Nokia's return to smartphone and tablet markets is not an easy mission: Gartner analyst

Global sales of smartphones to end users totaled 349 million units in the first quarter of 2016, a 3.9 percent increase over the same period in 2015, according to Gartner. Smartphone sales represented 78 percent of total mobile phone sales in the first quarter of 2016. Smartphone sales were driven by demand for low-cost smartphones in emerging markets and for affordable 4G smartphones, led by 4G connectivity promotion plans from communications service providers (CSPs) in many markets worldwide.

While smartphone growth is in the positive, the slow down is pretty obvious. Also, there is much disruption in the market with emerging Chinese brands. “In a slowing smartphone market where large vendors are experiencing growth saturation, emerging brands are disrupting existing brands’ long-standing business models to increase their share,” said Anshul Gupta, research director at Gartner. “With such changing smartphone market dynamics, Chinese brands are emerging as the new top global brands. Two Chinese brands ranked within the top five worldwide smartphone vendors in the first quarter of 2015, and represented 11 percent of the market. In the first quarter of 2016, there were three Chinese brands – Huawei, Oppo and Xiaomi – and they achieved 17 percent of the market.”

In such a tumultous market, the once-leading Nokia brand of phones are making a comeback. Microsoft recently announced it had reached an agreement to spin off its entry level smartphone devices to a FIH Mobile Ltd which is a subsidiary of Foxconn Technology Group and HMD Global. HMD will acquire the rights to use the Nokia brand on its products over a period of 10 years.

While Nokia will not be investing in HMD, HMD will be paying Nokia royalties for using its brand name, patents, software and other properties. Nokia Technologies will be on the board of directors for the newly formed company. This is a way for Nokia to assure its customers that consumers will get the same experience and value from these new products, as they would have gotten from a Nokia device. Microsoft will meanwhile continue to manufacture its Lumia series of phones, as well as Windows Mobile.

HMD plans to release Nokia branded smartphones, as well as tablets. “Nokia’s announced return to the smartphone and tablet markets will not be an easy mission,” said Gupta. “In today’s market it takes much more than a well-known brand to sell devices. Making good hardware won’t be an issue for Nokia, but users need a compelling reason to remain loyal to the same brand. Furthermore, that the smartphone market is slowing down makes it difficult for mobile phone vendors to reach previous levels of growth. New company HMD is entering the market at a less prosperous time, making it even more difficult for the vendor to do well in the short term," said Gupta.