Microsoft and Sony join up on AI and cloud gaming

Microsoft and Sony have signed a memorandum of understanding to jointly develop cloud systems for game and content streaming, and to integrate Microsoft’s AI with Sony’s image sensors.

This is another step on Sony’s journey to transform from a console and title seller to a game streaming service platform. Microsoft’s leadership in both cloud computing, its Azure cloud platform, and the global footsteps of its datacentres makes it an ideal partner to Sony.

The collaboration will also cover semiconductors and AI. Sony has been a leader in image sensors (among its clients is the iPhone including the latest XS Max model), and the integration of Microsoft Azure AI will help improve both the imaging processing in the cloud and on device, what the companies called “a hybrid manner”. Microsoft’s AI will also be incorporated in Sony’s other consumer products to “provide highly intuitive and user-friendly AI experiences”, the companies said.

“Sony has always been a leader in both entertainment and technology, and the collaboration we announced today builds on this history of innovation,” said Satya Nadella, CEO of Microsoft, in a statement. “Our partnership brings the power of Azure and Azure AI to Sony to deliver new gaming and entertainment experiences for customers.”

Kenichiro Yoshida, president and CEO of Sony agreed. “I hope that in the areas of semiconductors and AI, leveraging each company’s cutting-edge technology in a mutually complementary way will lead to the creation of new value for society,” he said.

Looking to the future of the PlayStation platform, Yoshida said, “Our mission is to seamlessly evolve this platform as one that continues to deliver the best and most immersive entertainment experiences, together with a cloud environment that ensures the best possible experience, anytime, anywhere.”

Gaming is following the trend of video and music from one-off ownership selling to access streaming. But gamers are more sensitive to the visual quality and, above everything else, lagging. So to provide good experience to convert gamers to long-term streaming subscribers, the platform needs to guarantee superb connection. This is where Microsoft’s datacentre footsteps and the upcoming 5G networks will fit well with the “game” plan.

Another key success factor, similar to video streaming market, is the content. Gamers’ taste can be fast changing and frivolous. That is why the companies also stressed the importance to “collaborate closely with a multitude of content creators that capture the imagination of people around the world, and through our cutting-edge technology, we provide the tools to bring their dreams and vision to reality.”

No information on the size of investment or the number of staff involved in the collaboration is disclosed, but the companies promised to “share additional information when available”.

Apple is facing complaints from developers for removing competing apps

Apps that help users control screen time have been removed or been demanded to curtail their features after Apple rolled out similar features.

Many app makers have claimed that their parental control and screen time alert apps have either been removed by Apple or have been asked to change the features, shortly after Apple rolled out similar features on iOS, reported The New York Times. 11 out of the 17 most downloaded apps of this category have been taken down, according to the research by the app analytics firm Sensor Tower and the NYT.

Apple included screen time control tools when iOS 12 was unveiled at the WWDC event in June last year, integrated in the Settings menu when the new OS was officially launched. They enabled parents to control how much time their kids can spend on iPhones and iPads, as well as alert users the time they spend on their iOS devices. But they are not as feature rich as some specialised 3rd party apps, the developers told the NYT. They were also not terribly robust. Only a few days after the new iOS was released to the public, many kids already found ways to bypass the control, according to the parents who shared their experiences on Reddit.

Apple’s official response claimed that these apps were removed to help “protect our children from technologies that could be used to violate their privacy and security.” Its spokesperson also denied that the apps were removed for competition reasons, saying, “we treat all apps the same, including those that compete with our own services.”

However, both the timing and the reasons given by Apple would raise some eyebrows. While its defence of limiting the device management features for enterprise use is plausible, as was detailed in the response to MacRumor by Phil Schiller, Apple’s SVP for Worldwide Marketing, some other key features that have been in place for years and have been repeatedly approved by Apple are being asked to be removed, some developers told the newspaper. For example, these apps support device level blocking of certain content while Apple’s tool only blocks content inside the Safari browser.

At least three of the app developers, Kidslox, Qustodio, and Kaspersky Lab have filed complaints at the EU’s competition commission.

