There could be a lot more smartphones shipping this quarter and next than anyone is prepared to buy, writes Collins Stewart analyst Ashok Kumar in a note this morning. Kumar warns smartphones face a “looming supply/demand imbalance.” That’s because Motorola (MOT) and Palm (PALM) are ramping up their production of devices dramatically while Nokia (NOK), Research in Motion (RIMM) and Apple (AAPL) hold the top slots in smartphone production, leaving little room, he believes, for the phones Moto and Palm are making to sell through to consumers.
Nokia, RIM, and Apple hold 41%, 20%, and 11% of global smartphone production, a combined 72%, as of the March quarter. Taiwan’s HTC (which has made “Android” phones for Google (GOOG)) and Samsung (SSNLF.PK) are a close fourth and fifth, respectively, with 5% and 3%.
Moto is meantime ramping up production of forthcoming Android phones, including the code-name “Morrison” device, and the “Scholes” device, at around 2 million units. Palm, writes Kumar, is expected to increase production of its Pre smartphone and also the forthcoming “Pixie” smartphone to 2.5 million units or more in the second half of ‘09 compared to “under 300,000 units” in the first half of the year.
Kumar implies there may not be enough demand to meet Moto and Palm’s supply surge, calling the smartphone market, “A zero sum game.”
“Based off production volumes,” writes Kumar, “Moto and Palm are expected to capture 6% of smartphone volumes up from 4%. Unless the market is stronger than we anticipate and/or incumbents lose share, there is a looming supply/demand imbalance.”
For my part, I’d note that a) it is entirely possible some incumbents will lose market share (hint: Nokia) and b) it is also possible that the market is not a zero sum game and that it is in fact, elastic given price, features, etc.
