While Android continued to gain market share in the global smartphone market, it saw a significant drop on another key metric: Profits.
Analyst Chetan Sharma estimates that global profits in the Android hardware market for 2014 were down by half from the prior year – the first year that there has been any significant drop.
Google doesn’t care, because this is exactly what Google wants. Google wants its services to be everywhere, and Android is the means. Smartphones need to be ubiquitous, and thanks to Android, they now pretty much are. Mission accomplished.
Android is a mess.
Why do you think that?
One thing that’s kept me on iPad is the abundance of MIDI control surface/music creation apps available for it. Some of these apps are starting to trickle over to Android, but are only supported on specific devices.
For example, a couple of IK apps have been released on Android, working only on a few Samsung tablets. Likewise, a port of Lemur for Android has been released, but is only supported on Nexus 7.
Meanwhile, Halflife 2 and Portal have been released on Android, but only work on Shield devices. (Well, maybe you can side load it, IDK.) And we can now finally get Amazon Instant Video on Android, but we have to install an entirely different app store to get it.
Basically, Android (ESP on tablets) is a fragmented clusterf–k. Can you imagine some high-profile PC app/game only working on Dell computers? This is essentially what’s going on with Android.
Edited 2014-12-31 19:10 UTC
I can imagine some high-profile games not working on machines with just an Intel GPU in it.
Yes, it’s commoditization and market segmentation. It was inevitable.
In which case you can just run out and buy another GPU. What are you gonna do on Android, replace the whole device? Esp frustrating when the device that something DOES run on is not as powerful as what you actually have.
Yes. That’s what commodity hardware entails. Sticking with the analogy, people will quite happily replace old video cards with new ones at a cost many times that of a new ‘phone already.
I would love to hear how I can get a GPU for my laptop.
Couldn’t agree more but they’re only trying to emulate the master of walls, Apple. I expect in time this to become less of an issue…least I hope so.
http://www.reddit.com/r/androiddev/comments/2hlw20/am_i_retarded_or… <—- My reasoning
How much Microsoft is worried by the razor thin profit of PC hardware makers? Not much.
Why? Because the alternative ecosystem is closed (Apple) and Linux distributors never really managed to close real deals with PC hardware markers.
The same is for Android. The alternative ecosystem is a monopoly of a single company (Apple), and changing to WP doesn’t mean much a change in profit margins.
This leaves Android as the only real choice for any new player on smartphone market. You know, any profit is better than nothing.
I don’t see your point. You make it sound like a closed ecosystem is bad for the market. there would have been nothing wrong with Macintosh dominance nor is it bad for iPhone dominance. I love competition and hope it continues but to suggest that openness is preferable for some reason is disingenuous.
Single manufacturer dominance is never a good thing. Regardless of whether the platform is actually open or closed.
Samsung, Sony, LG, HTC and Moto (I won’t even call them the “big 5” anymore), don’t know just how bad their situation is.
Once word gets out that Huawei and ZTE produce just as good, or dare I say better, phones, who’s going to pay for the premiums they charge.
2015 may see even less “profits”, aka margins.
And as a consumer, who would have to pay these premiums, I am all for it.
I wonder how much the ‘premium’ products are financing the whole industry.
Evaluating the real price of a phone is not just pricing the BOM. The billions spent on R&D and on building factories (screens, semi. fabs, …) is amortized first selling high margin products then “previous generation” devices.
(Apple devices are part of it, they finance Samsung, LG, Sharp…)
If high margin products disappear, the evolution of android phones and tablets will dramatically slow down.
Huawei and ZTE do not make screens, SOC chips, hardened glass, batteries, accelerometers, radio modules… They can only expect to be in the terrible role of a PC OEM.
Maybe phones and tablets are becoming, like PCs, a mature industry, and progress will slow down anyway.
Yet I’m not sure the suppliers profit from the higher margins (pun intented)
From what I understood, they are the one put under pressure to ensure Apple a greater profit. Otherwise Apple, or anyone else, wouldn’t produce its expensive devices at Foxxcon, China. But in mainland USA.
Do + The = Math!
Edited 2014-12-31 21:36 UTC
Different types of suppliers.
Doing assembly work gives little margins.
Advanced technology, billion dollars of R&D and CAPEX is in semiconductors, screens…
And these higher margins are in Taiwan, Korea, USA. Not P.R.China (yet)
Most component/equipment suppliers operate on razor thin margins, regardless of location. The Japanese have been particularly devastated during the past couple of decades.
The assumption that consumer products with high margins lead to better/more R&D subsidization for the supply chain is unfounded, since those margins are retained by the OEM not the suppliers. I.e. if you’re a phone manufacturer and I sell you screens for $1, that you get to keep $50 for every phone you sell, using those screens, is of little consequence to my bottom line since I’m not seeing any of those $50.
I don’t think you understand how high profit margins work.
You are right. Lots of money from the premium products goes back to or finances previous R&D. Making new phone based on existing technologies is not that hard. To create cheap phones you can basically buy the building blocks from various manufacturers. However when you have to design for few years in advance then you have to throw tons of money for experts from various fields. I happen to work for one of the Big 5 companies and I know first hand how hard is that.
