Market Insight

Bold start-up HMD launches three Nokia Android smartphones, must avoid nostalgia overshadowing innovation

February 26, 2017

Ian Fogg Ian Fogg Senior Director, Mobile & Telecoms
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Key points - 

  • HMD Global launches three new Nokia-brand smartphones, its first for a global audience. HMD has a 10 year exclusive license to use the Nokia brand on smartphones.
  • All three models run Google Android.
  • Nokia 6 a global version of the handset launched in China in January, includes a premium metal industrial design, chamferred edges, 5.5” full HD display, Dolby Atmos stereo audio, now includes Google Play 229Euro.
  • Nokia 5, antenna on top edge leaving clean aluminium back, 5.2” display, 189Euro.
  • Nokia 3, aluminium, 5” 720P HD display, sculpted Gorilla glass, 139Euro.
  • HMD also launches a revival of the iconic Nokia 3310 featurephone, now featuring a slimmer design, still 2G-only, 22 hours talktime, one month standby time, includes Snake, priced at 49Euro.
  • In a related announcement at the same MWC event, Nokia announced that Nokia-owned Withings health and well-being products to be re-branded Nokia.

Our analysis

HMD is not aiming to achieve similar volumes to Nokia in its prime and does not need to to be a be a major success and be profitable because of its different business model and organizational structure to old Nokia. HMD is a start-up company which is working in conjunction with Foxconn to bring innovative new Nokia handset to market. 

At old Nokia’s peak in 2008 it shipped 468m handsets, of which 60m were smartphones, and had a mobile market share of 41%. No handset player has anything like that dominance of the market today: current leader Samsung had just a 19% share in 2016. And, the most profitable player in the market now, has a share of 12% handset market share, and still just 15% of the smartphone market.

This initial range is just the start, and targets a segment where HMD could bring products to fastest quickest. We expect HMD to offer more premium handsets, especially centred around imaging capability, once HMD has had a little more time for its research and development teams to operate.

Once complete, the goal is for the portfolio is for each product to be indistinguishable from a true Nokia-made handset and fully deliver on the brand promise.

HMD must juggle innovation with brand nostalgia, 3310 risks overshadowing everything

HMD must balance two competing brand goals with its new handsets. HMD must appeal to those consumers who recall the Nokia brand from when Nokia was the leading handset and smartphone manufacturer in the early 2000s while establishing Nokia as a modern and up to date brand again known for innovation.

The launch of the new re-imagined Nokia 3310 featurephone threatens to overshadow HMD’s modern smartphones. HMD must avoid the Nokia brand being seen as purely a nostalgia brand. And, apart from everything else, with 2G networks being switched off in the US and Australia, among other countries, the 3310 will work in an increasing number of countries now. If HMD wishes to re-imagine more classic models, especially those known for data usage like the N95 or Nokia 7110, IHS believes 3G network support is now the minimum to meet Nokia brand values as well as maximizing the handset’s addressable market.

Nokia’s brand has its greatest share in the mobile handset installed base in emerging markets and this is reflected in the keen pricing and low to mid range focus of these initial smartphone products from HMD. In Nigeria and South Africa over 5% of the mobile handset installed base use a Nokia brand to go online. However, in absolute terms, the greatest volume of Nokia users is now in India and Indonesia.

HMD needs to revive the Nokia brand in classically strong but now weak markets such as Western Europe. To do this, HMD must emphasize the strong industrial design of its range, leverage open market channels for these keenly priced models while also re-building operator relationships. Once HMD has had time to develop high end products, IHS expects HMD to launch more premium models, leveraging the extensive Nokia intellectual property portfolio which old Nokia retained when selling its former device business to Microsoft. Most useful for HMD will be the imaging expertise because the camera continues to be a major differentiator for flagship smartphone models.

HMD’s business model is inspired by Apple, not old Nokia

In effect, HMD is a start-up company, with a start-up culture, despite its use of the established Nokia brand. The structure of this new Nokia operation is closer to the model of Apple than it is to the Nokia of old.

HMD partners with Foxconn on the engineering and manufacturing of its models. This lowers cost but has enabled HMD to offer leading materials design work in the industrial design of its range, this is especially notable in the current top of the range Nokia 5 model. Old Nokia operated many manufacturing plants, controlled the sales channel, research and development and operations. Like Apple, HMD designs in-house, but uses Foxconn for manufacture.

Partnering with Nokia-owned Withings will strengthen HMD’s Nokia portfolio

The other key opportunity is to partner more deeply with old Nokia around smartphone “smart accessories” such as wearables in the health and well being area. Nokia owns Withings which offers smartwatches, fitness trackers, smart bathroom scales and home blood pressure monitors. By working together here, HMD can compete not just with the mass of Chinese smartphone brands, but with the innovation leaders such as Apple and Samsung who both have extensive wearable and health-focused mobile products.

HMD is not old Nokia. It is a start-up with a start-up’s ambition but which has an existing brand to provide a kick start. But old Nokia is extremely keen for HMD to succeed. If it does, Nokia will likely take a large ownership stake or buy HMD outright. HMD has a 10 year license, but we will know within a couple of years, but not in a couple of months, whether it will succeed. These models are just a start for HMD.

 

Background information on the Nokia-Foxconn-HMD-Microsoft relationship is here in our analysis of the announcement of the license of the Nokia brand to HMD:
https://technology.ihs.com/578452/

Geography
China Finland
Organization
Foxconn Nokia
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