Market Insight

Sony Seeks Halo Effect for Z5 Smartphone Range with a 4K Ultra High Definition Z5 Premium

September 02, 2015  | Subscribers Only


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At IFA, Sony has unveiled three new models:

  • Xperia Z5 Compact, Xperia Z5 and Xperia Z5 Premium
  • All three models include a brand new camera design, including phase detection pixels for very fast focusing, are the first smartphones to include a side-mounted fingerprint sensor, and use Qualcomm’s troubled Snapdragon 810 chipset
  • Z5 Premium offers 5.5” 4K display, Z5 a 5.2” 1080P Full HD screen, while the Z5 Compact display offers 720P HD resolution
  • Both the two larger models include 3GB RAM, while the compact has 2GB

Our Analysis

While Sony seeks to visibly differentiate its new range with the 4K ultra high definition (UHD) display on the Z5 Premium, this threatens to overshadow the more significant improvements to the range which will be of more benefit to more consumers. Both the side mounted fingerprint sensor on all three models and the 4K display are the first of their kind on a smartphone handset.

Today, 4K content will be extremely sparse for the Z5 Premium which will make it hard for Sony to market this model product at a higher price than rivals with lower resolution displays. Globally, there are just eight UHD TV channels available anywhere and there is little 4K content too.

The most widely available on demand streaming service, Netflix’s 4K offer, includes just a handful of TV programmes: Netflix offers six TV shows, four documentaries, and ten films in 4K quality in total. But Netflix’s mobile app will initially not offer 4K video streaming on the Z5 Premium making this content irrelevant to Sony’s smartphone.

Instead, Sony must focus on other consumer uses for the 4K screen, for example reviewing user-captured 4K video taken using the smartphone itself. Sony  may also bundle 4K movie downloads as part of marketing incentives in conjunction with mobile operators. This will leverage the 200GB micro SD capacity of the Z5 Premium.

Significantly, the high resolution on the Z5 Premium also runs counter to Sony’s competitive strengths with its smartphone range and supports its competitors’ strategies. Over the last two years, Sony Mobile has focused on offering extremely long smartphone battery life which is harder to deliver with higher resolution screens. Unlike LG and Samsung, which have display component divisions, Sony chose to forego offering Quad HD displays on its range previously (bar the Verizon-only Z4V), and continues to pursue this strategy even now with its mainstream Z5 flagship.

Sony’s other challenge with the Z5 range is its need to leverage other company’s chipsets. Smartphone makers with the capability to use their own designs – Huawei, Apple and Samsung in particular -- have enjoyed an advantage with flagship models in 2015 because of Qualcomm’s weak Snapdragon 810. LG experienced issues with the eight core 810-based Flex 2 a the start of the year and as a result switched to using a lower capability six core 808 for its G4 flagship in the second quarter.

Because the Z5 range will not be available until October for the Z5 and Z5 Compact, and not until November for the Premium, these models will have to compete in-market with smartphones running Qualcomm’s next chipset, the 820. This also means that while Sony may be the first to announce a 4K screen smartphone, it may not be the first to ship one. IHS expects the first 820-powered devices to perhaps arrive as early as December 2015 and during early 2016 will become common on new flagship models. In essence, 820 smartphones will arrive  just a few months after the Z5 range’s debut.

The new camera technologies included in the Z5 do play to Sony’s competitive strengths. Its camera division has been a pioneer in mirrorless interchangeable lens cameras which require fast digital focusing and innovations which can be re-purposed onto smartphones. Sony’s sensors are now a leader in the smartphone industry and are widely used by most of Sony Mobile’s smartphone competitors.

Other important differentiators the Z5 Premium may overshadow include the innovative position of the fingerprint sensor which allows easy unlocking without learning a new power button position on the back as HTC and LG have tried to push. And, which works better on large screen smartphones than Apple’s iPhone Touch ID button position. Sony should also benefit from Samsung’s decision to drop IP rating from its mainstream flagships in 2015, but to date, Sony has enjoyed little uplift.

The premium strategy works for Samsung with the Galaxy S6 and the Galaxy S6 Edge as there is a clear and unique design difference between the two. By comparison, the resolution differences between the Z5 and the Z5 premium will be harder for consumers to see because of the limited content and the small screen size. This will make it much harder for Sony to sell the Z5 Premium at the higher price. It may also explain why Sony opted to retain a mere Full HD 1080P display, rather than a Quad HD display on the Z5, as an attempt to make increase the differentiation between the  two devices.

As a result, IHS expects these strong new Sony smartphones to have limited effect on Sony’s overall shipments in the short term. IHS forecasts Sony will ship 27 million smartphones in 2015, compared with 40 million in 2014. However, Sony’s goal of improving profitability in preference to unit shipment volumes will be supported by these high quality flagship models because margins are stronger at this end of the market than at lower price points. If Sony can overcome the weaknesses of the 810 chipset, these new Z5 models will boost the appeal of the Sony brand, and hence help support margins into 2016.

 

 

Organization
Sony Sony Ericsson
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