The rise of Windows Phone as an alternative platform to Android and iOS has long been predicted. Microsoft may have struggled to carve out a niche in the smartphone market, but there are signs that its mobile platform is finally making inroads. With BlackBerry on the ropes, that third place looks safe, but it’s still a distant third right now. As Microsoft swallows its dominant manufacturer, in the shape of Nokia, the big question right now is – why would any other manufacturer choose the Windows Phone platform?
The cost of Windows Phone
Licensing agreements are kept secret, so it’s tough to know how much Microsoft charges OEMs (original equipment manufacturers) to use the Windows Phone platform. Back in 2012 the Chinese manufacturer ZTE revealed that Microsoft was charging £15 to £20 for each license. Most people agreed that was a high price, and it seems safe to assume that not every manufacturer would have to agree to the same terms. Big hitters like Samsung and HTC presumably paid less.
It’s worth remembering that Microsoft has successfully sued and cajoled the majority of Android smartphone manufacturers into paying a license fee to cover patents it insists that Android illegally infringes. This led to the strange situation of Microsoft making more money from Android than it does from Windows Phone. Once again we don’t know the exact terms of these licenses, but it seems safe to assume that they’re a lot lower than £15 to £20 per device, probably less than £5.
Android is cheaper, it’s far more popular, and Google is adding new features to it all the time. It’s not too difficult to see why Android took off and Windows Phone didn’t. The popularity is a double-edged sword, though, because it means more competition, and we know Samsung has been dominating. Still, there’s no getting round Microsoft’s embarrassing failure to attract more OEMs to Windows Phone.
According to the latest data from AdDuplex, Nokia accounts for 89.2% of all the Windows Phone 8 devices in the world. HTC is next on just 7.7%, and Samsung is a distant third at 1.8%. It has been clear for a while now that Nokia was the preferred partner. Microsoft paid the company hundreds of millions in instalments to entice it to focus on the Windows Phone platform, and now it has acquired Nokia’s manufacturing wing for $7.2 billion.
If we glance at the tablet market, where Microsoft already manufactures its own Surface line, we can see growing tension with OEMs. Hewlett Packard’s Meg Whitman was recently quoted by Business Insider as saying, “Current partners like Intel and Microsoft are turning from partners to outright competitors.”
We speculated before about whether Microsoft might want to adopt an Apple model. Owning and controlling the software and the hardware has some obvious benefits, but it’s clearly not easy, especially when you’re chasing two leading platforms with a combined market share pushing 80%. Microsoft has a better chance of closing the gap with more manufacturers onside. Samsung may dominate Android, but the other contenders definitely drive innovation, and the South Korean giant is not the only company making money from Android anymore.
There was a fear when Google acquired Motorola Mobility that it would become the preferential partner for Android, but the two companies have been kept separate and there’s little evidence of that happening. There’s still strong competition in the Android market.
There has never been strong competition in the Windows Phone market. Microsoft’s acquisition of Nokia cannot be interpreted as an inviting move for companies that have only dipped a toe in the water with Windows Phone. Who’s going to jump in there now?
The latest rumour doing the rounds is that Microsoft tried to persuade HTC, Samsung, and Huawei to make their smartphones dual-boot devices, capable of running both Android and Windows Phone. Why you would want the ability to swap between two different operating systems that don’t play nice with each other on your smartphone is beyond me. It would eat up a lot of storage space, you would have to invest in two eco-systems, and what exactly is the benefit?
Microsoft is fast reaching the point where it can’t realistically look to anyone else to manufacture hardware for it. Unfortunately, beyond the Xbox 360 and some PC peripherals, it’s tough to highlight any previous success in manufacturing. Microsoft’s last attempt at the mobile hardware market was the Kin. At least the Nokia acquisition brings some hardware skills to the table, but whether it will be enough for Microsoft to really challenge is debatable.