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Elliot Mulley-Goodbarne
June 8, 2018
HMD Global is perfectly poised for the coveted slot according to its ambitious general manager
HMD Global has a good chance in its bid to claim third place in the UK market according to experts.
Analysts were mainly positive on whether HMD Global can be the third biggest manufacturer by the end of this year on the back of a five-device strong product range launched at Mobile World Congress (MWC) in February.
Speaking to Mobile News, HMD Global UK and Ireland general manager Sarah Edge (pictured above) reaffirmed the commitment she first made to Mobile News at MWC 2017 – to take the vendor to third spot again by the end of this year.
“I think number three in the UK market is achievable but it will take a lot of hard work. Lots of brands have publicly stated a desire for the same spot.
“However, we know it’s not impossible for us – we achieved third place last year. It’s not something we’re unfamiliar with.”
Edge cited figures from analyst firm Counterpoint Research (see graph on facing page) which recorded HMD Global at third taking 7.4 per cent market share in Q4 2017, behind Samsung (26.5 per cent) and Apple (42.1 per cent).
According to analyst firm Canalys, HMD shipped more than 4.3 million units globally (1.6 million in EU) in the same quarter, pushing it into the Canalys top ten manufacturers list.
In 2017, The Finland-based firm launched its first Nokia-branded devices – the Nokia 3310, Nokia 3, Nokia 5 and Nokia 6 – which ranged in price between £70 and £230. The premium Nokia 8 came six months after MWC.
This year HMD is putting more of a scope on smartphones and the premium market with the Nokia 8 Sirocco leading a five-device strong portfolio.
Part of the range is another blast from the past, the Nokia 8110 feature phone, which was iconised in box office hit film The Matrix.
The firm is ambitiously striving to attack all ends of the mobile phone spectrum in a bid to challenge Samsung and Apple.
Its first range did considerably well for a fresh company taking the plunge into the competitive space that is mobile phones, shipping more than 70.
Several analysts had their say on the manufacturer’s chances of a podium finish and were mainly positive on its chances. However, IDC senior research analyst Susana Santos doubts the vendor’s challenge for third.
“HMD is still very far away according to IDC figures; I don’t think it will overtake Huawei by the end of the year. The Chinese vendor commands 8.5 per cent of the market compared to HMD’s 3.3 per cent.
HMD is also behind fourth placed Sony which takes 5.2 per cent of market share. This is because affordable devices are not as popular per se in the UK which will drive the majority of its shipments.”
Canalys analyst Ben Stanton thinks otherwise, saying: “In the UK, it is not unthinkable that HMD could make the number three position by the end of the year, but it will be challenging. The UK is effectively a duopoly, with Samsung and Apple controlling a collective 74.4 per cent of the market in Q1 2018.
So the challenge is to take volume away from either of those two.” Counterpoint research director, and former Nokia head of global market and competitive intelligence, Peter Richardson, echoes Stanton.
“I would say HMD has a good chance of hitting third in the UK by the end of the year. You can see HMD means business with the massive cash injection it received and it is now worth $1 billion (£748 million).
With that cash HMD can push itself deeper into every market, particularly the brand-focused UK.”
Smartphones
Edge said there’s a bigger focus on smartphones this year to generate volume and grow the business, as is evident from its launch of the Nokia 8 Sirocco, Nokia 7 Plus, Nokia 6, Nokia 1 and feature phone Nokia 8110 .
The first three are the main focus of this year’s launch. The manufacturer shipped 8.7 million smartphones in 2017 according to IDC.
“This year there will be more of a focus on smartphones as you can see from our MWC launch. It will be interesting to see what the reaction is to our new devices.
“We were thrilled with the reaction we got at MWC and had the biggest share of voice of the show.
This year we got a lot more coverage on the smartphones as well as the 8110, which is brilliant for us, it’s not just about the feature phone. We need smartphones to really drive volume.”
Santos said the manufacturer has to shake off Nokia’s image as a Windows Phone feature phone manufacturer to really push its smartphones, a move HMD seems to be implementing after announcing last month that £75m had been raised from investors to fuel expansion plans, and it is now a billion dollar valued firm.
“HMD had to raise those funds. Even though it is charting quite high in market share, there’s still work to be done as it is still a fresh company and, in a way, a fresh brand that requires tweaking.
Channels would know about the brand and its new philosophy with smartphones, but consumers are yet to be updated,” said Santos.
She also highlights that HMD could see considerable success market share-wise by attacking the lower end of the smartphone market.
“Nokia probably won’t be strong in the high-end of the market, but if it can conquer the lower tiers then that will be an advantage. Many brands are actually running away from these low-end segments because it’s not very profitable.
But then the higher you go in price segment you’ll face competition from the top three manufacturers in the world,” said Santos.
“Many manufacturers, such as Wiko in France and BQ in Spain, had to invest in the ultra-low end under $100 segment, but are now moving to the $100 to $200 segment because it’s very hard to invest in the under $100 space because of margin.”
Canalys research analyst Lucio Chen said as a privately-owned company HMD can take the risk and work at a “substantial loss” to gain market share, but it’s a plan that is, of course, not sustainable.
“This is not sustainable in the long term, and private companies like HMD Global will eventually have to shift their revenue and cost structures, as the top three have now done, towards profitability,” he said.
Stanton added: “If HMD is operating at a loss, this is perfectly normal for a new private company. If HMD decides to go to IPO in future, having scale will help it achieve a high market capitalisation.”
