The end of easy growth in smartphones
At the end of last year I was saying that the smartphone boom was a tide that lifted all boats. That is no longer the case. — But the big story is that there has been a clear non-seasonal counter-cyclical decline in Nokia and RIM's smartphone performance.
Context & Ripple Effects
In February's analysis of the lives and deaths of mobile platforms, asymco framed smartphones as a rising tide lifting every participant. This piece marks the inflection: the tide is still rising, but it has stopped lifting everyone — the boom now differentiates between platforms rather than rewarding them all.
The specific evidence is a clear non-seasonal, counter-cyclical decline at Nokia and RIM. Two incumbents shrinking while the overall category grows is what turns an expanding market from a safe harbor into a share-shifting contest, which is why this observation mattered when published on 2011-07-31.
First-order effects
- Nokia and RIM are losing volume against a growing category — their declines are not seasonal troughs but counter-cyclical erosion, meaning demand is leaving them even as total smartphone demand expands.
- The 'rising tide' thesis that justified patience with struggling platform holders no longer holds; investors and carriers can no longer assume category growth rescues a weakening vendor.
Second-order effects
- Demand abandoning Nokia and RIM flows to competing platforms, concentrating gains among whichever ecosystems can absorb switchers and raising the stakes for developers choosing where to build.
- Incumbent handset makers facing share loss come under pressure to change course — new operating-system strategies, pricing resets, or partnerships — rather than wait out a cycle that is not coming back for them.
Third-order effects
- If divergence replaces uniform growth, the smartphone market consolidates around a small set of winning platforms while legacy vendors become structurally declining businesses rather than cyclical participants — the pattern asymco had already sketched in its platform-lifecycle framing.
- A market defined by share shifts rather than expansion invites harsher competitive behavior — price aggression and ecosystem lock-in — and eventually draws the kind of scrutiny and strategic upheaval that reshapes who counts as a phone maker at all.
The trend: Smartphone growth is decoupling from incumbent vendors, shifting the industry from an expansion story where all boats rise to a zero-sum contest among platforms that will sort survivors from casualties.