Linux client market share gains outside the Android? Instead of gains will it shrink to 5% in the next 3 years?

The Linux Foudation quite proundly referred to ReadWriteMobile: The ‘Year of the Linux Desktop’? That’s So 2012 [Feb 3, 2013]

For those Linux enthusiasts still pining for the mythical “Year of the Linux Desktop,” the wait is over. In fact, it already happened. In 2012 Microsoft’s share of computing devices fell to 20% from a high of 97% as recently as 2000, as a Goldman Sachs report reveals [”Clash of the titans” downloadable from here, dated Dec 7, 2012]. While Apple has taken a big chunk of Microsoft’s Windows lead, it’s actually Google that plays Robin Hood in the operating system market, now claiming 42% of all computing devices with its free “Linux desktop” OS, Android.

Read more at ReadWriteMobile.

from which I will include here the following chart:

for which Goldman Sachs commented as:

The compute landscape has undergone a dramatic transformation over the last decade with consumers responsible for the massive market realignment. While PCs were the primary internet connected device in 2000 (139mn shipped that year), today they represent just 29% of all internet connected devices (1.2bn devices to ship in 2012), while smartphones and tablets comprise 66% of the total. Further, although Microsoft was the leading OS provider for compute devices in 2000 at 97% share, today the consumer compute market (1.07bn devices) is led by Android at 42% share, followed by Apple at 24%, Microsoft at 20% and other vendors at 14%.

Note from Goldman Sachs: Microsoft has gone from 97 percent share of compute market to 20 percent [The Seattke Times Dec 7, 2012]:

I asked Goldman Sachs about what happened in the 2004-2005 time frame — as seen in the above chart — that made Apple’s vendor share jump, Microsoft’s share plummet and the “other” category to go from zero to 29 percent. Goldman Sachs replied that it has to do with more mainstream adoption of non-PC consumer computing devices but declined to elaborate beyond that.

Microsoft was put into the “Challenged” category (along with Google BTW) by Golmann Sachs noting that:

… we estimate that Microsoft would have to sell roughly 5 Windows Phones or roughly two Windows 8 RT tablets to offset the loss of one traditional Windows PC sale, which we estimate has an overall blended selling price of $60 for business and consumer.

but a kind of more positive than negative outlook was predicted for the company by

… we expect the recent launches of Windows Phone 8 and Windows 8 tablets to help the company reclaim some share in coming years.

Apple, at the same time, was into the “Beneficiaries” category (along with Facebook and Samsung BTW) by Goldmann Sachs for the reason of:

… we believe loyalty to the company’s ecosystem is only increasing and this should translate into continued growth going forward. In particular, we see the potential for Apple to capture additional growth as existing iOS users move to multiple device ownership and as the company penetrates emerging regions with new devices such as the iPad miniAAPL and lower priced iPhones. As a result, we believe Apple’s market share in phones has room to rise much further, and that its dominant tablet market share appears to be more resilient than most expect. We expect these factors to continue to drive the stock higher.

This is, however, not going to happen if taking a judgement from the stock market reflections since then with 13.7% drop in Apple’ share price vs. that of Dec 7 (the report publishing date) and a whopping 34.5% drop vs. its last peak on Sept 19, 2012 (at $702.1): 
source: Yahoo! Finance

Why Did $AAPL Stock Go Down After Beating Earnings Estimates And $AMZN Stock Go Up After Missing? [Techcrunch, Jan 29, 2013] had the following explanation:

The moves in different directions for Amazon and Apple have been about expectations and guidance. Wall Street has higher expectations for Apple and ‘different’ expectations for Amazon. Wall Street wants Apple’s ‘gross margins’ to grow. They don’t expect Amazon’s ‘profits’ to grow. It sounds silly, but if Apple has reported lower profits and a huge gross margin increase the stock might have shot up. If Amazon had reported record profits today on decreasing margins, Wall Street might have panicked.

