Low-down on the smartphone industry in 2019

smartphone industry in 2019

Danny Adamopoulos, Motorola GM sales APAC Mature Markets, dropped into GadgetGuy for a chat about the smartphone industry in 2019 – warts and all!

Its one of those traditions where he can call a spade a bloody shovel and educate us on the issues behind the issues – the smartphone industry in 2019. It is also Motorola’s 90th birthday.

I like Danny. He is not afraid to discuss anything, and if we need to, we can ‘put the pen down’ (go off the record) to give me a better understanding. Our last chat was more about the rebirth of Motorola under Lenovo. This chat is about the smartphone industry in 2019. And he should know – 25 years in the game and 20 at Motorola.

It was a great Q&A, and we covered so much ground that the best I can do is attribute this to him and paraphrase.

smartphone industry in 2019

The smartphone industry in 2019 heralds the era of the affordable mid-range

While all the focus is on the glamorous and expensive flagship devices – Apple XS Max, Samsung Galaxy S10, Huawei Mate 20 Pro and phones costing well over $1,000 (and over $2,000) the real action is in two areas.

First, the sub $200 pre-paid market is experiencing massive growth.

We need product in all segments to succeed. Our 4G Moto C-series is a low cost ($129) outright not even prepaid. Value buyers see our brand as a strength, and you see it at Amazon, supermarkets and service stations. It is nothing fancy, but it delivers all essential Android features with our backing.

The Moto e5 is $199 with a 4,000mAh fast-charge battery, Qualcomm Snapdragon 425 processor, 2/16GB, 5.7”/18:9 screen, fingerprint reader, dual sim and separate microSD, Android One 8.0 and a decent front/rear ‘social media” 13/5MP camera. It is walking out the door faster than we can get them.

Motorola push features down. The moto e5 is as good as last years Moto G series at half the price. And good old Motorola quality means good reliability too.

I think it would be hard for any other company to offer such a comprehensive package without the strength of Lenovo’s supply chain and buying power. At this price, you should expect a no-name processor and nowhere near the LTE band coverage or camera quality!

Smartphone industry in 2019

Second, is the sub $500 segment.

Motorola has the moto g6 play, moto g6 and moto g6 plus for $299, 399 and $499 respectively.

We make this range in our factory – not at an ODM’d and slapped together as quickly and as cheaply as possible. We put a lot of value into it. The moto g6 plus has a dual, big pixel camera, Qualcomm Snapdragon 630 and 15W fast charging.

Smartphone industry in 2019

These are going to consumers who want most of the flagship features but realise that top tier smartphone prices are now way over the top. We are also getting ‘fleet sales’ where companies want a reasonable price device backed by Motorola. I dare say the moto g6 plus offers nearly double the features for well under half the price.

Note that Motorola launched its G7 series at MWC 2019 – we should see them here in a few months.

Finally, our Moto Z series and Moto Mods.

The Moto Z series and Moto Mods offer some, if not the most innovative thinking in a smartphone and protects your investment. For example one of the first 5G smartphones in the US will be a 5G Mod for our Moto Z3 play. Everyone else is building an expensive all in one handset, and here we can do it with a Mod.

We didn’t bring the Moto Z3 here, just the lower-cost Moto Z3 Play, but we may grow this family in Australia in the future.

Smartphone industry in 2019

Most want a phone that works – price is going overboard.

Joe and Jane Average want a phone that works and won’t cost them the earth. We call them the savvy consumer and their understanding of what they need and what is under the bonnet is increasing.

More and more find they can get similar features [to a flagship] for half or less of the price.

Have you noticed that the average flagship plan is typically $80 to $100+ per month or more plus the handset repayment? More buyers are going to monthly pre-paid to save lots of money.

Where once it was hard to leave the iOS ecosystem – it is now becoming much easier with Android and certain apps.

Blind brand devotion is falling

People now understand that you don’t need to spend 1,000 dollars or more to get a well-featured phone.