It is less likely that Apple purges the competing apps for the revenue. On one hand, Apple does not directly get revenue from their screen time apps, it is included in the phone price. On the other hand, by taking down these apps Apple is losing its share of the payment the apps receive (30%). A more plausible reason to trigger the Apple action is these apps can be used cross-platform, which means parents on iPhone can control their kids’ screen time on Android. It is not entirely out of the question that Apple may be using some feeble excuses to lock in as many users as possible.

This is another example that Apple is taking its role as platform and curator of apps too far, and inadvertently lending support to the rhetoric of Elizabeth Warren, the Democratic presidential candidate for 2020, when she said, without naming Apple, that “either they run the platform or they play in the store. They don’t get to do both at the same time.” These complaints also sound similar to Spotify’s accusation that Apple is being both the referee and a player.

Apple said to be losing faith in Intel’s 5G modem capabilities

A new report suggests Apple no longer has faith in Intel’s ability to deliver a 5G modem it can stick in its 2020 iPhones.

The scoop comes courtesy of Fast Company, which cites an anonymous source that claims to have some insight into the development of the Intel XMM 8160 5G modem. This shadowy figure told Fast Company Intel has been missing incremental deadlines for the development of this critical component, which has led to understandable consternation on the part of Apple.

Equally unsurprising is the revelation that Apple is a pretty high-maintenance company to work with. While some people might take a more chilled approach to component punctuality, Apple is pretty uptight about this sort of thing and isn’t shy about giving errant suppliers a hard time. Intel presumably bent over backwards for this massive deal win, but it always looked like a bit of a reach.

Speculation around Intel’s ability to deliver began as soon as the deal was announced. Late last year Intel got so sick of this scepticism that it publicly announced it was going to have the part ready half a year sooner than previously promised. At the time that seemed like a cosmetic PR move and when asked for comment on this story Intel only had the following to say: “As we said in November 2018, Intel plans to support customer device launches in 2020 with its XMM 8160 5G multimode modem.”

That’s hardly the most strident rebuttal of these latest allegations is it? Especially the use of the term ‘plans to’ instead of ‘will’, that seems to deliberately allow for a level of wriggle room that shouldn’t be needed if everything’s going according to plan. You can see why Apple might be concerned and the report implies Intel might be starting to think it doesn’t need the hassle too.

It goes on to talk about Apple’s ultimate goal of making its own modems, pointing out, as many have previously, that this is far from straightforward. The piece cites a UBS analyst who has joined the chorus of scepticism about Apple’s ability to deliver a 5G iPhone in 2020. Of course this could all be rubbish and Intel may well deliver on its promises, but if it doesn’t Apple doesn’t seem to have a 5G plan B.

Samsung warns profit could half on weak chip and display demand

The world leader in smartphones and chips has released a profit warning for its Q1 results, due to be announced next month. Analysts estimate its operating profit could halve from a year ago.

The company announced that it would miss market expectations, due to hard hits for sales in its key display and semiconductor business units. “The company expects the scope of price declines in main memory chip products to be larger than expected,” said Samsung.

Semiconductor and display have been the major revenue and profit generators for Samsung Electronics over the last few years. In 2018, these two business lines, combined to form Samsung “Device Solutions” (DS) business unit, delivering 49% of total revenues and 79% of its operating profit. However, it has already come under pressure. In Q4 last year, the operating profit of DS dropped by 29% from a year ago.

This communication should not come entirely as a surprise. In the company’s AGM on 20 March, Samsung already outlined its 2019 outlook for both the overall business and for individual business units. On the macro business environment, Samsung predicted “In 2019, we expect business conditions to remain difficult as global trade conflicts persist and changes in monetary policies of developed nations may lead to financial uncertainties in emerging economies.”

On the semiconductor front, especially for NAND business, Samsung warned “uncertainty persists over supply-demand dynamics caused by capacity expansions in the industry and a potential slowdown in demand following inventory stocking by customers.” On the display business Samsung expected “conditions to worsen in 2019 as competition rises amid a relatively stagnant market.”

Samsung did not give more specific indicators on the level of miss, but investment analysts predicted the company to report a $6.4 billion operating profit for Q1, down from $13.8 billion in Q1 last year, with revenues expected to come down to $47.4 billion from $53.5 billion, according to Refinitiv SmartEstimate.