…

Wall Street has stopped caring about Apple’s profits today. They were displeased with forward guidance. Growth rates have slowed measurably at Apple which is understandable for a company of its’ size. Wall Street is worried that growth is slowing and competition from Google and Samsung are taking a toll. Apple has given Wall Street so many wonderful surprises so magic has become the norm. Now that Apple is boring, they have run for the hills.

That moode didn’t change even after Apple CEO Tim Cook was trying to assure investors at the Goldman Sachs Internet and Technology Conference on Feb 12, just a week ago. Read the Wrap up: Apple CEO Tim Cook’s Goldman Sachs Conference keynote [AppleInsider, Feb 13, 2013] from which I will quote only the following excerpts as the most notable ones:

Cook went on to say that introducing a “budget device” was not something Apple would be comfortable with, and instead pointed to the strategy seen with the iPhone lineup. In that model, new variants like the iPhone 5 are sold at the highest price while preceding versions like the iPhone 4S and iPhone 4 are sold at discounted rates.

…

According to Cook, the iPad is “the poster child of the post-PC revolution” and has driving the push to tablets since its introduction in 2010.

While Apple’s tablet has been the downfall for a number of PC alternatives, such as netbooks, the device is also said to be hurting the company’s own Mac computer sales. During the last quarter of 2012, Mac sales dropped 22 percent year-to-year on low demand and supply constraints. Apple’s iPad business, however, grew by nearly 50 percent over the same period.

“The cannibalization question raises its head a lot,” Cook said. “The truth is: we don’t really think about it that much. Our basic belief is: if we don’t cannibalize, someone else will. In the case of iPad particularly, I would argue that the Windows PC market is huge and there’s a lot more there to cannibalize than there is of Mac, or of iPad.”

Cook noted that burgeoning markets like China and Brazil will be major players in future growth, and the company is banking on its ability to draw customers in to the Apple ecosystem with “halo products.”

“Through the years, we’ve found a very clear correlation between people getting in and buying their first Apple product and some percentage of them buying other Apple products.”

At the same conference Microsoft, similarly to Apple, declared a ‘no change’ strategy despite of the obvious failure of its Windows 8 and Windows Phone efforts so far. In the No “Plan B” for Microsoft’s mobile ambitions: CFO [Reuters, Feb 13, 2013] report one can read:

“We’re very focused on continuing the success we have with PCs and taking that to tablets and phones,” Microsoft’s Chief Financial Officer Peter Klein said

…

“It’s less ‘Plan B’ than how you execute on the current plan,” said Klein. “We aim to evolve this generation of Windows to make sure we have the right set of experiences at the right price points for all customers.”

…

Gartner estimates that Microsoft sold fewer than 900,000 Surface tablets in the fourth quarter, which is a fraction of the 23 million iPads sold by Apple. Microsoft has not released its own figures but has not disputed Gartner’s.

Windows phones now account for 3 percent of the global smartphone market, Gartner says, which is almost double their share a year ago but way behind Google’s Android with 70 percent and Apple with 21 percent.

To grab more share, Klein said Microsoft was working with hardware makers to make sure Windows software is available on devices ranging from phones to tablets to larger all-in-one PCs.

“It’s probably more nuanced than just you lower prices or raise prices,” said Klein. “It’s less a Plan B and more, how do you tweak your plan, how do you bring these things to market to make sure you have the right offerings at the right price points?”

So the last 3 months went against Goldmann Sachs’ November 2012 predictions. The only question now remains whether those 3 months brought any changes in the non-Apple and non-Microsoft territories which would question other parts of the Goldmann Sachs’ forecast as well?

There were no negative changes just strengthening of the already established dominant position against both Apple and Microsoft:

1. Mainstream tablets 7-inch at US$199, say Taiwan makes [DIGITIMES, Feb 19, 2013]

Google’s Nexus 7 and Amazon’s Kindle Fire HD have reshuffled the global tablet market and consequently 7-inch with a price cap of US$199 has become the mainstream standard for tablets, according to Taiwan-based supply chain makers.

