Editor's Corner—The U.S. smartphone market is going to get a lot more interesting this fall

It’s that time of year: The leaves are changing, the weather is getting colder, and Apple, Samsung and others are gearing up to release a bunch of new phones. Except the annual “fall smartphone battle” in the U.S. ought to be a lot more interesting this time around because of several new factors:

  • An expected iPhone redesign with augmented reality functions.
  • A refreshed Motorola with new phones and new carrier partners.
  • A smartphone backed by the creator of Android.
  • New Pixel phones from Google.
  • And Samsung, recovering from the Note 7 disaster, with something to prove.

“The smartphone market has always been competitive, but this fall is definitely shaping up to be more interesting than many in the past,” Avi Greengart, research director for consumer platforms and devices for GlobalData, told FierceWireless.

“I agree there is lots of interesting stuff going on,” added CCS Insight research chief Ben Wood.

Handset analysts aren’t the only ones gearing up for a busy fall.

“We look forward to iconic device launches to continue to drive higher upgrade rates amongst our customer base,” noted Sprint CEO Marcelo Claure on the carrier’s recent second-quarter earnings conference call, according to a Seeking Alpha transcript of the event. “Obviously, it's going to be dependent on what competitors' offers are at this time when there's new iconic devices being launched.”

In his own carrier’s quarterly conference call, AT&T CFO John Stephens acknowledged that the operator’s handset sales have been sluggish this year, but added that “I would expect a pickup in the second half of the year as new devices come out.”

“In terms of the impact of any new devices coming along, look, we assume that we'll see something later in the year,” agreed Verizon’s CFO, Matthew Ellis, according to a Seeking Alpha transcript of Verizon’s call. “We typically have very strong results when we have new devices come out because when customers get a new device with new functions, they want it on the best network, but we'll see what happens there. And certainly would expect that to be accretive to the overall revenue story.”

So exactly what can the U.S. wireless industry expect this fall?

Of course there are other players in the U.S. market worth noting, such as LG, ZTE, Alcatel and Asus—and potentially Huawei—but none is expected to make much of a dent this year. Indeed, most analysts expect Apple will dominate the fall smartphone battle.

“Apple certainly seems to have a vice-like grip on the market,” CCS’ Wood said, explaining that it will be Apple’s game to lose based on the leverage the company’s iOS ecosystem holds over customers as well as shoppers’ pent-up demand for a new, redesigned iPhone.

“We’re all making the assumption now that Apple will knock it out of the park,” Wood said. “The rest of these guys are going to be competing for the crumbs that are left.”

Cliff Maldonado at handset research firm BayStreet Research said Apple’s ARKit could help create “one of the biggest mobile computing moves in a long time.” He pointed out that ARKit is backward-compatible to 2015’s iPhone 6S, creating a significant base of addressable devices that AR developers could target.

“That’s what we’re going to be watching very carefully in the fall,” he said, adding that “it all comes down to how quickly the utility of AR apps can ramp.” He said that, if Apple’s ARKit is successful, Google’s Android AR effort, dubbed Tango, will have a difficult time competing due to the fractured nature of Android hardware.

“Apple’s ARKit has enormous potential to reinforce the iPhone ecosystem today, and position Apple for success in wearable AR solutions in the future,” agreed GlobalData’s Greengart.

Of course, Samsung will look for any opening it can get to steal share from Apple, but analysts noted that Samsung’s products don’t necessarily benefit from a cohesive ecosystem—for example, Apple’s smartwatch plugs directly into its iOS platform whereas Samsung’s Gear S3 runs Tizen rather than Android.

As Counterpoint noted, Apple and Samsung together grew their share of the U.S. smartphone market by 1 percentage point to 60% in the second quarter. That leaves Motorola, Google, Essential and others to battle for the second tier of the market.

“We’re going to see if Apple and Samsung reinforce their dominance [during the fall], or, as the smartphone market matures, can other vendors carve out sustainable niches?” GlobalData’s Greengart said.

BayStreet’s Maldonado predicted Google’s Pixel 2 would rise to the top of that struggle among the companies vying for the market sitting below Apple and Samsung—if Google is able to generate sufficient demand. 

“Everything I’m hearing about Pixel 2 is that it’s an extremely well-designed device,” CCS’ Wood agreed. “The real question there is how much cash Google is willing to put behind it.”

Wood added that Google must also toe a fine line between generating interest in its devices—as Microsoft has done with its Surface laptops—without burning existing Android supporters like Samsung.

But really, Google’s share can only go up—Counterpoint reported the company’s Pixel now owns around 0.3% of the U.S. market.

And what of Motorola? “I still say it’s tough for them,” Wood said, noting that the company’s Moto Mods accessories do help set Motorola apart from the pack. “That looks like a very crowded space in that sort of high-tier Android space.”

"Motorola's volumes dropped 2% YoY,” Counterpoint wrote this week. “However, the launch of the Z Force 2 across carriers will help. The major carriers are promoting ‘Moto Mods’ (modular battery, speaker, projector accessories) at launch. The flagship launch could provide a halo effect for its entry devices, which have been successful selling in open channels.”

Finally, apart from the coming fall smartphone battle, analyst Mark Lowenstein argued that the real struggle lies beyond the devices themselves.

“The phones will all have a nice 'evolution,' from a hardware standpoint, but I think a lot of the action will be in the software, and what apps take best advantage of the software,” said Lowenstein, managing director of Mobile Ecosystem and a FierceWireless contributor. “For example, the race between Siri, Google Assistant, Bixby, etc. The next stage of this is the ecosystem of apps that leverage these capabilities.”

A 5G iPhone?

From my standpoint, I’m particularly interested in how the nation’s carriers navigate the annual fall smartphone battle. Will they all pick one device like the Note 8 to feature in their discounts and promotions? Or will they each back a different phone?

For example, Verizon might use its exclusive on Google’s Pixel to try to gain share, while AT&T might reiterate how its DirecTV Now service can be streamed through a 70-inch projection via the combination of the Moto Insta-Share Projector Moto Mod and the Moto Z2 Force Edition.

Just as importantly, will Apple’s new iPhone play favorites? Will it support Sprint’s new HPUE network technology as well as T-Mobile’s new 600 MHz spectrum? Will AT&T be able to sell an iPhone that supports all of its new spectrum bands, from 700 MHz to WCS to AWS-3? Indeed, might one of these carriers turn that kind of support into a “5G iPhone” marketing campaign? (I’m looking at you AT&T.)

At this point I suspect everything is on the table, and that we’re in for a ride. – Mike | @mikeddano

Article updated Aug. 17 to clarify information.