“Inventories piling up on its memory chip side and the weak performance of its display panels business due to bad sales of Apple’s iPhones are hurting profitability for Samsung,” said Lee Won-sik, an analyst at Shinyoung Securities, quoted by Reuters.

The soft smartphone market including that experienced by Apple, Samsung’s main rival as well as customer, has been attributed the main reason behind the difficulty. But Samsung believed it could turn things around, especially the demand for memory products, in the second half of the year, as it told the shareholders last week.

Samsung Electronics share price went down by 0.55% at the time of writing.

Apple issues weak response to Spotify’s claims of discrimination

Apple has presented its side of the dispute with Spotify, claiming it is treating the latter the same as other apps and it is reasonable to charge 30% of premium payment to apps.

Shortly after Spotify filed a claim at the EU against Apple for being discriminated by the latter’s App Store rules and practices, Apple released a statement to deny these claims and throw the accusations back at Spotify.

Apple argued for the 30% charge of premium paid to apps on App Store platform with a few justifications. “Apple connects Spotify to our users. We provide the platform by which users download and update their app. We share critical software development tools to support Spotify’s app building. And we built a secure payment system — no small undertaking — which allows users to have faith in in-app transactions,” the statement said. Apple also hastened to add that Spotify has left out policy that the revenue share will drop to 15% from the second year on.

On Spotify’s argument that Apple has restricted payment methods to Apple’s own payment system only, Apple retorted that it demands all “digital goods and services that are purchased inside the app using our secure in-app purchase system”.

There are a few layers in the reading of the attrition when each side is only talking its own side’s truth, but there are also bigger questions related to the whole digital economy. There are minor inconsistencies in Apple’s statement, for example it claimed that Spotify has made “substantial revenue that they draw from the App Store’s customers”, only to contradict a few lines below by playing down the App Store’s significance by saying “only a tiny fraction of their subscriptions fall (sic.) under Apple’s revenue-sharing model.” And there is no need for Apple to use the dubious accusation that Spotify is suing music creators. They (Spotify, Google, Pandora, Amazon) are not. They are appealing to overturn a court decision to increase royalty payment by 44%.

There is as much left unsaid as said. For example, Apple failed to address Spotify’s concern that Apple is both operating a platform and distributing its own competing products, in this case Apple Music. This was a point brought up in a conversation The Verge had with Sen. Elizabeth Warren, who did not include in her first list of companies to “break up”. “It’s got to be one or the other,” Warren told The Verge referring to Apple. “Either they run the platform or they play in the store. They don’t get to do both at the same time.” This resonates with Spotify’s accusation that Apple is being both the referee and a player.

It also does not give out the reason why Spotify, or any apps, should not have the option to handle payments within the app with equally safe payment system (e.g. credit cards).

Then there is the broader question whether app stores should be allowed to collect a commission fee for apps distributed on its platform. Technically Apple, and other applications stores like Google’s Play Store, could argue that they are a distribution channel and a retail outlet. Like other channels and retailers, they must charge a fee to sell the products. This side of the business would not be so significant for Apple earlier, as it was mainly using the app ecosystem to sell, and lock consumers in, iPhones. It is getting more meaning for the company now that the iPhone sales are slowing down while “Services” has become a meaningful part of the business. That is also a key reason why both Apple and Google are actively encouraging apps to move to subscription model to generate recurring income for the platforms.

But there has never been any justification why the fee should be as high as 30%, and Apple and Google have been well synchronised with their charge level (as well as dropping the fee from second year onward to 15%). This has become a significant additional cost for the app developers. Some with deeper pockets could absorb the cost and keep the retail price similar to other platforms (e.g. The Economist magazine). Those businesses operating on low margin or on a loss have to move the additional cost to users who opt to pay for the premium inside the app (e.g. Spotify). Other businesses simply choose to disable the option to upgrade to premium inside their iOS app to avoid the fee (e.g. the Financial Times newspaper).