Cumulative sales of the Nexus 7 have reached six million and are expected to reach eight million units before the expected launch of the second-generation model in June 2013, the sources said. The Nexus 7 and Kindle Fire have driven vendors to develop inexpensive 7-inch tablet models instead of 10-inch ones, the sources indicated.

In order to be as reach US$199, 7-inch tablets are equipped with basic required functions such as access to the Internet and watching video, the sources noted. While Google, Amazon, Samsung Electronics and Asustek Computer are competitive at US$199 for 7-inch tablets, white-box or other vendors need to launch 7-inch models at lower prices such as US$149, the sources said. Fox example, China-based graphics card vendor Galaxy Microsystems has cooperated with Nvidia to launch a 7-inch tablet in the China market at CNY999 (US$160).

2. Digitimes Research: 68.6% of touch panels shipped in 4Q12 from the Greater China area [DIGITIMES, Feb 19, 2013] meaning that in supply chain terms there is a growing concentration on suppliers not only from Greater China but especially from mainland China:

Taiwan- and China-based touch panel makers held a 68.6% global market share for touch panels shipped during the fourth quarter of 2012, according to Digitimes Research.

China-based panel makers saw the biggest share in the handset touch panel market during the fourth quarter due to smartphone demand in China, while Taiwan-based panel makers only held a 27.5% share in the market largely due to lower-than-expected sales of the iPhone 5, said Digitimes Research.

In terms of touch panels used in tablets, Taiwan-based panel makers saw a drop in their global market share to 59.9% during the period largely due to the iPad mini using DITO thin-film type touch screens provided from Japan-based touch panel makers. China-based panel makers meanwhile held 18.6% in the market due to demand for white-box tablets in China, added Digitimes Research.

Meanwhile, Digitimes Research found that Taiwan-based TPK provided 70.9% of all touch panels used in notebook applications in 2012.

3. Touch Panel Market Projected for a 34% Growth in 2013 from 2012 [Displaybank, sent in a newsletter form, Feb 19, 2013] published to promote Touch Panel Market Forecast and Cost/Issue/Industry Analysis for 2013 [Jan 30, 2013]

The touch panel market is growing rapidly due to the increasing sale of smartphones and tablet PCs. The touch panel market size in 2012 was 1.3 billion units, a 39.4% growth over 2011. The market is projected to grow 34% in 2013, growing to more than 1.8 billion units.

Touch Panel Market Forecast (Unit: Million)(Source: Displaybank, “Touch Panel Market Forecast and Cost/Issue/Industry Analysis for 2013″)

Smartphone and tablet PCs, major applications that use touch panels, are expected to continue to grow at a high rate. In addition, most IT devices that use display panels have either switched to or will start using the touch panels soon. Therefore the touch panel market will show a double digit growth annually until 2016, by unit. The market size is expected to reach more than 2.75 billion units by 2016.

With the explosion in the sale of smartphones and tablet PCs during the past few years, our lives have changed dramatically. They are now common place in our lives, and have a huge influence in the IT industry in general. With the introduction of Windows 8 OS in October 2012, upsizing of touch panels has begun. The impact of this event on the immediate growth of the touch panel market and the long-term effect is so immense that it cannot be estimated at the moment.

The financial crisis that started in 2008 left much of the IT industry hobbling worldwide. But only the touch panel market is enjoying a boom. Many new players are pouring into the industry, and those on the sidelines are waiting for the opportune moment to enter. As more players enter the competitive landscape, touch panel prices are falling rapidly. In addition, to gain competitiveness and to differentiate itself in the market has led players to develop and improve structure, technique and process, and seek out new materials.

The introduction of Windows 8 is leading the increase in touch capable Notebook and AIO PCs. It is still too early for the touch interface to completely displace keyboard and mouse, but the touch functionality does add convenience to some operations. We are sure to see an increase in specialized apps that capitalize on such functions. Therefore, touch functions will complement traditional input methods. As the technology is still in early implementation stages, it is used only in select high-end Ultrabooks. But it’s only a matter of time before touch functions make its way to mid-end products.

