Contrary to all expectations, Nokia is back. Its demise has been predicted several times, but the once market-leader refuses to die.
According to data from Counterpoint Research, Nokia took third position for smartphones shipped in the UK in Q4 2017, thanks to affordable phones like the Nokia 3 and Nokia 6. It sat behind only Apple and Samsung.
History makes the revival seem unlikely. While Apple changed the world with the iPhone and Google pumped cash into Android, Nokia clung to its outmoded Symbian software as late as 2013. At this point Symbian wasn't sinking, it was sunk.
Nokia ended up in a similar bind with the ailing Windows 10 Mobile platform. Microsoft bought Nokia's devices division in 2014, and fairly quickly scrubbed the Nokia name from its Lumia phones. And then Nokia smartphones disappeared.
To give you an idea of Nokia's fall from grace, in Q2 2007 it had 50.8 per cent of the smartphone market. In Q2 2013, before its purchase by Microsoft, it had just 3.1 per cent.
It now makes mass-market Android phones, something analysts have suggested for almost a decade.
The change is down to a company called HMD, established in 2016. It makes phones under license from Nokia, but its ties to the phone-maker's past are deeper than that. Current CEO Florian Seiche was a sales VP in Nokia, and took on a similar role at Microsoft Mobile. Chief marketing officer Pekka Rantala worked at Nokia in its glory years. COO Pia Kantola joined Nokia in 1999 and only left Microsoft Mobile to form HMD. Almost the entirety of HMD's list of execs reads like a roll-call of Nokia luminaries.
HMD is Nokia in all but name. However, we might compare its 2017 activity to BlackBerry's revival. In 2017, BlackBerry teamed-up with manufacturer TCL Corporation to make its new phones. And Foxconn's ODM (original design manufacturing) arm FIH has more of a hand in phones like the Nokia 3, 5 and 6 than you might assume.
"[Nokia] phones are co-designed by HMD and Foxconn's team, and finally manufactured by Foxconn under its FIH Mobile subsidiary. FIH also owns Nokia's Vietnam plant now to manufacture feature phones," says Counterpoint Research's Neil Shah.
"Foxconn (FIH) has cutting edge manufacturing expertise with advanced tooling, machining capabilities to build metal or glass back or phones with newer materials or processes, which is a big plus for HMD compared to likes of Xiaomi or someone else who outsources to Foxconn to use those capabilities. So in a nutshell HMD has sort of in-house capabilities leveraging Foxconn FIH." Foxconn, not just HMD, has invested heavily in the new Nokia.
Despite its apparent success, HMD has not announced any Nokia smartphone sales figures. "None of the products was a disappointment or a failure, but we don't disclose volumes," says HMD chief marketing officer Pekka Rantala. So what do we know about where has the success has come from?
"HMD edged out Huawei to become the third largest brand in terms of shipments into the channel ahead of holiday season," says Shah. "[This is] according to our quarterly market research, where we track shipments of mobile phones, smartphones and feature phones, shipping into the channels across more than 50 top markets in our database."
Shipments aren't sales, though. "Huawei ran promotions and carrier exclusives to be neck-and-neck inching in sell-through – Huawei with 5.9 per cent sell-through share and HMD with 5.7 per cent sell-through share," Shah adds.
HMD ranked third in shipments, but fourth in sales. However, this remains remarkable. Its first smartphones, the Nokia 1, 3 and 6, only came to the UK in June 2017. The success was seemingly instantaneous. But how?
"Nokia does have some brand recognition, even if some of it is in DNA from some buyer's parents rather than directly. And despite perhaps not being ultra cool, it is recognised for very solid usability," says Quocira principal analyst Rob Bamforth.
HMD also maximised the 20-year-old warm feelings many of us have for Nokia with a relaunch of the Nokia 3310 in early 2017. For the uninitiated, the original 3310 was released in 2000 and was many people's first mobile phone.
In February 2017, its return seemed just another fun product launch. But it also acted as a viral marketing campaign that prefaced Nokia's smartphone comeback.
