In 2015, your smartphone is still going to be the center of your electronic universe—and, it’s going to know more about you than it ever did before. Smartphones are THE central data gathering point for your connected life and average users check them about 150 times each day. Of course, we will see new mobile devices this year: wearables, smart cars, smart homes, and more—but, they will all connect to and through your smartphone. So for 2015, yep, there’s still an app for that.
We expect 2015 to be a massive year for Android. Fragmentation is improving, with Android version 4.0+ now accounting for 90% of the market. Thanks to Google Play Services, the platform is more backwards compatible than ever before. And last but not least, we'll see version 5.0 Lollipop and Material Design give the platform a long overdue facelift.
Global Smartphone OS Market Share, Q3 2014
Chinese smartphone maker Xiaomi overtook Samsung as China's leading smartphone vendor in the second quarter according to Canalys and is now the third largest in the world. The company has been harshly criticized for copying Apple, so much so, Johnny Ive stated, "I think it’s theft, and it’s lazy" in regard to the Mi phone (their flagship device). While Xiaomi devices technically do run Android, it's a completely customized version (similar to how Amazon customizes Android for its Kindle Tablets). In 2015 we expect Xiaomi will spend some of the $1.1bn it just raised to bring its software and thus a third OS to the western world.
Global Smartphone Vendor Market Share, Q3 2014
Apple has always trumped Google Play in terms of app store revenue. However, that will change soon. According to Radio Free Mobile analyst Richard Windsor, Google Play Store revenue is expected to surpass Apple App Store revenue by 2018. The math is not terribly difficult, Android has almost 85% market share and it's increasing. But it isn't just cheaper hardware prices that are contributing to Android's success, the ecosystem for developers has matured--leveling the playing field with once dominant iOS.
With Android Lollipop (v5.0), Wear, TV, and Auto about to hit the market, Google used the opportunity to give itself a long overdue facelift. At the June I/O conference they introduced Material Design, a unified design language and system for all screen sizes. Unlike Apple's flat interfaces in iOS 7 and iOS 8, Material Design incorporates paper-like surfaces with slight gradients, shadows, and textures, as well as real-world physics that are supposed to make interfaces easier for users to navigate. Hate or love it, the Material design spec is an example of how brands need to approach a multi-screen world.
As unique hardware improvements are harder to come by, Apple is expanding and fortifying the walled-garden around the iPhone. At WWDC, Apple announced the Apple Watch and iOS 8. Although iOS 8 lacked major design changes, the addition of HomeKit, the Swift programming language, CloudKit, Handoff, and WatchKit, has made the ecosystem around iOS better than ever, especially for developers.
Sadly for Apple, an unusually high number of iPhone users aren't upgrading their devices. iOS 8 adoption has been considerably slower than previous updates, creating unprecedented fragmentation in iOS for the first time. That being said, the iPhone 6 has been a hit, while the 6 Plus is selling about as well as the 5c since launch. In fact, iPhone 6’s are outselling iPhone 6 Plus’s 3 to 1 (Fiksu). Based on the changes this year, what will the iPhone 7 look like? Maybe it will bend...on purpose.
80.4M tablets were shipped this year, but growth has cratered and revenues are down 4% in 2014 according to the CEA By 2017,annual growth will slow to single-digits (NPD). Why? The market is getting hammered on two fronts: phones are getting bigger and lightweight laptops are looking more like larger tablets. Without massive hardware improvements and an average lifespan of 3 years, the market appears to be cooling down.
Global PC and Tablet Shipments (in 000s) 2013-2015E
With the bulk of the market still driven by businesses, and the consumer market struggling to decide whether the future is in tablets with keyboards or laptops with touch screens, the market has reached an inflection point.
Windows 8.1 fixed some of the big problems with Windows 8. Based on the previews of Windows 10, it looks like Windows is going back to basics with its UI and scaling back the controversial mosaic tiles. We expect businesses to skip Windows 8 and 8.1 all together.
Google’s Chromebooks are one of the few bright spots in the PC market. These laptops run Chrome OS, a modified version of Google’e Chrome Browser but with added offline support. With an entry-level price of $199, they are schooling competitors (especially iPads) in the education market. While the idea of inexpensive, mostly cloud-based laptops is awesome, greater adoption hinges on the robustness of the Chrome Web Store and web apps.
Massive price deflation continues to plague TV manufacturers. On Black Friday, Best Buy was selling 55” 4K sets, which would have cost around $3000 to $3500 last year, for just $900. With fierce competition, commoditized features, and razor-thin margins, sales are down 5% in 2014 to just $18.4B according to the CEA.
Thanks to dramatic price reductions, prices for 4K sets are now in the same range as last year’s high-end HD sets. Sales are up 400% YoY due to consumer-friendly pricing. 8 million sets are expected to ship globally FY2014. Despite the hype, 4K sets will only be in about 10% of US households in 2018.
Why? Screen size and lack of content. First, it is extraordinarily difficult to tell the difference between HD and 4K resolution on screens smaller 60” (unless you like to sit uncomfortably close to your TV). Second, getting 4K content is a whole other issue. Right now, only over-the-top (OTT) services can stream it. Unfortunately, 4K cable distribution is likely years away. But then again, who watches cable anyways?
Smart TV sales increased 29% YoY and continue to grow in market share (54% of all shipments in 2014, 73% by 2016). However, this is an example of correlation and not causation, since people are not seeking out the “smart” functionality per se. Regardless of the reasoning, enhanced distribution will increase connection rates and bring streaming services like Netflix, Amazon, and the other major providers into more homes. Samsung is the leader at 29% market share (because they are the leader in TV sales), followed by Vizio (24%), Sony (17%), and LG (13%).