Forecasting the future of touch panel industry is not only difficult, but also outright confusing in the current landscape due to the rapid expansion; the increase in number of devices that use touch panels; more players in the market; and rapid development of new products and new processes. In serving clients, Displaybank has released “Touch Panel Market Forecast and Cost/Issue/Industry Analysis for 2013″ to provide industry outlook by application, product, and capacitive touch structure. The report also includes the supply chain of set makers and touch panel manufacturers; and cost analysis of major capacitive touch panels by size and type. This report will serve as a guide to bring clarity and understanding of rapidly transforming touch panel industry.

4. Cheaper components could allow 7-inch tablets priced below US$150, says TrendForce [DIGITIMES, Dec 14, 2012]

Viewing that Google and Amazon have launched 7-inch tablets at US$199, other vendors can offer 7-inch tablets at below US$150 only by adopting cheaper components, according to Taiwan-based TrendForce.

As panels and touch modules together account for 35-40% of the total material costs of a 7-inch tablet, replacing the commonly used 7-inch FFS panels with 7-inch TN LCD panels accompanied by additional wide-view angle compensation could save over 50% in panel costs, TrendForce indicated. In addition, replacing a G/G (glass/glass) or OGS (one glass solution) touch module with a G/F/F (glass/film/film) one, although inferior in terms of transmittance and touch sensitivity, can cut costs by about 70%. Thus, the adoption of a TN LCD panel and a G/F/F touch module for a 7-inch tablet could reduce material costs by about US$25, TrendForce said.

Given that the type of DRAM affects standby time only as far as user experience is concerned, costs can be reduced through replacing 1GB mobile DRAM priced at about US$10 with 1GB commodity DRAM priced at about US$3.50, TrendForce noted. As for NAND flash, 8GB and 4GB eMMC cost US$6 and US$4, respectively, and therefore the latter should be the preferred choice to save costs.

For CPUs, China-based IC design houses, including Allwinner Technology, Fuzhou Rockchip Electronics, Ingenic Semiconductor, Amlogic and Nufront Software Technology (Beijing), provide 40-55nm-based processors at about US$12 per chip which could be alternatives to chips used in high-end tablets which cost about US$24, TrendForce indicated.

While the sales performance of tablets below US$150 is yet to be seen, such cheap models are expected to put pressure upon China-based white-box vendors, and in turn intensify price competition in the tablet market in 2013, TrendForce commented.

5. Strong demand from non-iPad tablet sector to boost short-term performance of IC vendors [DIGITIMES, Jan 28, 2013]

Demand for IC parts from the tablet industry in China has been stronger than expected in the first quarter of 2013, which could help boost the short-term performance of IC design houses, while offsetting the impact of slow demand from China’s smartphone sector caused by high inventory levels, according to industry sources.

Entry-level tablets meet market demand in terms of pricing and functionality, particularly in China, said the sources, adding that demand for entry-level tablets in China and other emerging markets could top 4-5 million a month in 2013 compared to 2-3 million in the second half of 2012.

MediaTek, while seeing demand for its handset solutions from China decrease in the first quarter of 2013, has also enjoyed emerging IC demand from the tablet sector, with plans to release chipset solutions for the segment in the second quarter of the year, the source revealed.

Since the growth momentum for tablets in 2013 is expected to come from non-iPad vendors in China and other emerging markets, Taiwan-based suppliers of LCD driver, analog and touch-controller ICs as well as those of Wi-Fi, audio and Bluetooth chips will benefit from the trend thanks to cost advantages and strong business ties in these markets, the sources commented.

