Last month I asked: "Will the smartphone replace the PC in three years?" The answer looks more like five years, or about a half-decade sooner than predicted by Pew Internet in December 2008. I also asked Betanews readers: "Has your smartphone changed your life?"
In preparation for readers' answers (coming in another post), I offer something meaty: Three indicators about what might happen by 2015 -- from the Morgan Stanley "Internet Trends" Webinar, Intel Developer Forum and the Nokia "Everyone Connect" event; all three conferences happened this week. If you're one of the iPhone-obsessed, either open your mind to fresh ideas or read something else. This post probably isn't for you.
Morgan Stanley's "Internet Trends"
On April 12, Morgan Stanley popped an 87-deck slide presentation, researched by three of its analysts. Morgan Stanley predicts that the number of mobile Internet users, 1.6 billion, will exceed desktop Internet users by 2015. It's a seemingly bold statement that actually is consistent with other analyst data, such as an IDC forecast released in December 2009. Morgan Stanley includes non-cellular devices, such as music players and handheld gaming consoles, in its definition of the mobile Internet.
That said, 3G penetration rapidly rises in most geographies over the next four years. The sweet spot will be achieved this year, according to Morgan Stanley. The financial analyst firm predicts that by 2014, 3G penetration will be: 100 percent in Japan, 92 percent in Western Europe, 74 percent in North America, 40 percent in Eastern Europe, 37 percent in Asia Pacific, 35 percent in Middle East and Africa, and 17 percent in Central and South America. Morgan Stanley predicts global 3G penetration will be 43 percent, or 2.78 billion users, by 2014. The analysts are clear: "3G is key to success of the mobile Internet."
In December 2008 blog post "The Mobile Internet is now, not 2020," in response to the aforementioned Pew report, I asserted: "The transition will happen much sooner. My prediction: Five years -- and that's being overly conservative." I've since stuck to 2015 as the date.
Atom's Dual-Core Future
On April 13, Intel CEO Paul Otellini spoke about the importance of the mobile Internet and development of dual-core atom processors. Atom processors have been most-widely used in netbooks, but they may have another future: Smartphones. Also at IDF, Intel revealed that Google's Android mobile OS runs on Atom processors. That opens the possibility of future Android Atom smartphones competing with handsets using chips from Arm and Qualcomm.
During Intel's April 10 quarterly conference call, executives put lots of perspective around Atom and its importance to the company's bottom line during the global economic crisis. As netbook sales soared, so did sales of Atom processors. But trends are changing. With the exception of Western Europe, where telco carrier subsidies help lift sales, netbook shipments are slowing. The Atom-netbook goldmine has tapped out its vein. Atom-powered smartphones would be a logical next step, and why not dual-core from a company specializing in low-power consumption processors? Intel plans to ship dual-core Atom processors during this quarter.
How about 2015, if not sooner? Intel and Nokia are already working together on the MeeGo mobile operating system, which they showed off yesterday. Intel as the world's largest chip maker and Nokia as the world handset market share leader both have strong incentives to make a hard push into the smartphone-PC-replacement market. For Intel, the gold coming from the mobile Internet vein could be riches indeed. Manufacturers ship about 1.3 billion handsets a year, which is larger than the entire PC install base. Handsets are but one mobile Internet category, as Morgan Stanley analysts so astutely observed.
Nokia's Smarter Dumb Phones
On April 13, Nokia announced three new handsets -- the C3, C6 and E5 smartphones. These new mobiles compliment the C5 dump phone that was announced last month. Nokia's current handset strategy is simple: Bring more smartphone capabilities to dumb phones and add more social sharing features to smartphones. Nokia doesn't have a handset as sexy as iPhone, but the manufacturer's reach is large enough this shortcoming isn't yet detrimental. To date, Apple has sold 85 million iPhones or iPod touches combined. Nokia ships more handsets than that in a single quarter.
Not everyone can afford to buy an iPhone or fancy Android smartphone. By offering more social capable -- and lower-cost -- smartphones and making dumb phones smarter, Nokia is looking to preserve huge market share in key geographic regions. According to Morgan Stanley, five countries account for 48 percent of Internet users: The United States, Brazil, Russia, India and China -- the latter four are often referred to as BRIC. BRIC is generally considered to be the most important block of emerging markets. In 2009, there were 620 million Internet users in BRIC compared to 238 million in the United States.
US bloggers and journalists often ignore Nokia when writing about handsets, unless negatively comparing to Apple. Nokia has done poorly getting good carrier-subsidized distribution here, which contributes to the blogging and news reporting blindspot. But Nokia's BRIC presence is something else. Gartner doesn't publicly release geographic handset data, but IDC shared it with me once -- and not since (I have asked). From October 2009 post "iPhone global success is more marketing myth than reality," Nokia market share was: 38 percent in Brazil, 41.5 percent in Russia, 56.1 percent in India and 46.1 percent in China. No competitor came even close in any of the countries.
Something else: Most emerging markets exhibit a past-seen trend -- skipping a more established technology in favor of something newer. Cell phones are often the first Internet-capable device used in many emerging markets, not PCs. The question: Will handset owners' next Internet-capable device be a PC or a smarter smartphone? Judging from Morgan Stanley forecasts, Intel chip positioning and adoption success of Android and iPhone OS, the answer could be the smartphone -- and by 2015.
Nokia has embarked on a save-its-core-markets strategy that syncs well with emerging market trends and its sales success in BRIC. However, despite the strategy's merits, Nokia may yet lose the handset wars, particularly if Apple or Google establishes a more viable ecosystem around their mobile platforms. Nokia may enrich the mobile Internet experience for billions of handset users (the majority on 2G networks), only to fall away. The smarter dumb phone strategy is good for mobile Internet adoption, regardless of Nokia's future success.
Handset competition is fiercer now than ever, and that's potentially good for accelerating mobile Internet device development, which Morgan Stanley claims already outpaces the desktop Internet's development (based on progress measured over 11 quarters). If 2015 is too soon for you, no worries. I concede that no one knows the future. Movie "Back to the Future II," predicted that 30 years from 1985 people would fly rather than drive cars, skateboards would hover and pizza would reconstitute nearly instantly -- hot and fresh -- from a freeze-dried state. There's still five years left. Who knows what can still happen? If some of you say smartphones will replace PCs when cars can fly, hehe, you might be right.