Apple used Spotify’s partnerships with carriers as a supporting argument for the charge, saying “a significant portion of Spotify’s customers come through partnerships with mobile carriers. (This) requires Spotify to pay a similar distribution fee to retailers and carriers.” This may or may not true as each carrier deal with OTT services is different. Even if this is accurate, mobile carriers most likely are following the Apple’s and Google’s benchmark rather than the other way round.

Apple will struggle with 5G for years – analyst

Not only will Apple lag its competitors by at least a year in launching a 5G phone, it might still suck anyway according to a semiconductor analyst.

Bloomberg apparently got hold of a research note from Matthew Ramsay, who heads up the TMT semiconductor business at Cowen. He seems to reckon Apple has boxed itself into a corner by ditching Qualcomm as a 5G modem supplier and is now seriously short of good options in that area. He also expressed surprised that Apple has allowed this situation to develop.

Ramsay detailed four main options for Apple for 5G, but he doesn’t think any of them are great. The first is what is generally assumed: that Apple will launch 18 months behind the competition with an Intel 5G modem that is expected to be inferior and not even support mmWave. The recent MWC show saw the first 5G phones launched but Apple tends to announce new iPhones in September, hence the big lag.

Rubbish option number two is to see if anyone else can help Apple out on the modem side of things. But Huawei is off the table due to all the aggro it’s getting from the US and Samsung would be likely to ruthlessly exploit its overwhelmingly strong bargaining position, since it’s another of the long list of companies Apple is on frosty terms with. Other than that there’s Taiwanese MediaTek, but Ramsay seems to think it’s even further behind than Intel.

A third, highly implausible, option would be for Apple and Qualcomm to kiss and make up. Not only does there seem to have been too many things said that can’t be unsaid in their bitter legal dispute, but that would be an utter humiliation for Apple and surely Qualcomm wouldn’t be able to resist imposing punitive terms. Having said that, sometimes pragmatism and enlightened self-interest prevail, but we would be amazed if they did in this case.

The last option would be for Apple to buy Intel’s modem business from it in order to accelerate the development process. This would be expensive but Apple can certainly afford it. There is, however, no guarantee Apple would improve on Intel’s efforts since modems are hardly a core competence. It’s even less likely that Apple would be able to make a material improvement in the next year or two.

A fifth option not posited by Ramsay would be for an even longer delay in bringing a 5G phone to market. Apple is brilliant at marketing and could easily throw resources at belittling 5G in the short term to downplay the significance of its absence from that market. That argument would certainly find some sympathy from us in the short term, but it would surely start to wear thin before long.

Apple and Goldman Sachs may soon issue a credit card together

The Wall Street Journal reports that the iPhone maker from Silicon Valley and the Wall Street stalwart are mulling over the idea of jointly issuing a credit card to Apple users.

Quoting people familiar with the situation, the paper claimed that Apple and Goldman Sachs may start a trial of the card on their own staff in the coming weeks before it is launched later in the spring. A similar partnership was earlier reported in May 2018 by the same paper.

If this does happen, it will not be the first time Apple takes part in card issuing. The company has already partnered Barclays to issue Barclaycard with Apple Rewards, by which users can earn points from purchases made at Apple or elsewhere, which can then be converted to Apple Stores or iTunes Store coupons.

Nor is Apple the only internet company to issue bank cards. Amazon, for example, has partnered with multiple banks (including RBS and NatWest in the UK) to issue different kinds of credit, debit, cash-back and other types of cards with different benefits.

Where the Goldman Sacks card will be different, according to the WSJ article, is its tighter integration with features offered by the Apple Wallet app on the iPhone and the iPod Touch.

By now, users of Apple Wallet can store in the app “credit, debit, and prepaid cards, store cards, boarding passes, movie tickets, coupons, rewards cards, student ID cards” etc. Then users can use “passes on your iPhone to check in for flights, get and redeem rewards, get in to movies, or redeem coupons. Passes can include useful information like the balance on your coffee card, your coupon’s expiration date, your seat number for a concert”, and so on.

