Communications The Global Smartphone Industry: A New Era .

Industry Intelligence ProgramCommunicationsThe Global SmartphoneIndustry: A New Era ofCompetition and MajorPlayers' StrategiesAbstractAmid the global economic uncertainties, it is anticipatedthat global Smartphone shipment volume will still witness a27% year-on-year growth to around 868.0 million units in2013. However, the global Smartphone industry is highlyconcentrated such that the combined revenue share ofApple and Samsung is expected to have reached around60% and the combined profit share around 95% in 2012,thereby leaving only 5% of profits to be shared by otherSmartphone branded vendors. This report profiles thedevelopment of the global Smartphone industry in 2012,examines strategies of five major groups in the industryand provides an insight into the future outlook of theindustry while pointing out feasible product strategies tobe put in place by other Smartphone brands, aside fromApple and Samsung, in order to seize a larger piece of themarket-pie.by Edward LinDocument Code: MCRPT121111123822Publication Date: November 2012Check out MIC on the Internet!http://mic.iii.org.tw/english

The Global Smartphone Industry: A New Era of Competition and Major Players' StrategiesiTable of ContentsPage1.Development of the Global Smartphone Industry . 11.1 Mature Markets Remain Overshadowed; EmergingMarkets Grow at Slow Pace . 11.2 Telecom Operators Reducing Subsidy Amount and Period . 11.3 Telecom Operators Prioritize Apple and Samsung overOther Vendors . 22.New Competition in the Smartphone Industry . 42.1 Global Branded Vendors . 62.2 Regional Branded Vendors . 102.3 Mobile Operating System Suppliers . 142.4 Networking Service Suppliers . 152.5 PC Branded Vendors. 183.Outlook for the Smartphone Industry in 2013 . 203.1 Strategies of Other Smartphone Branded Vendors . 223.1.1 Marketing Innovation Key Success Factor . 223.1.2 Increased Specialization through Collaboration withEMS . 233.1.3. Low-price Market Competition to Intensify in 2013 . 243.1.4 Mergers and Acquisitions to Tap Fast-growingMobile Device Market . 253.1.5 Small Form Factor Consumer Devices to Expand intoMass Markets . 26Appendix . 27 2012 Market Intelligence & Consulting InstituteMCRPT121111123822November 2012

ii Industry Intelligence Program - CommunicationsList of FiguresPageFigure 1 Global Smartphone ARPU by Telecom Operator, 2011 2012. 1Figure 2 Global Smartphone Shipment Volume by Price Point,2012 - 2017 . 2Figure 3The Amount of Subsidies by Telecom Operator, 2012Figure 4 Apple's iPhone Sales Volume by Model Type, 1Q 2011 4Q 2012 . 3Figure 5 Major Smartphone Brands' Average Promotional Costs,2011 - 2012 .Figure 6 Global Smartphone Shipment Share, Revenue Share andProfit Share by Branded Vendor in 2012 – 2013 . 4Figure 7 Five Business Types and Five Strategic Fits ofSmartphone Branded Vendors . 5Figure 8 Key Technology Development Milestones of Apple andSamsung . 6Figure 9 Electro-Magnetic Resonance and Magnetic ResonanceTechnologies . 7Figure 10 Chinese Mobile Phone Market Share by Price Point,2012 - 2013 . 11Figure 11 Chinese Smartphone Sales Volume and 3G Subscribers,1Q 2011 – 4Q 2012 . 11Figure 12 The Business Model of the Chinese SmartphoneIndustry . 12Figure 13Chinese Smartphone Distribution Channels . 14Figure 14Chinese Smartphone Sales Channels . 15November 2012MCRPT121111123822 2010 Market Intelligence & Consulting Institute

The Global Smartphone Industry: A New Era of Competition and Major Players' StrategiesiiiFigure 15 Chinese Mobile Network Service Market Share byService Type, 2011 - 2012 . 16Figure 16 The Smartphone Business Model of NetworkingService Suppliers in China . 18Figure 17 Product Development of Global Three Leading SystemOperators in Notebook PCs, Tablets, and Smartphones. 19Figure 18 Worldwide Smartphone Market Share by OperatingSystem, 2011 - 2017 . 21Figure 19 Worldwide Smartphone Market Share by BrandedVendor, 2011 - 2014 . 21Figure 20 Future Development Roadmap of Key SmartphoneTechnologies, 2011 - 2014 . 23Figure 21 The Global Smartphone Market Share by Print Point,2012 - 2014 . 24Figure 22Future Development of Smart Handheld Devices . 26 2012 Market Intelligence & Consulting InstituteMCRPT121111123822November 2012

iv Industry Intelligence Program - CommunicationsList of TablesPageTable 1 Comparison of Electro Magnetic Resonance and MagneticResonance Technologies . 9November 2012MCRPT121111123822 2010 Market Intelligence & Consulting Institute