Smartphone industry in 2019

We’re starting to see the rise of a new consumer group. This group is disillusioned by advertising and overly marketed products. They are not looking for the bells and whistles and just want a good quality phone, with long-lasting battery and great specs at a reasonable price. This group is really what has given birth to the mid-range smartphone market and what is challenging the larger handset players.

Motorola has a 64% upgrade retention rate (from one Motorola model to the next) and many return buyers. About 20% of our buyers skipped a generation and came back to Motorola after they have tried another brand. Motorola is a powerful and respected brand and with Lenovo’s backing elicits more brand loyalty than smartphone only companies.

What is a typical buyer?

In the end, it comes down to price, design, features and brand. If two brands have similar featured phones at the same price brand ‘cred’ wins. If money is a key motivator ‘specs’ win. And if you don’t care, then ‘Shallow Hal’ looks win.

Motorola has a lot of different consumers, and we can see that when we look at our retailers. Officeworks buyers are technical – bang-for-buck. If you go to JB Hi-Fi, you are a typical consumer and want recommendations that may end up costing a little more. If you like Good Guys, you are after a bargain.

You cannot compare Apples with oranges.

Apple has done a magnificent job in establishing an aspirational brand and makes the highest average revenue per user of any company.  Although innate trust in Apple is not as strong as it was with Android globally now taking up 87% of the smartphone market.

Joe and Jane Average fall into two categories, and we can only speak for Motorola here.

About 50% of our website traffic is to the product cover page where they see lifestyle images and unique selling propositions. Interestingly about half then click over to a detailed specification page and spend a lot of time looking at the specs and value – bang-for-buck.

Of the other 50% most land on the specification page ignoring the marketing pages. They are driven by a mix of the brand (if it is Motorola then it is good) and specifications (they want pure Android One and a Qualcomm based device).

Lifespan is now measured in months, not years

Whereas once a handset was good for three to four years – yes, it lasts that long – the flood of new features overhyped by advertisers and ‘fear of missing out’ is seeing that turnover reduced to about 12 to 18 months. We still build to last!

Most telco’s now encourage you to upgrade after 12 months if you are on a lease locking you into the Telco ecosystem as well. Buy a phone outright and shop around for telco deals.

Two things drive more frequent phone changes.

The first is cosmetic. A phone can get a beating, screens break, or scratch, and we all want to have nice shiny things.

Next, is the fact that batteries lose resilience and we all want a full day’s use also drives frequent change.

Motorola was one of the Founding members of Mobile Muster, and we still place a free-post return bag in every box. We are seeing about 20% of smartphones sold coming back for recycling. Australia, we need to do better.

And its easier to change a phone if you have paid less than $400 for it!

Growth of Android

Android globally is already at 87% of the market. But the real growth is in ‘pure’ Android One – that is where Google can roll out over-the-air updates to improve already great security and features.

Google has answered the call for improved security by releasing Android updates every 30 days and ensuring handset vendors pass these on at least every 90 days. It’s making sure you’re getting the latest software versions and security onto your device. And it is offering at least two updates – Android 8 to 9 and 10.

Android is by far the most flexible operating system and allows handset vendors to showcase their technology but also allows consumers to optimise the phone the way they want to, like with widgets or folders. App developers also have a lot more flexibility.

Smartphone industry in 2019

Conversely, you have the walled garden iOS – ‘You can do anything you want, as long as it fits into this square’. It is like the old saying when you went to buy a Model T Ford, “You can have any colour you want, as long as it’s black!”

By the way, Australia is one of the few remaining countries that are strong Apple lovers. Statcounter shows by a relatively stable 56% of the market, but towards the end of last year after the initial uptick of the new XS and Max, it is again dropping. If Apple does not change course you can expect Android to overtake it in Australia in the next couple of years.

Smartphone industry in 2019

This further reinforces the value issue. Device Atlas shows the iPhone 6/Plus, 7/Plus and 8/Plus are more popular than the iPhone X, XR XS and XS Max buy a huge margin. Price is a real issue.

Smartphone industry in 2019

5G adds more opportunities, but these won’t be realised for everyone or for some time

Sure, we will see 5G handsets in 2019 – we have a Moto Mod 5G – but the benefits are a lot further down the track. Early adopters will pay through the nose for handsets and 5G Telco data plans. And frankly, 4G does a pretty good job for 99.99% of us.

