better structured portfolio helped bring the brand back to growth and market dominance. The only brand with more than three 5G-enabled devices in the market, Samsung is at the forefront of the European rankings.
Apple Didn’t Bring 5G — Just Great New Devices and Services
Apple saw Sir Jonathan Ive leave the company, leading to rumours about the future of the brand’s design. With the advent of 5G in the first half, there were many voices casting doubt on Apple’s September launch.
An early settlement with Qualcomm in April/May and the subsequent acquisition of Intel’s chipset division revived the expectations around a 5G phone in launch quarter. Although the device didn’t materialise, that did not prevent Apple from having a very good start, with the iPhone 11 and the iPhone 11 Pro Max being well received by consumers.
Older chassis devices, such as the iPhone 8 and the 6S, helped the brand to keep its market share and grow its installed base — its most valuable asset. Recognising the market potential of billions of users, Apple has turned to content distribution and added-value services.
For the first time, Apple services were made available in non-Apple devices, namely Samsung smart TVs. This move suggests that Apple’s investment in content creation and distribution is aimed at a larger market than initially estimated. Apple is clearly on a quest to untie its revenues from the cyclicality of iPhone launches and the wearables division, and investments in health-related products and services were well received by the investment markets, which again responded favourably to its strategy.
Huawei’s Ban Impacted its 5G Rollout
Huawei was easily the hottest topic of the year. It was not the first time the US had banned a Chinese brand (ZTE), but this time around the impact was bigger as the rollout of 5G networks in Europe was relying on the upgrade of Huawei’s 4G gear at less cost.
5G auctions proved to be very expensive and conflicting. Italy, for example, is still struggling to find a solution, a number of carriers are engaged in sharing agreements to cope with the rollout costs, and there are even regulators delaying the auctions to 2020 as the benefits are still being assessed against the required investment.
The initial impact of the US ban on Huawei was an immediate halt in sales, hitting the brand’s market share especially in 3Q19. Channels had to carefully navigate this situation as Huawei is a difficult company to replace due to the huge number of devices distributed and the marketing investments the brand makes in Europe.
Is a Third Operating System Needed?
Doubts around the capacity of Google to sell its Android software to Huawei reignited the discussion about the need for a third operating system. KaiOS’ efforts are focused on feature and hybrid phones (4G feature phones mainly), and while in some geographies such as Southeast Asia and Africa the new OS opportunity is clear, it is a harder sale in Europe.
Rumours of a Chinese OS from Huawei (Harmony OS) or even from Samsung fuelled speculation. In fact, Huawei does not use Google Android in China, the company’s main market, and is not allowed to distribute devices in the US, which means that the concerns were centred in regions where the brand grew rapidly, especially in Europe, where Huawei holds a solid place alongside Apple and Samsung in the triumvirate of leading providers.
Continuous rollovers of 90-day delays following each negotiation round did not improve the outlook and all eyes started to look for the next big player in the region. Xiaomi, Oneplus, Google, OPPO and Realme all understood it was time to ride the wave and restrategised to adapt to the new context.
Foldable and Flexible Displays Unveiled
Another big event was the launch of foldable and flexible displays. The market had already been dazzled by the super high speeds of 5G, and the huge improvements in camera performance from the latest flagship devices were now teased with devices that crossed a phone with a tablet.
Samsung’s release was pre-empted by the Huawei Mate X by a few days right before the biggest show of the year (MWC). Samsung’s release of the Galaxy Fold was followed by other negative events, including reviewers and influencers broadcasting videos showing the device being damaged after they mistakenly removed the plastic screen.
The shadow of the Note 7 recall looked like it was about to darken Samsung’s door again, but the brand shrugged it off by scheduling a second launch and continuing to invest in the volume driver’s quality and availability.
Later in the year, Motorola brought RAZR back to the market with less impressive specs, no eSIM or 5G connectivity, but a spotless vintage design.
On a negative note, Sony, LG, HTC and other well-known brands continued to lose further ground in Western Europe.
The European mobile market has declined for 15 quarters in a row, bringing quarterly volumes to the lowest levels since the 4G wave of adoption. Value followed a very different path, as brands bid for profitability in a volume-shrinking market.
Manufacturers continued to develop better devices, while increasing their prices, aiming to attract consumers to spend more on their upgrades. This drove the entire market value up. But high prices always drive consumers to look around or to delay the replacement of their current handsets.
New market opportunities emerged, such as refurbished devices — with their high margins this is becoming a gold mine for vendors and channels. Manufacturers competing in the lowest end of the market are struggling to compete against premium refurbished devices sold at attractive prices.
On a very positive note, the debate around fast portfolio updates (quarterly for some Chinese vendors) and business models also had an impact on the market with brands pushing for trade-in programmes and environmentally responsible ways of disposing of old devices.
IDC expects the market to continue to recover slowly until 2023. As for forecasts … stay tuned, follow IDC EMEA and keep an eye on the latest market developments.