2 Industry Intelligence Program - Communicationsbipolarization. MIC predicts that the share ofSmartphones priced under US 300 will reach around32% of the total Smartphone shipment, furtherexpanding to xxx in 2015 and xxx in 2017. Meanwhile,the share of high-end Smartphones priced over US 600will maintain around xxx .Figure 2Global Smartphone Shipment Volume by Price Point, 2012 - 2017Source: Respective companies, compiled by MIC, October 2012In the case of bipolarization, the room for developmentof mid-range Smartphones has been eroded. As aresult, telecom operators have begun adjusting theirsubsidy strategies. AT&T, for instance, normally enjoysaverage revenue of US xxx for a person subscribing toa two-year plan. After deducting all costs, AT&T canearn US xxx per user. Therefore, . Telecom operatorswill then have difficulty in choosing subsidizedmodels as there are too many to choose from.1.3 Telecom Operators Prioritize Apple and Samsung overOther VendorsTo date, Apple already launched six generation ofiPhone series including the latest iPhone 5. Observingthe sales volume of Apple's iPhone series by quarter, itis found that around xxxNovember 2012MCRPT121111123822 2010 Market Intelligence & Consulting Institute

4 Industry Intelligence Program - CommunicationsFigure 6Global Smartphone Shipment Share, Revenue Share and ProfitShare by Branded Vendor in 2012 – 2013Source: Respective companies, compiled by MIC, October 2012In the future, it is anticipated that Smartphone willcontinue to enjoy a xxx year-on-year growth and themarket development is promising. However, with theindustry competition becoming fiercer, the industryhas become highly concentrated, with the combinedshare of Apple and Samsung taking up around xxx ofthe total Smartphone shipments, xxx of the totalrevenues and xxx of the total profits. Against suchbackdrop, other branded vendors will have to improvecompetitiveness in order to battle for the remainingmarket share in the already fierce competition.2. New Competition in the Smartphone IndustryMIC reckons there are five types of players in theSmartphone industry. The first type is brandedvendors such as HTC, Nokia, Sony and LG which aimat the global market. With the global deploymentsalready in place, those branded vendors hope to obtainhigher profits by increasing product prices. In order toexpand their market share, they require moretechnology innovations and applications to be appliedto their future products. The second type is regionalvendors that focus on a certain market such as China'sCoolpad and Lenovo. Due to high homogeneity inconsumer demand in a regional market, it will beNovember 2012MCRPT121111123822 2010 Market Intelligence & Consulting Institute

The Global Smartphone Industry: A New Era of Competition and Major Players' Strategies5difficult trying to have huge variants in prices. In orderto increase profitability, regional vendors have toreduce costs such as the costs related to managingchannel distributions. The third type is mobileoperating system suppliers that already have highprofits from Smartphones, with an aim to expand theirreach from Smartphones to other products. In order tomake forays into other products and markets, theymay need to integrate with other operating systemplatforms in the future. The fourth type is networkingservice suppliers which do not rely on revenue fromSmartphone hardware but from services andapplications provided via Smartphones. In China, abunch of networking service suppliers is rising.However, they are facing a problem as they are lack ofa profitable business model to run businesses so theyneed to develop new services to help them increaseprofits and revenues. The fifth type includes PCvendors such as Acer, Asus and HP which have theirproducts sold around the world but have yet to seesignificant growth in the Smartphone market.Leveraging their strengths and advantages in the PCand corresponding markets, it is expected that theystill stand a chance by diversifying their services andproducts in the future.Figure 7Five Business Types and Five Strategic Fits of Smartphone BrandedVendorsseriSource: Respective companies, compiled by MIC, October 2012 2012 Market Intelligence & Consulting InstituteMCRPT121111123822November 2012

The Global Smartphone Industry: A New Era of Competition and Major Players' Strategies27AppendixGlossary of TermsAMOLED Active Matrix Organic Light Emitting DiodeARPU Average Revenue Per UserCPU Central Processing UnitEDGE Enhanced Data rates for GSM EvolutionEMR Electro Magnetic ResonanceEMS Electronic Manufacturing ServiceFOB Freight On BoardHTML Hyper Text Markup LanguageSIM Subscriber Indentify ModuleSTB Set Top BoxUI User InterfaceWPC Wireless Power Consortium 2012 Market Intelligence & Consulting InstituteMCRPT121111123822November 2012

28 Industry Intelligence Program - CommunicationsList of CompaniesAcerAlcatelAlcatel One TouchAlibabAmerica MovilAppleAsusAT&TBaiduBharti AirtelChina MobileChina TelecomChina etalMediaTekMeizuMTI MicroFuel CellsMurata ManufacturingNokiaOPPOOrangeNovember 2012MCRPT121111123822 2010 Market Intelligence & Consulting Institute

The Global Smartphone Industry: A New Era of Competition and Major Players' eXiaomiZTE 2012 Market Intelligence & Consulting InstituteMCRPT121111123822November 2012

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backdrop, other branded vendors will have to improve competitiveness in order to battle for the remaining market share in the already fierce competition. 2. New Competition in the Smartphone Industry MIC reckons there are five types of players in the Smartphone industry. The first type is branded