Phablets Growing Strength by Strength

After the release of the Samsung Galaxy S4 two weeks ago in the United Kingdom, Europe, and some areas of the United States - without distribution problems, we are now beginning to see the full proliferation of "phablet" (smartphone screen size of 5 inches and greater) devices. Rewind just over 18 months ago, to the release of the Samsung Galaxy Note I, the device type was considered a freak, a one off phenomenon that no other mobile OEM would consider releasing. At best, the gigantic smartphone was a niche product that would only be popular with a small number of people. It is anticipated that most of the top mobile OEMs, except Apple, will have a phablet device available in their smartphone portfolio this year. ABI Research projects more than 150 million phablets will be shipped in 2013.

Currently, Samsung is at the forefront of the phablet trend. The mobile OEM has released several phablet devices including the Galaxy Note, the latest Galaxy S series, and also the Galaxy Grand, which have all received significant praise and cater for different market segments. Additionally, HTC and Sony are chasing Samsung's heels with their respective phablet champion devices, One and Xperia Z. The companies have carefully tracked Samsung's leading smartphone, Galaxy S series, and watched the devices increase from 4.3- to 4.8-, to 5.0-inch screen sizes with each of the last three generations. The other mobile OEMs deliberately held off producing a phablet device, cautiously watching Samsung's progress and thus paid the price for entering the market late with their respective models.

Granted, the Samsung Galaxy S4 has slightly more differentiators than being bigger than a standard smartphone. The Korean mobile device maker has developed some seriously impressive user experience features and its smart ready and "eye scrolling" features spring to mind. Nevertheless, the company was also quick to spot that, in these media consumption obsessed times, consumers want bigger screen real estate.

Screen size is becoming an important element of a vendor's device portfolio and an indicator of value, particularly at the high-end (similar to TVs, where Samsung is also market leading). Additionally, Huawei and ZTE have been steadfastly promoting their new phablets at MWC this year. Huawei's Ascend D5 and, in particular, its Mate model, with a massive 6.1 inch screen, have drawn notable glances from other mobile OEMs. Furthermore, ZTE's Grand Memo phablet has demonstrated mobile vendors' urgent need to step into the large smartphone dimension category. It is likely we won't see too much visibility and demand for the Chinese companies' phablets in Western Europe, North America, and probably Latin America. These products are aimed primarily at the Asia-Pacific countries hoping to accommodate the demand for phablets at lower price points.

There are several reasons that have led to the tremendous popularity for phablets. Consumer usage patterns are shifting from simple call making and texting to consuming high levels of multimedia content, constant Internet browsing on the go, to potentially video calling on Wi-Fi and, when the network operators around the world get their act together, for LTE coverage and reasonable priced tariffs. Gaming is also a key driver for phablet devices which greatly enhance the user experience with a larger screen.

An interesting aspect to consider is the growing population sizes of major cities. The Economist magazine projects the population of Tokyo will be 37 million by 2015. The global magazine also projects Delhi will have a population of 24.2 million, Mexico City 20.1 million, New York 20 million, and London 8.7 million by the same year. The growing numbers living in a limited space will stretch the city's infrastructure and more and more people will be forced to abandon their motor vehicles for commuting via train, tube, metro, or bus to their place of work. As such, more people will want to entertain themselves during these commutes. Step onto any of these modes of transport on your way to work today and you will witness a posse of people reading papers, magazines, emails (if they have Wi-Fi or cellular connection), or gaming on their smartphones. In many cases, these devices are phablets.

Another key factor driving phablet appeal is the "bling" factor. People assume a larger smartphone is a more expensive device thus other associated values are also derived with phablets, such as demonstrating wealth and prestige. This is particularly true with certain regions in Asia-Pacific, the Middle East, and other Eastern European countries. On a smaller scale, you could probably relate the smartphones and phablets to TVs. People relate the size of the TV screen to the value of the TV, and for some people this will correlate to the person's income and social standing perhaps. These minor "social ups" are vitally important in countries like Indonesia, Malaysia, and China.

Consequently, don't be surprised if we see some rather impressive shipment and sales figures from Huawei and ZTE's phablet products this year. N.B., this isn't a recent phenomenon; the early to mid-noughties saw significant interest in both the Nokia Communicator and BlackBerry devices from many of these markets, because of their relative size and perceived prestige. It must, therefore, be considered an ongoing market opportunity.

Finally, while addressing the prime suspects for phablets in the previous section, those missing are Apple, BlackBerry, and Nokia. Rumors have circulated that BlackBerry and Nokia will be releasing phablet devices later this year. As yet, Apple has made no announcements and ABI Research doesn't believe the recently re-crowned most valuable company in the world, with a market cap of $435 billion compared to Exxon's market cap of $408 billion, will release a phablet in 2013. Apple is not averse to following form-factor trends, specifically the iPad Mini, however, we don't believe the company is considering a phablet and, in reality, the company has probably missed the bus/underground/train on this. Oh, I just wanted to conclude to the readers, I have a 60-inch TV at home!