Global LTE Phone Shipments Will Surge Tenfold to a Record 67 Million Units in 2012
SummaryGlobal LTE handset shipments will surge tenfold to 67 million units in 2012. It is a breakout year for 4G technology. Which countries and operators will drive the growth? Which handset vendors can gain the most share? What might Apple do with its iPhone? This report analyzes the benefits of, and barriers to, LTE handset adoption. It goes on to provide quarterly forecasts for global LTE handset shipments from 2010 to 2012. AnalysisThe world’s first LTE handset was launched commercially, by Samsung, at second-tier CDMA operator MetroPCS in the USA during Q4 2010. Global LTE handset shipments subsequently grew from 0.1 million units in 2010 to 7 million during 2011 as South Korea and Japan joined the fray. LTE accounted for less than 1% of total worldwide handset shipments in both 2010 and 2011. In 2011, a majority of the world’s LTE handset shipments was attributed to Verizon Wireless of the USA. North America’s largest CDMA carrier has been aggressively migrating to faster 4G networks and devices to outcompete rivals like Sprint and ATT. Key vendors supplying first-generation LTE handsets last year were headquartered mostly in Asia. Samsung (38% share), HTC (29%), LG (16%), Motorola (8%), Pantech (6%) and Fujitsu (3%) were the world’s top 6 LTE phone makers in 2011. Android was the best-selling LTE platform. Qualcomm was the number one LTE chipset supplier. FD-LTE was the leading sub-technology. The most common LTE phone band was 0.7GHz. Some of the most popular LTE handset models worldwide during 2011, from Samsung, HTC and LG, are displayed in Exhibit 1. Black slates and large touchscreens have been the main formfactors for early 4G models, with differentiation mostly achieved through hardware thinness or lightness. Exhibit 1: Popular LTE Handset Models Worldwide in 2011
We forecast global LTE handset shipments to surge tenfold from 7 million units in 2011 to a record 67 million during 2012. LTE penetration will quadruple from 1% of all worlvdwide handset volumes in 2011 to 4% in 2012. LTE will be found in 10% of all smartphones shipped globally during 2012. It is set to be a breakout year for 4G. In addition to LTE leader Verizon Wireless USA, our WOS (Operators) service expects multiple big carriers in several countries to expand their LTE networks this year. They will be evolving in major smartphone markets, such as AT&T USA, NTT Docomo Japan, SK Telecom South Korea, KT South Korea, LG Uplus South Korea, Telstra Australia, Rogers Canada, Three Italy, T Mobile Germany, Orange France, Telefonica Spain and Everything Everywhere UK. These and other carriers will be a major factor in propelling global LTE handset shipments to rise tenfold during 2012. At recent mobile industry events, such as CES and MWC, there were multiple LTE handsets announced or launched. Prominent handset vendors leading the push into LTE phones in 2012 will include Samsung, HTC, LG, Nokia, Motorola, Pantech, Fujitsu, Sharp, NEC Casio, Sony and Apple. We currently assume that Apple will launch an LTE-active / LTE-ready iPhone5, probably with a Qualcomm radio, in multiple regions worldwide during the fourth quarter of 2012. If Apple executes effectively, then it stands a reasonable chance of overtaking Samsung to become the world’s number one LTE phone vendor by the end of the year. For carriers, LTE network deployment not only benefits them in terms of switching to a more cost-efficient infrastructure, but it also means offering their customers higher throughput (Mbps), better quality of service (QoS), potentially generating millions of dollars of extra roaming revenues, and opportunities to cross-sell advanced cloud-based services across multiple screens. For handset vendors, integrating high-speed LTE capabilities into their new models will allow them to differentiate in important high-value 4G smartphone markets, enable popular cloud services like HD video, strengthen their hardware ASPs, and possibly boost profits. For component vendors, LTE phones can provide opportunities to sell premium parts, as well as generating fresh revenue streams through future IPR payments. Key component players to monitor over the coming years will include Qualcomm, Intel (Infineon), ST-Ericsson, MediaTek, Renesas Mobile, Samsung, NVidia, Huawei, InterDigital, LG Display and others. For software, services, apps, cloud and mobile advertising providers, LTE phones offer the chance to deliver premium content or campaigns at high speed to affluent consumers or businesses in major cities of North America, developed Asia and Western Europe. For example, the BBC may be able to expand its mobile iPlayer streaming video-TV service in the UK and elsewhere. The second half of this year will be a vital period for LTE. We expect global LTE handset shipments to rise sharply in the second half of 2012, as more LTE networks go live and more devices get launched in more countries. The fourth quarter will be the most critical one and the largest, accounting for 52% of the entire year’s worldwide volumes. This is illustrated graphically in Exhibit 2. While Japan and South Korea will represent significant volume opportunities, the United States will be easily the most important LTE handset market during the second half of 2012. Verizon Wireless and AT&T will be the most important carriers. We believe the period between September and December will quickly become crowded for handset vendors, and it will be marked by intense competition for marketshare between several big brands such as Apple, Samsung, LG, HTC, Motorola, RIM, Nokia, Sony and others. Even wildcards, like Amazon, Dell, HP or Nintendo, cannot be discounted from springing a competitive surprise in this year or next. Ultimately, those brands who most impress Verizon Wireless and AT&T with their differentiated offerings of new hardware, software, services, pricing and marketing will be the ones who attract the highest LTE subsidies and will thus stand the greatest chance of success. Exhibit 2: Global LTE Handset Shipments Forecast by Quarter in 2012
Of course, the LTE handset segment is expanding at a rapid rate this year, but there will undoubtedly be growing pains in this early phase. Many LTE phones and data plans will be relatively expensive, which means operators will need to invest generous subsidies to make 4G more affordable for subscribers. Some carriers, like T Mobile, desire to spend less on subsidies, but the arrival of pricey LTE phones will make that goal seem further away than ever in the near-term. The development of VOLTE technology for richer voice services has been relatively glacial so far, and VOLTE deployments at carriers worldwide will remain tiny this year. Meanwhile, consumers will be concerned about LTE usability issues, such as shortened battery life, excessive device weight, occasionally unreliable voice call quality, or sudden bill shock caused by high data consumption. Conclusions & ImplicationsWe forecast global LTE handset shipments to surge tenfold from 7 million units in 2011 to 67 million in 2012. The United States, Japan and South Korea are the three most important countries to prioritize in 2012. Western Europe will become more important in 2013. We expect global LTE handset shipments to rise sharply in the second half of 2012. More devices will get launched in more countries. The fourth quarter will be the most critical and largest, accounting for 52% of the entire year’s volumes. Stakeholders must maximize performance in this period. We currently assume Apple will execute effectively on an LTE iPhone5 in H2 2012. Apple stands a reasonable chance of overtaking Samsung to become the world’s number one LTE phone vendor by the end of the year. Despite niggling issues like expensive phones and sudden bill shocks, LTE is here to stay and ready for take-off. Consumers and operators want faster and more cost-effective mobile connectivity. LTE is a market that no device vendor, component maker, operator or service developer can afford to ignore. Contact Information: The author of this Insight, Neil Shah, can be reached at: NShah@strategyanalytics.com. Other Contacts: Matt McKee +1 617 614 0745 MMckee@strategyanalytics.com Linda Sui +1 617 614 0735 LSui@strategyanalytics.com Alex Spektor +1 617 614 0726 ASpektor@strategyanalytics.com Scott Bicheno +44 1908 423 600 SBicheno@strategyanalytics.com Thomas Kang: +82 10 2874 8133 TKang@strategyanalytics.com Neil Mawston: +44 1908 423 628 NMawston@strategyanalytics.com
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