Microsoft doesn’t care about PC hardware profits because they have nothing else really to turn to.
Google on the other hand have an issue because if the profits get too low they will lose out!
How you ask? Because unlike Windows, Android is more open which means I can use it without paying Google or installing Google services (IE Amazon) no Google services no money to Google, where as Microsoft isn’t open and you have to pay to OEM windows.
As vendors lose hardware profits they will look where to cut. First cut will be to Google services for instance like Firefox they can make deals with companies like Yahoo for search etc.
So for those who think Google is not sweating it, I would think different.
Edited 2014-12-31 21:07 UTC
Nope. Not outside China.
Without Google, there is no Play Store and GMS. And without Play Store and GMS, there are no customers. Oh, and any apps relying on GMS APIs such as GMaps or Play Games or whatever will have to be rewritten by their devs. Only Chinese app devs bother to do that.
I like how everybody points to Amazon as an example, considering they have put themselves in a pit that gets deeper every year, and their devices are essentially ereaders with some internet functionality, as they don’t have the PlayStore.
And most major OEMs are OHA members anyway, they aren’t legally allowed to ship “incompatible” devices.
Not to mention, Amazon is stuck on an older Android version of Android, because Google changed their own license on key Android components to make it so companies can’t fork any more (similar to the change that Wine made years back that left Cedega with an old fork, or that Xamarin did with Mono that left Unity3D stuck with an old fork, etc.).
Amazon now has to manage and maintain their own entire branch of Android (which they’ve even renamed FireOS), and while they are doing that, this isn’t a realistic option for startups and other smaller companies with less cash to burn.
Below certain screen size (7 inches IIRC), windows is now fre to OEMs.
Google should be very concerned. The Chinese already sell hundreds of millions of “Google-free” Android phones every year.
Thee is nothing to stop any major OEM using AOSP and replacing all the Google apps with alternatives. This is the nuclear option if profit margins fall too far.
Thee is nothing to stop any major OEM using AOSP and replacing all the Google apps with alternatives. This is the nuclear option if profit margins fall too far.
True Google actions suggest they predict this.
Next Google vs AOSP or Ubuntu or Sailfish will still leave Google in the search and advertising business.
Please remember Android existence is a direct response to Microsoft CEO Steve Ballmer threat to kill Google.
Big problem here is the idea that profits come into it. We are seeing the same Arm CPU and GPU’s used in everything from phones to thin-clients to server farms all using the same Linux kernel base.
The question is how much money really is required to develop a OS and hardware.
Any extra profit goes to share holders. Remember arm soc chip development comes to a wacky 10 cents per unit. 50 dollar phone is profitable just.
Also remember the newer Arm64 chips allow reduced costs because they allow multi phones using different Arm64 socs to share the same install image. Yes over the next 12 months the maintenance cost on phone makers is going to reduce.
There is also the possibility that Microsoft will support an Android hybrid using AOSP and MS services (Here maps, Hotmail. Bing etc) and pay OEMs to install it.
That would be interesting…but the bulk of the Android experience comes from having the Google Play Services installed. Forking Android does not solve the Google Play problem. So Microsoft would essentially be trying the same route that Nokia, Amazon, Jolla, and BlackBerry have already tried with no success.
It would also pose an interesting dilemma for developers; do you write a separate Metro app, or do you just write an Android app and hope it works everywhere? Then Windows Phone becomes the next OS/2. From what I’ve seen, developers are interested in Google Play…its like pulling teeth to get them to push the same app to the Amazon Play store or even F-Droid if it’s an open-source app.
Edited 2015-01-01 16:24 UTC
there is something: customers *want* the Google apps, a phone without them will flop
People don’t “want” the Google Apps. They use them because they are pre-installed. They would be just as happy using Bing, Here and Hotmail if they were installed instead. [Hundreds of millions of Chinese users have Android tablets and phones with no Google Apps or Playstore.]
The argument with Chinese users is wrong: 1. they obviously prefer the cheaper phone (or couldn’t afford the expensive one) and 2. they obviously prefer apps created in their native language (and they may prefer apps not blocked in their country). For the English speaking words, people *do* prefer Google services over Microsoft services, just look at the market share.
news at eleven: after a race to the bottom, profits drop. who would have thought of that?
Edited 2015-01-01 13:11 UTC
The profit drop could be said for any smartphone makers that isn’t Apple (luxury, zombie fans, glamour make it still on high profiles).
The thing is that smartphones started to replace the dumbphone market, and that market is much cheaper and operates with very narrow profit margins.
Want an example?
I live in Brazil and could have bought a Moto X, but got a Moto G instead. Android runs so well on it that, less than a year later I bought a Moto G second generation and passed my old Moto G to my wife. Again I could had bought the more expensive Moto X, but why should I?
Microsoft is selling better than Apple in Brazil, but mostly cheap smartphones, so they are on the same price and margins levels.
Edited 2015-01-03 14:13 UTC