6. Allwinner A31 SoC is here with products and the A20 SoC, its A10 pin-compatible dual-core is coming in February 2013 [Dec 10, 2012] and The upcoming Chinese tablet and device invasion lead by the Allwinner SoCs [Dec 4, 2012], both from my own separated trend tracking site devoted to the ‘Allwinner phenomenon’ coming from mainland China and having the potential of drastically altering the 2013 device market (not taken into account at all by Goldmann Sachs report):

that already resulted in huge growth of the mainland China Android tablet manufacturing in 2012, as well shown by this chart:which has already fundamentally affected the worldwide tablet market in 2012:

7. What Allwinner started in 2012 with the single core A10/A13 SoCs and which was further boosted by the quad-core Cortex-A7 A31 SoC on Dec 5, 2012 with the release of Onda V972 and V812 tablets (for US$ 208 and US$144 respectively) is an incredible strategic inflection point for the whole ICT industry, which ALL SoC vendors should compete with. Rockchip shown as the #2 on the mainland China market just followed the suite:

8. Now the most ambitious external challenger Marvell Announces Industry’s Most Advanced Single-chip Quad-core World Phone Processor to Power High-performance, Smartphones and Tablets with Worldwide Automatic Roaming on 3G Networks [press release, Feb 19, 2013] which is going to add to the competition the integrated on the SoC 3.5G modems:

Marvell’s PXA1088 is the industry’s most advanced single-chip solution to feature a quad-core processor with support for 3G field-proven cellular modems including High Speed Packet Access Plus (HSPA+), Time division High Speed Packet Access Plus (TD-HSPA+) and Enhanced Data for GSM Environment (EDGE).

The Marvell PXA1088 solution incorporates the performance of a quad-core ARM Cortex-A7 with Marvell’s mature and proven WCDMA and TD-SCDMA modem technology to provide a low-cost [elsewhere stated by Marvell that this SoC is for the phones space in the "$100 range"] 3G platform for both smartphones and tablets. The advanced application processor technology of the PXA1088 enables a breakthrough end user experience for multimedia and gaming applications with universal connectivity. Marvell’s complete mobile platform solution includes the Avastar® 88W8777 WLAN + Bluetooth 4.0 + FM single-chip SoC and the L2000 GNSS Hybrid Location Processor, and an integrated power management and audio codec IC.

Marvell’s PXA1088 is backward pin-to-pin compatible with its dual-core single-chip Unified 3G Platform, the PXA988/PXA986, enabling device partners to upgrade their next-generation mobile devices to quad-core without  additional design cost.

…

Currently, the PXA1088 platform is sampling with leading global customers. Products based on this platform are expected to be commercially available in 2013 [elsewhere stated by Marvell that “We'll start seeing PXA1088-based phones in the first half of this year”].

9. Yesterday we had two significant advancements described in the Ubuntu and HTC in lockstep [Feb 19, 2013] post here. Especially the Ubuntu related part is remarkable as first time we had a new platform which can span the whole spectrum of devices: from smartphones, to tablets, to desktops, to TVs – actually all from a smartphone capability expanded via docking and other means to a screen, to a TV, a keyboard, and a mouse. This is certainly an extreme case of the new Ubuntu capability which can have implementation in different devices as well. Even in that case, however, the source and binary codes could be the same. This is also cleverly using the already well established Android drivers and Android Board Support Package (BSP) infrastructure of the most cost-efficient ARM SoC vendors. Note that this is furthest from any “license violation” attacks as the original OHA terms and conditions are stating the Apache V2 licencing which:

The Apache license allows manufacturers and mobile operators to innovate using the platform without the requirement to contribute those innovations back to the open source community. Because these innovations and differentiated features can be kept proprietary … Because the Apache license does not have a copyleft clause, industry players can add proprietary functionality to their products based on Android without needing to contribute anything back to the platform. As the entire platform is open, companies can remove functionality if they choose.

10. Finally today came Google Glass: showing how radically the user experience might be changing in the next 2-3 years:

More information: Google Glass – Home [Feb 20, 2013] where it is also possible to grasp its wonderful, non-intrusive seign like this:

Conclusion: There are even more uncalculated by Goldmann and Sachs advancements in the non-Apple and non-Microsoft spaces than in Apple and Microsoft ones. Just in these 3 months! Therefore it would be ridiculous if Goldmann and Sachs’ “consumer compute platform share” forecast as shown in the chart above will be fullfilled!