The speculated card is said to work with these Wallet functions as well as with upcoming features. For example, Wallet may keep spending limits, track rewards, encourage users to pay down their credit card debt, and manage balances. These will not be fundamentally new ideas. Apple Watch is already attempting to improve the user’s physical wellness, and the recent update on iOS has added notification of user’s screen time.

This may bring addition benefit to Apple, at a time when its Products business is slowing down while Services is growing to be more important. As a concrete example, Apple could get higher commission fee from transactions on its own cards then on those made through Apple Pay linked to cards issued by other institutions.

For Goldman Sachs, on the other hand, the main driver would be the iOS users. Traditionally an investment and wholesale bank, Goldman Sachs only recently opened an online retail banking business in the shape of Marcus by Goldman Sachs. A joint credit card would be a good channel to access the iPhone users, which are believed to be higher spenders among smartphone users. Eventually, WSJ claimed, the card may expand to offer personal loans, wealth management services, and other financial products, which would be closer to Goldman Sachs’ heart.

The secondary market is becoming a primary consideration for smartphone vendors

With western smartphone markets in steep decline the secondary market is gaining traction as a counter-intuitive way to reverse that trend.

On first inspection a vibrant secondary (i.e. used) smartphone market seems like a threat to sales of new phones. Why would you bother buying a new one when you can get a decent second-hand one for a fraction of the price? But dig a bit deeper and you can just as easily conclude that making it easier for people to flog their old phones could incentivise them to upgrade more frequently.

The latter position is one adopted by smartphone security specialist Blancco, which has just published a report entitled ‘The Critical Importance of Consumer Trust in the Second-Hand Mobile Market’. The report is based around a survey of 5,000 punters from the UK, US, Germany, India and the Phillipines, which looked into their attitudes towards the secondary smartphone market.

As with all reports published by a company with a product or service to sell, it’s safe to assume there is a business reason for such an undertaking. In this case one of the things Blancco does is manage the data erasure on used devices when they’re collected to make sure no consumer data is hacked/breached/misused, so they have an interest in generating demand for such a service. That said, let’s have a look at the findings.

58% of those surveyed had never traded in a device and in the first table below you can see the stated reasons why. Cutting to the chase, people were then asked how concerned they were about their data security if they were to flog their old phone and, as you can see from the second table, the majority of people in all the countries surveyed had at least some concern.

Blancco table 1

Blancco table 2

“The secondary mobile device market is a huge success story,” said Russ Ernst, EVP, Products & Technology at Blancco. “Each of its major stakeholders – operators, OEMS and 3PLs [third party logistics] – have so much more value to extract from it as more global consumers choose to sell or buy used equipment if they trust in the process of used device collection and redistribution.

“Without a common, mandated and regulated rule book for smartphone processing, the ecosystem will be subject to abuse and malicious attack. The current ecosystem is made up of multiple stakeholders that collect devices from various touchpoints and redistribute them to many other parties.

“Since the speed of device processing is the only critical success factor, and as more devices flood the market, the chances of data breaches or issues related to data misuse will become increasingly likely. The secondary device market remains an amazingly lucrative and exciting opportunity for everyone, but only if it retains full consumer confidence built on trust and data integrity.”

Apple is being especially proactive in the secondary market by letting its loyal punters trade in their old iPhones as part of the price of a new one. The UK trade-in page makes it very easy to get a valuation and cleverly they will even accept non iPhones. Having said that they’ll only give you £445 for a 64GB iPhone X that they can resell for twice that amount so they’re not being that generous.

But Blancco does seem to have a point about the growing secondary market and it stands to reason that trust plays a big part in it. Presumably Apple fanboys are more likely to trust Apple itself than their operator or some random third party. While we don’t accept it as a given that a strong secondary market necessarily equals a strong primary one, it looks like there’s at least some money to be made from being a trusted reseller.

Apple slaps Google and Facebook on the wrist

One day after Facebook had its enterprise developer certificates revoked by Apple, Google ran into similar troubles with the iOS and App Store owner.

It turned out that Facebook was not the only naughty player attempting to circumvent Apple’s rules to forbid apps developed under enterprise certificates to be distributed outside of the company. Google was found to have distributed a data monitoring and survey app called Screenwise Meter. The app comes with Apple’s enterprise developer certificate granted to Google and has been distributed to a “panel” selected and maintained in partnership with the research firm GfK. The panel may include users as young as 13, or with the parents’ consent, those under 13 though the data monitoring method will be modified.

