Happy New Year to all my readers. 2014 was an eventful year from a technology standpoint in that a lot of pieces of the puzzle started coming together. Technology innovation continued its blistering pace and companies big and small have thrived in this growth era. 2015 will hopefully continue that streak and here is the first part of my take on what and who will matter in 2015.
Before I get started, here are some caveats. This post is less of prognostication and more of extrapolation of real data from sales, trends and analytics reports from 2014. There is not really a grand revelation here as much as stating what is slowly starting to be obvious. Some other observations are taking the best and worst case scenarios within boundaries of reason. This is a broad outline for the industry for the year. I am hoping to expand on a few of them as the year progresses with much more context and detail. Finally, given the pace of innovations these days, outliers are a norm every year. With all that out of the way, let us get started.
Since Steve Jobs announced the very first iPhone in 2007, the world of smartphones has changed dramatically. Apple has continued to gather marketshare in the smartphone business since. During the same period, Google introduced Android to the world and has continued to increase its worldwide marketshare in smartphones. Other smartphone pioneers have faded into the background- Nokia’s Symbian was put to bed and a large portion of the company sold to Microsoft, Blackberry has drifted into insignificance, Motorola has changed hands twice and HTC is trending down. In the meantime, Chinese manufacturers like Huawei, Xiaomi and Lenovo are growing rapidly in China and other emerging markets across the world. Samsung and LG have done well but are facing strong headwinds. So what does 2015 hold for the smartphone business as a whole?
The iPhone 6 and to a lesser extent the iPhone 6 Plus have completely upended the high-end Android smartphone segment. For a long time, Apple’s biggest problem was a large screen smartphone. Android devices from Samsung and HTC thrived on that by shipping 4.5 to 5.5 inch display devices. But with the 6 and 6 Plus, Apple has filled the gap. All early indications point to a dramatic first quarter of sales for the new iPhones. Samsung’s numbers are reflecting the opposite side of the story. This story will continue into next year in the US, Japan and China.
In China, Samsung’s problems are complicated by the dramatic rise of Xiaomi and growth for Lenovo and Huawei. Until Samsung completely rediscovers its lost mojo, the numbers will not be pretty for the Korean company. Apple on the other hand will see a significant bump up in sales for the iPhone 6 well into Q2 of 2015 when things have shown to slow down. Interestingly, for the industry as a whole, the iPhone 6 is an important milestone. At this stage, all major smartphone makers have similar devices and much of the dramatic innovation in display, camera quality and processing capability is accounted for. From this point onwards, innovation will be strictly incremental. This will be reflected in the smartphone launches all through 2015 which focus on additive improvements in camera sensors, display resolution, marginal battery life improvements and so on.
The first golden age of smartphones is coming to a close. This does not mean that smartphones are going to be replaced. It just means that products year over year will not change dramatically. People will continue to upgrade and change OS preferences and the emerging markets will continue to be where growth is. Android and iOS will largely dominate and proliferate but the rate of innovation will slow down. Software is where the next golden era will be.
Tablets, Chromebooks and PCs
The tablet market went through an interesting 2014. The leader of the pack, the iPad showed signs of weakness. The rest of the business was also weak on the tablet side. Lower end tablet sales seemed to do fine indicating second and third units being purchased for family members but at a lower point of entry. One other interesting thing about tablets is that they last longer in terms of utility. When much of the use from the tablet is viewing videos, browsing, listening to music and the occasional bite sized video game, tablets age much more gracefully and over a much longer period of time than phones which tend to get beaten up and thrown around much more. And this is reflecting in the overall tablet business slowdown. But not everything is bad.
Tablets are now starting to make significant headway into the enterprise segment, Point of Sale systems, use among clipboard workforce and more. Apple’s recent partnership with IBM will be a big step in this segment and we will know more about how this relationship plays out over the next few years. 2015 will see this segment growing rapidly. While this will not replace the volume lost in consumer sales numbers, it will start making the tablets even more ubiquitous.
Chromebooks on the other hand are starting to chip away at both the iPad education segment and Microsoft dominance in laptops. With a fully cloud based OS, Chromebooks are starting to be a real threat. Chromebooks started outselling Apple in the education segment for the first time ever. Microsoft is also starting to face a serious threat from Google on the lower end laptop segment and is finally responding with lower priced Windows laptops. Chromebooks will continue to make headway in 2015 and become a really strong player in the segment.
The Chipset Companies
The fortunes of the major chipset companies are tied closely to the PC, tablet and smartphone business. This means that any significant change one way or the other would affect the fortunes of Intel, Qualcomm, Nvidia and AMD. Of this group, AMD is not much of a player in any of the major devices unless there is a pickup anytime soon. Nvidia has the promising just-announced Tegra X1 but it needs a big win soon to truly demonstrate its potential. 2015 might be that year. And that leaves us with Intel and Qualcomm.
Qualcomm is the de facto king of mobile computing. It powers all the major platforms and the most popular phones. It utterly dominates the LTE landscape and has no competition whatsoever. That is until you start talking about MediaTek. MediaTek started small in China building low cost modem offerings for cheap Android phones. With the Chinese market taking off and low cost phones and tablets across the world demanding a cheaper solution than the ones from Qualcomm, MediaTek has started challenging Qualcomm. When MediaTek starts shipping its LTE modem in volume this year, it will truly be a big challenge to Qualcomm and 2015 will be a fascinating battle between the two.
Intel has been a real surprise story in many ways. For a long time, the Wintel alliance dominated the personal computing space. But with the emergence of the post-PC era, the Wintel alliance has struggled to be a potent threat. Microsoft is working with ARM as much as Intel and Intel is working with Google as much as Microsoft.
Apple’s partnership with Qualcomm and Qualcomm’s dominance of the mobile computing space has caused a big problem for Intel. The soft launch of Windows 8 has been another thorn in Intel’s growth path. Given these challenges, one would think Intel would be in trouble. But given its quarter over quarter growth, reality seems to be different. Thanks to an exploding data center market and growth in enterprise computing needs, Intel has continued to be a strong player. And more is yet to come.
Intel started betting big on wearables in 2014 and this will continue into 2015. I also see an Apple-Intel mobile computing partnership in the horizon. This makes sense in many ways. Apple is completely reliant on Qualcomm and this does not give comfort to Apple. An alternative partner in some areas- either in tablets or phones (unlikely) or possibly on the Apple Watch would allow Apple to get better pricing power. Intel’s recently unveiled ultra small 3G modem could be put in Apple Watch for starters. Or Apple could go big and replace Qualcomm with Intel on its tablets and/or smartphones. Either way, this would be the big break Intel was looking for in the mobile space. 2015 could be that year.
Coming soon in Part 2
In the next post, we will look at some other major technology areas of interest and the companies uniquely positioned to leap ahead. Specifically we will look at wearables, Internet of Things, home automation, social, cloud and big data.