The Nokia 3310 reboot earned mainstream media coverage in the The Mail, The Sun and The Telegraph, among others. The fuss over Nokia 3310 likely helped smartphone sales, but according to HMD, two-thirds of the people buying its smartphones in the final quarter of 2017 were aged 35 or younger. "I'm positively surprised about this figure," says Rantala.
Lingering brand recognition also helped Nokia quickly establish itself on UK shelves, virtual and real. You can buy its smartphones from EE, O2, Carphone Warehouse, Vodafone, GiffGaff, Tesco Mobile, Argos and Virgin Mobile. Companies like Huawei and its sister outfit Honor have spent years trying to get close to such exposure.
"We think HMD has done exceptionally well here to bring back the brand from the dead," says Shah. While we don't know about HMD's behind-the-scenes deals, the ubiquity of Nokia's phones suggests highly competitive offers may have been made to carriers.
HMD's approach is aggressive. However, it is also marked by the humbler pragmatism of a company that recognises itself as a contender, not a world leader.
"HMD with its partnership with world's leading manufacturer Foxconn has been able to design their portfolio as per traditional "Nokia build" standards and design language," says Shah. "Further, going with plain vanilla Android and closely partnering with Google helped HMD to achieve faster time-to-market."
The company relies heavily on close partnerships. HMD's Rantala describes the company as a "startup", operating with "agility" but also the "humility" of a smaller outfit.
Where do HMD and license-owner Nokia go from here? It should be noted that HMD is based at the same building as Nokia's headquarters in Espoo, Finland, and we're already starting to see Nokia's new pragmatism as leaked memos suggest it may axe its health division.
This is based on the products of Withings, which Nokia acquired in June 2016. They include hybrid smartwatches and a smart weighing scale. Since HMD entered into its long-term licensing deal to become the exclusive manufacturer of Nokia-branded phones and tablets outside Japan in May 2016 it has for the most part only relabelled and tweaked existing Withings designs.
"Rather than only falling in love with our technology, we must be honest with ourselves," reads the memo foreshadowing the fitness arm's possible closure. It was written by chief strategy officer Kathrin Buvac and published by The Verge.
Read more: Nokia's retro 8110 is getting a revival as HMD goes high-end
But Quocira analyst Bamforth also has concerns about the longevity of HMD's current smartphone plan. "There is a decent market for supplying the underlying hardware for a time and IBM didn't do too badly with the PC, but there is always a risk of becoming a commodity," he says. "Software, services and apps, or rather the market or ecosystem that supports and encourages them, is a powerful driving force and differentiator. Nokia does not lead on that for Android, Google does, and that affects the balance of power in the partnership."
Nokia seems at risk of becoming a vassal entity, a maker of shells in which Android lives. Its relationship with Google already seems closer than that of other manufacturers.
All but the lowest-end of HMD's 2018 smartphones are part of Android One, and Pekala says HMD intends to become the "lead partner of this programme". Android One phones take Google's OS as-is, with no preinstalled apps or custom interfaces, ruling out a manufacturer putting their own clear stamp on the software.
From the perspective of a budget phone buyer, this does not seem an unpleasant future. Lower software R&D costs point to more lower-cost phones, and in a world of models costing up to £1,000 this appeals. The new Nokia 1 will cost under £100, for example.
Shah agrees. "Investing in intellectual property as they scale and scouting differentiating technologies and materials to integrate within their future smartphones" should be HMD's next move, he says. HMD has already purchased patents from Nokia, according to Nokiamob.
There's some evidence of an attempt to further differentiate in HMD's 2018 Nokia phones. They have a Pro camera mode based on that of the Lumia 1020, and a HMD-designed face unlock feature.
HMD's higher-end 2018 Nokia phones, including the €749 Nokia 8 Sirocco, should prove an indicator of whether this is enough to lure buyers who aren't drawn in by the competitive pricing of its early smartphones.
Update 09.03.18, 14:20: Microsoft purchased Nokia's devices division, not the entirety of Nokia.
This article was originally published by WIRED UK