Thinking back to 4G and 3G handsets, every time a new device came out, the phones were bigger and bulkier because they needed bigger batteries or antennas, and then the technology matured, and the devices got smaller and smaller.

5G will allow for zero latency; the ultimate data experience for devices. Now, we have high-speed data at home, but when you’re travelling, you can’t always take that same experience with you. With 5G, you’re bringing your broadband internet with you, anywhere you go and can do the same thing whether you’re at home, in a car, on the train, or in a park. If you can afford it!

Foldables and AI – a fad?

Foldables are not a fad insofar as they meet a need for more screen space in a similar size footprint – they are just a smartphone with a larger screen. Early adopters will pay a lot more, the folding screen technology is still rudimentary, and it may soon give way to other formats like pull-out, rollable screens. For that matter, wearables like smart glasses or even neural interfaces may win in the longer term.

Smartphone industry in 2019

More interesting is the development of AI and there is so much scope to improve the smartphone experience. Contextual awareness of your surroundings and actions like reminding you to get petrol when driving via an auto-interface. Or extending the battery life by precisely managing the CPU power and screen brightness needed for a task.

Most of the AI advancement has been in camera technology allowing the user to take an average shot and the phone to post-process it into a great one. That is not amazing – its just a good use of extra CPU power and a few presets to make photos look better.

The real trick is to make AI non-intrusive, invisible but powerful so that it becomes an extension of the user.

AI is where most advancements over the next few years will happen as smartphone chips get the extra power and neural processors needed to start to think for us in a meaningful way.

There is a mad scramble for brand supremacy.

Huawei recently knocked Apple off as the world’s second largest smartphone maker. Danny says it is no secret that companies in the top five are eyeing the top spots and may do anything to improve positions.

Without mentioning brands, he says it is all about strategy.

For example

  • Flooding an emerging market like India with low-cost smartphones – even if it is subsidising the price (dumping).
  • Setting up a factory in an emerging country (patriotism)
  • Focusing on markets where it can get growth and ignoring those where it cannot (easy way out).
  • Dumping tons of money at retailers to buy shelf space, advertising catalogue space and kickbacks for sales-people too recommend brand X over brand Y (coercion).

Motorola and its parent Lenovo are global companies with too much at stake to play games. They need to cover more than 85+ countries with a good quality product, a high level of support and service.

We are in the top four in the U.S, top two in Latin America, experiencing strong growth in Europe and on the rapid ascent in Australia.

Time in the sun

Over the past 25 years, he has seen Motorola rise to the top only to be knocked off by Ericsson. Then to be knocked off by Nokia with Symbian and Windows Mobile. Apple came in 2007 and took the world by storm – really driving the smartphone and stylus-free touch screen experience.

In his opinion time is the sun is a precursor for a time in the shade. Apple and Samsung are targets, and relative newcomers like Huawei, OPPO/Vivo/One Plus (all part of BBK) and Xiaomi are determined to get to the top.

Motorola is pursuing a ‘slow and steady’ global strategy to get back into the top five, and with its, Lenovo backed manufacturing, supply chain control and distribution.

So, we see Motorola as innovation and value/feature led with the backing of a well-respected global brand. That approach is seeing us adopted by business as a fleet phone, often in tandem with Lenovo as a fleet computing device.

Last year we celebrated 90 years. There is a great read about the company here.

Motorola and especially its famous Bat Wing Logo still enjoys huge brand recognition.

GadgetGuy’s take: Smartphone industry in 2019 – tell it as it is Danny

I like talking to Danny – no marketing hype or BS. His take on 5G and foldables is just so true – early adopters will pay through the nose and should wait for version 2.0.

Similarly GadgetGuy readers all love to hear about the flagship phones, but in the end, most are spending under $400 and buying Mototorla, OPPO, Nokia or Alcatel or the mass-market models from Samsung or Huawei.

Happy 90th birthday Motorola- you old bat.

Smartphone industry in 2019