Feature phones made up the bulk of HMD’s shipment figure last year. According to IDC, the manufacturer shipped 59.2 million in that year, which also saw the release of the classic Nokia 3310.
According to IDC 2018 Q1 figures the Nokia brand is number one feature phone brand in the UK, taking 35.3 per cent market share.
No doubt the release of the Nokia 3310 helped drive that charge to the top spot,unseating former chart topper Alcatel, which now resides in third at 20 per cent, behind Doro (22.9 per cent).
On a yearly basis, the Nokia brand has been the biggest volume driver in feature phones since 2015, partly due to Samsung pulling out of the segment entirely – the Korean giant was the leader in the space in 2013 and 2014.
According to IDC, HMD Global shipped 59.2 million feature phones globally in 2017.
Premium
GfK technology key account director Imran Choudhary, highlighted the power of the Nokia brand and how it was associated with premium devices.
On the back of that, HMD Global has seen growth not many start-up companies experience.
By comparison, UK smartphone brand Wileyfox began life as a fresh brand in 2015 and recorded more than 600,000 devices sold in 2017 across eight device launches, a figure that is dwarfed by HMD’s multi-million volume.
“The brand is undoubtedly a key reason for its early performance since coming back to the market,” said Choudhary.
“The name Nokia has instant recognition and warm sentiment amongst many in the market.
Having said this, in such a competitive market place, one has to also have the right go-to market strategy underpinned by a pointof- view expressed cleverly through a handset range aimed at the right audience.
The latest Nokia range has some compelling devices at very competitive price points.
“GfK Tech Consumer 360 can reveal that 10 per cent of all handset buyers considered Nokia, with these figures rising amongst buyers of brands supporting the Android OS, which bodes well for future efforts.”
Canalys’s Ben Stanton concurs with Choudhary’s point on branding ranging by HMD Global and also highlights its challenge to push customers towards its premium range.
“Brand is a key part of why it has been so successful in UK and Europe, but it is not everything.
“HMD also offers great value-for money at the low-end of its portfolio. And that is where customers are largely gravitated to.
“In Q1 2018, globally, more than 85 per cent of its shipments were Nokia 6 variants or a lowerspec phone. To give some perspective, in the UK, the new Nokia 6 is priced at £229.
So, the vast majority of what HMD is shipping today is low-end. Its challenge is to try and transition its business towards higher priced devices, like the Nokia 7 Plus and Nokia 8 Sirocco.”
Challenges
All experts Mobile News spoke to agree HMD has a considerable amount of work to do. A considerable hurdle to take on is its rivals, new and old.
Many manufacturers are vying for the third spot in the UK or have laid claim to it – such as Huawei, its sub-brand Honor, Alcatel – while other established players such as LG and Sony continue to compete.
However, Counterpoint Research director Peter Richardson said there will be a “royal battle” between two in the fight for third this year, as established players seem to have taken their foot off the pedal.
“The fight will be between HMD and Huawei for third. Sony and LG won’t be competing at all for third place.
“There’s a certain respect for Sony but it doesn’t have the range and reach to mount a sustainable challenge. It seems to be focusing on other aspects of its business instead of the smartphone segment.
“LG is too humble and doesn’t seem to try that hard and would rather operate in the shadows with its great products, but overall it will not set the world alight.”
Santos said HMD faces competition from another challenger brand, Xiaomi. The world’s fourth largest manufacturer will sell devices through Three in the UK. Similar to HMD, Xiaomi is known to sell premium handsets at attractive prices.
“Xiaomi is serious about its challenge in Europe after announcing it will open 100,000 retail stores. HMD and other players below the top two will face strong competition from Xiaomi, which also has financial capital to back itself up. It is seeking to raise £7.3 billion for expansion after announcing its initial public offering on the Hong Kong stock exchange.”
Unique
Edge stated a desire to push deeper into the B2B channel and believes its key device points, partnerships and price range will be see to that.
She’s targeting 10 per cent of shipments to come from B2B sales. Nokia’s smartphones boast unique selling points over its rivals having penned deals with Google and Carl Zeiss to stamp selling points into handset software and hardware respectively.
Android One is the operating system in its unmodified form intended to provide consistent user experience and provide regular security updates.
HTC, Motorola and Xiaomi also have devices on the Android One programme. Getting its upper-end smartphones the Nokia 6, 7 Plus and 8 Sirocco on the programme was a key move for HMD to move deeper into the B2B channel, according to Edge.
“We just began to focus on the B2B market with our recent product launch. Other manufacturers might release products on previous versions of Android whereas we aim to be away from that with our B2B propositions.
“We also have price points B2B will find attractive. It’s perfect for enterprise and validated by Google.
“As part of that programme it says that it needs to commit to regular security patches. HMD will update every month as part of the Android One promise.
“Around 10 per cent of smartphone shipments in the UK is through B2B. I’d like 10 per cent of our shipments to be from B2B in two years’ time.”
Challenger
After more than a year at the UK helm, Edgestill sees HMD as a challenger and references the recent win at the Mobile News Awards as ‘challenger manufacturer for the year’.
Despite breaking into the top five of most analyst charts, she said: “I think we are still a challenger brand and, obviously, we won the challenger brand award at the Mobile News Awards.
The brand isn’t a challenger but of course its well-established and it puts us in a good position.
“But we still have a lot of hard work in the year ahead of us. What we do have is a great portfolio and strong partners. With that and our brand we have a great chance to fulfil our ambition for the year.”