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A Peek at Smartphones in the Year 2020

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It's the year 2020 and, if you currently get angry at those who drive and talk on their cell phones, just wait until you deal with distracted hoverboard drivers. Kidding, of course. But as wrong as predictions have been for flying cars and the like, there are things that we can predict with a certain sense of accuracy. For example, one thing that's fairly sure to happen is the saturation of the smartphone market in the U.S.

What will this smartphone market in the year 2020 look like? What can Apple (NASDAQ: AAPL  ) and other device makers expect?

Nary a feature phone in sight
Horace Dediu of Asymco plotted out the expectations for the smartphone industry. By 2020, Dediu estimates 270 million U.S. smartphone users, which, when converting to devices, does not include the fact that many have more than one smartphone, or have a company-issued phone. Adding those factors in, Dediu arrives at about 300 million smartphones in the U.S. in 2020 and, with purchases of a new phone averaging about every two years, a market of 150 million new smartphones annually.

Given these numbers, what would smartphone makers expect to sell in 2020 with their current market share?

Company U.S. Marketshare Hypothetical 2020 U.S. Unit Sales (millions)
Apple 40% 60
Samsung 25% 37.5
HTC 9% 13.5
Motorola 9% 13.5
LG 7% 10.5
Blackberry  (NASDAQ: BBRY  ) 3% 4.5

Source: Nielson, and author's calculations.

The issue with such an extrapolation, however, is that device makers have proven that they can drop market share incredibly fast. Seven years ago, Apple had no market share, Microsoft (NASDAQ: MSFT  ) had 36%, and Blackberry had 31%. Seven years in the future, there could very likely be a different hierarchy of names on this list.

For example, HTC recently announced its first quarterly loss since going public in 2002. As Deidu notes, when a handset maker posts a losing quarter, it's incredibly difficult to resurrect momentum, as Blackberry, Nokia (NYSE: NOK  ) , Motorola, and Sony Ericsson have demonstrated in the past. These firms all ended up sold, merged, or they withdrew from the market, and at an increasing speed once they hit trouble.

However, while HTC may eventually bow out, there is a trend that fewer users are switching platforms, and when they do, they switch to Apple. While 4% of iPhone users expect to switch to Android, 12% of Android users expect to switch to an iPhone. This dynamic could lead to Apple remaining on top, even seven years in the future, and smaller competitors fighting among themselves in the lower ranks.

Potential disruptors
Apple will have to put up with hefty competition from companies that can afford to battle for years: Microsoft and Amazon  (NASDAQ: AMZN  ) . Microsoft is not afraid to lose money in a segment for years, as its online division demonstrates, with at least $7.5 billion in losses over the past three years, not including a $6 billion write down in goodwill. Microsoft has committed itself to an extended presence in mobile with its $7 billion purchase of Nokia's device business. And, although losses may mount, its enterprise profits can easily fund years of failure.

Amazon is the dark horse of the mobile industry's future, a frightening prospect for both Samsung and Apple. Amazon recently denied rumors of an upcoming smartphone release, which said that a value device could come late this year, and a more advanced device released in 2014. Amazon has no regard for margins, whether in eBooks or traditional products, as the company's decisions seem centered around the idea that the customer needs to be overjoyed with its products and services. If the company can release a phone that competes on features, with an incredible price tag, it could easily grab share in the always tumultuous smartphone market.

Making the best bet
History can only help us predict the future so well. Instead of digging into trends, investors should look, perhaps, at which company is best at responding to market changes ahead of competitors. That is, if a company just focuses on satisfying the current market, it will miss out on the next shift in technology; but if it creates the next change, it's already on top.

The best way to capitalize on the smartphone trend
Want to get in on the smartphone phenomenon? Truth be told, one company sits at the crossroads of smartphone technology as we know it. It's not your typical household name, either. In fact, you've probably never even heard of it! But it stands to reap massive profits NO MATTER WHO ultimately wins the smartphone war. To find out what it is, click here to access The Motley Fool's latest free report: "One Stock You Must Buy Before the iPhone-Android War Escalates Any Further..."

Read/Post Comments (4) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 09, 2013, at 5:29 PM, tbstheman wrote:

    Completely worthless article.

  • Report this Comment On October 09, 2013, at 7:03 PM, PaulPhoenix wrote:

    The writer of this article REALLY thinks 1.) Blackberry will be around in 2020 2.) Apple will sell more phones than Samsung, HTC, and LG combined. 3.) There are rainbow colored unicorns that poop out gold coins.

    This has got to be the dumbest thing I have ever read. Apple is doing well because it's phones are so cheaply made yet sell for more than their competitors. It also has a customer base that hates change and or is so stuck in the eco-system they do not want to move on. Despite this, I highly doubt Apple commands anywhere near the market share it does today.

    Blackberry will be lucky to survive to the end of this year at least as a hardware maker. Now as software, that is another story.....

    Samsung too will feel the pain, not so much like Apple but there comes a point where the company stops really trying. It has come to that point. Releasing dozens of phones all with slightly different specs to cover every niche will back fire on them. No one buying a Galaxy S4 or even more expensive Galaxy J wants their phone to look like a Galaxy Y Duos.

    I see Google extending its lead with Android on it's devices along with LG and to some extent HTC.

    I also see Nokia being the ONLY windows phone product, which is okay as it will be the #2 smartphone os, after Android and followed by iOS.

  • Report this Comment On October 09, 2013, at 9:06 PM, WineHouse wrote:

    PaulPhoenix is trying to oversimplify what Newman has written. What Newman has written is both profound and inscrutable (not unlike the future itself). That silly chart at the beginning is intended to be exactly that, silly -- since it's an overly-simplistic extrapolation of current trends assuming that nothing really changes. Newman's point of course is that things change!

    I find this to be an intriguing article, and not just because the author does not -- repeat, does NOT -- try to make any specific predictions about what will happen. Instead, Newman points out some of the factors that will determine the downstream outcomes. He makes no predictions whatsoever as to which compan(y/ies) -- or perhaps a company not yet even "in the running" -- might prevail; he merely outlines in general yet reasonable terms some of the factors that will enable long-term success or failure.

    I enjoyed the article. It gave me things to think about.

  • Report this Comment On October 10, 2013, at 2:20 AM, DavidZabowski wrote:

    I found this article to be light. While it provokes some thought, how does it help me evaluate where to invest money now with the expectation that I keep that investment for the next 7 (or more!) years? It stops right before it gets interesting. The article is a nice setup, but what happens next?

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