It is not clear if it was a reaction to the revocation of Facebook’s certificates, but Google stopped the distribution of Screenwise Meter before Apple acted. “The Screenwise Meter iOS app should not have operated under Apple’s developer enterprise program — this was a mistake, and we apologize,” Google said in a statement on Wednesday. “We have disabled this app on iOS devices. This app is completely voluntary and always has been. We’ve been upfront with users about the way we use their data in the app, we have no access to encrypted data in apps and on devices, and users can opt out of the program at any time.”

However, Google’s developer certificates were still made invalid by Apple on Thursday, reported first by The Verge. This resulted in Google’s pre-release beta apps as well as employee-only apps, for example those for using Google’s shuttle bus or coffee shops, stopping working. (One cannot help but wondering how many employees in Google, which controls Android and releases its own Pixel smartphones, are using iPhone as their primary devices.) The tone from Apple, however, was much reconciliatory. “We are working together with Google to help them reinstate their enterprise certificates very quickly,” said the statement from Apple to BuzzFeed.

In comparison, Apple was much sterner when pulling the plug on Facebook. “We designed our Enterprise Developer Program solely for the internal distribution of apps within an organization. Facebook has been using their membership to distribute a data-collecting app to consumers, which is a clear breach of their agreement with Apple.”

To look at the two cases together, there are two types of issues Apple needs to deal with. To borrow the economics jargons, one is normative, i.e. based on principles, another is positive, i.e. based on facts. On the normative side, Apple should clarify whether Facebook and Google were punished for launching apps gathering users’ private data or for distributing the apps under the wrong type of certificates and through unofficial channels, i.e. not using the App Store.

Although most media coverage was focused on the Facebook app gathering user data, it looks that Apple was more annoyed by the fact that Facebook (and Google) has abused its enterprise developer certificates. It said in the statement related to Facebook: “Any developer using their enterprise certificates to distribute apps to consumers will have their certificates revoked, which is what we did in this case (of Facebook) to protect our users and their data.”

However, what drove Facebook to distribute “Facebook Research”, the app in question through unorthodox channels, looks to be that Apple has banned apps to gather user data as detailed as app history, private messages, and location, from being listed in the App Store. In its “App Store Review Guidelines”, Apple stated “5.1.1 Data Collection and Storage: (iii) Data Minimization: Apps should only request access to data relevant to the core functionality of the app and should only collect and use data that is required to accomplish the relevant task. Where possible, use the out-of-process picker or a share sheet rather than requesting full access to protected resources like Photos or Contacts.”

The rule above would be caught in a paradox in cases where the “core functionality” of an app is to gather detailed user data and is explicit with it. That was the case with “Facebook Research”. Facebook said in its statement: “Key facts about this market research program are being ignored. Despite early reports, there was nothing ‘secret’ about this; it was literally called the Facebook Research App. It wasn’t ‘spying’ as all of the people who signed up to participate went through a clear on-boarding process asking for their permission and were paid to participate. Finally, less than 5 percent of the people who chose to participate in this market research program were teens. All of them with signed parental consent forms.”

As an aside, despite the repeated furore towards Facebook recently, neither users nor advertisers seem to be deterred. The Q4 results recently published showed that in Europe, where GDPR went into effect mid-2018, Facebook’s monthly active users went up from 375 million in Q3 to 381 million, and the average revenue per user in Europe jumped from $8.82 in Q3 up to $10.98.

If Apple was unhappy with companies distributing apps developed under enterprise certificates to users outside of the enterprises, there would come the positive side of the issues, i.e. related how Apple implements the rule. Whether Apple was punishing Facebook and Google as a deterrent to other companies that have or might have distributed apps externally using enterprise certificates, or it will go after all offenders, remains to be seen.

