U.S. Smartphone Market Today

Market Definition

The U.S. smartphone market consists of all firms throughout the world that manufacture
and sell smartphones to U.S. consumers. A smartphone is a mobile electronic device which runs an
advanced operating system that is open to installing new applications, is always connected to the
internet, and which provides very diverse functionality to the consumer, including phone, text,
email, calendar, address book, games, music, video, camera, maps and GPS, etc.51 A smartphone is
more than a typical feature phone in that it provides significantly greater functionality than just a
calling and other basic functions, and it typically has a large screen.52
The participating firms in this market will be described next. Following that, the bases of
competition will be presented. Then, the nature and characteristics of the market will be discussed.
An analysis of the market at the firm level will then be presented, followed by a brief analysis of the
intermarket-level effects.

 Market Participants

The participants in the U.S. smartphone market include all manufacturers of smartphones
that sell smartphone devices in the United States. The major participants include Apple Inc. (a U.S.
corporation), Research in Motion Limited (or RIM, a Canadian corporation), HTC Corporation (a
Taiwanese corporation), Motorola, Inc. (a U.S. corporation), and Samsung Electronics Co. Ltd. (a
subsidiary of the Korean corporation Samsung Group). Smaller participants include HP/Palm, Inc. (a
subsidiary of HP, a U.S. corporation), LG Corp. (a Korean corporation), and Nokia Corporation (a
Finnish corporation).
2. Market Shares/Value Pool
Estimating the market shares of the participants in the U.S. smartphone market is difficult.
Because many of the market participants are international or multinational corporations, sales and
financial figures relating strictly to smartphones are difficult to find. Additionally, even when the
revenue figures are available, oftentimes all mobile devices are lumped into one figure, and
smartphones are not separated out. Finally, sales figures are rarely broken down to U.S. only sales,
and every participant has sales all over the world.53
51 Steve Litchfield, Defining the Smartphone, July 21, 2010,
http://www.allaboutsymbian.com/features/item/Defining_the_Smartphone.php; see also
http://en.wikipedia.org/wiki/Smartphone.
52 http://en.wikipedia.org/wiki/Smartphone.
53 See, for example, Apple’s recent 10-K filing that does not break out U.S. iPhone sales explicitly:
http://www.sec.gov/Archives/edgar/data/320193/000119312510238044/d10k.htm.
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Worldwide sales numbers for mobile device manufacturers are highly misleading. For
example, Gartner reports that Nokia, Samsung and LG are the top manufacturers of mobile devices
(see Table 1), but in the U.S, Nokia and LG hardly have a presence in the smartphone market.54
Table 1: Worldwide Mobile Device Sales in 3Q10 (in thousands of units).55
In order to get a better idea of smartphone manufacturer market share in the United States,
it is helpful to look at a proxy that is available: quarterly sales by smartphone OS. Smartphone OS
sales have the advantage of giving a clear indication of the size of the market share held by
manufacturers that follow the proprietary OS model, i.e., their OS is only available on their
smartphones. Unfortunately, for smartphones that run a licensable or open source OS, this proxy for
market share gives very little information about the respective manufacturers.
Figure 1 and Figure 2 summarize U.S. smartphone market share by OS. Here we see that
Apple has 26 percent of the market, while RIM has 24 percent. After that, the data is less useful
because the Android market share is made up of all manufacturers of Android phones. This group
includes HTC, Motorola, Samsung, and LG. The data on Windows Mobile has the same problem as
that of Android, but the market share of the Windows Mobile OS has become so insignificant in
recent years that it is not especially important to understand the manufacturer breakdown of that
segment of the market. HP/Palm and others also make up a very small portion of the market.