If it was the former tactic, an old Chinese saying that goes “Kill the chicken to scare the monkey” would summarise it well, though the two chickens Apple has put the knife in are much fatter than most monkeys. On the other hand, if Apple were true to its word that it would act on “any developer using their enterprise certificates to distribute apps to consumers”, it may find a long line of chickens (or monkeys) standing in the line. Alex Fajkowski, a Twitter user and iOS app developer, suggested that both Amazon and DoorDash were distributing apps to recruit temporary deliverers. Then a longer list of companies suspected of doing the same thing was drawn up, including companies like Square and Sonos (though Sonos looks to have removed the page recently).

Looking at it either way, it is clear that Apple is tightening the control over its already tightly controlled ecosystem. With Services becoming increasingly important, Apple would not want to see any loss of revenues from iOS apps distributed outside of App Store, nor would it want to be seen complacent or even complicit in any comprise of users’ privacy. Or, standing up to the internet giants which have been on the receiving end of much anger, could score a PR victory for Apple.

Both Facebook and Google had their enterprise certificates restored by Thursday evening.

Full-year global smartphone market declines for the first time

For five consecutive quarters the global smartphone market has registered year-on-year decline, marking the first time it has shrunk on annual basis since the first iPhone defined the category in 2007.

The size of the contraction is believed to be around 4-5%, according to some research firms. Among the leading smartphone makers, Huawei was the only one that has bucked the trend by increasing its sales volume and vastly improving its market share. By some estimate it is almost neck and neck with Apple.

“Huawei grew 35 percent and shipped a record 205.8 million smartphones globally in full-year 2018,” said Woody Oh, Director at Strategy Analytics. “Huawei is now just a whisker behind Apple, who shipped 206.3 million iPhones last year. Huawei is massively outgrowing the iPhone and we expect Huawei to overtake Apple on a full-year basis worldwide for the first time in 2019.”

In general, the leading Chinese brands, including OPPO, vivo, and Xiaomi (in addition to Huawei) have been aggressively expanding overseas to compensate the weak domestic market. According to the estimates by Counterpoint Research, 46% of the Chinese brands’ total volume was shipped outside of China, up from 33% a year ago. “The collective smartphone shipment growth of emerging markets such as India, Indonesia, Vietnam, Russia and others was not enough to offset the decline in China, which was responsible for almost 1/3 of global smartphone shipments in 2018. With China showing little or no sign of recovery due to various politico-economic factors, Chinese brands are looking to expand overseas,” said Shobhit Srivastava, an analyst from Counterpoint. “To increase market share, Chinese brands have been aggressive in both hardware/software design and marketing.”

Despite being badly hit in the smartphone market in 2018 (and foreseeing continued difficulties in 2019), Samsung was still able to hold on to the overall market leader position. “Samsung shipped 69.3 million smartphones worldwide in Q4 2018, dipping 7 percent annually from 74.4 million units in Q4 2017. Samsung remains the world’s number one smartphone vendor, despite intense competition from Apple, Huawei and others across core markets of India, Europe and the US,” commented Neil Mawston, Executive Director at Strategy Analytics.

Calculating Q4 was made further complicated as this was the first quarter that Apple would not publish the iPhone shipment volume (though it continues to publish iPhone revenues). We sampled three research firms’ published numbers on the market size and vendor share, each of them making their judgement call on Apple as well as other firms that do not publish their shipments.

Both Counterpoint Research and Strategy Analytics believed Apple sold 66 million iPhones in the final quarter of 2018, presumably by applying the announced year-on-year 15% decline of iPhone revenues directly on the volume. This is a crude methodology, as it would assume the average selling price (ASP) of the iPhones has remained constant from a year ago. The new models released in 2018 were sold at much higher price points than their predecessors from 2017. To couple this with Apple’s decision to discontinue some older, cheaper models, the iPhone ASP should only go up, which means its volume decline should be bigger than 15%, though by how much is anyone’s guess.

On the other hand, Canalys estimated that 71.7 million iPhones were sold in Q4, or a 7% decline from Q4 2017. As a matter of fact, the firm, based on this estimate, declared that Apple overtook Samsung to be the market leader in Q4. This calculation implies Apple must have vastly discounted the iPhones to drive up volume. This is not entirely impossible, but it has not been reported broadly.

Smartphone 2018