Shipments and Market Share Matter; Even if Companies Say Otherwise

Apple recently stopped reporting quarterly hardware volumes in its earnings calls. Amazon has, famously, never reported its hardware numbers. Nor has Microsoft (for Surface). In fact, many companies don’t publicly state their hardware shipments, and more than a few suggest the unit number is less important than the revenue number. Obviously, revenue is hugely important, but the world still wants to know: How many did you ship?
Unit volumes are important because they help drive an industry-wide scorecard. We sum them up, and it tells us if the market is growing, flat, or declining. And it gives us important information about the status of the players inside that market and their relative position against the competition. Companies use the numbers to plan their businesses, their marketing, and even their employee bonuses.

Market research companies capture shipment volumes through different methods. At IDC, we use a very resource-intensive one that involves dozens of people across the world. It’s not a perfect system, and we occasionally make mistakes (when we do, we work to correct them). There’s been a fair amount of chatter about our numbers lately, and I thought it might be instructive to talk about our process.

Top-Down Process
IDC tracks new product shipments into the channel. Most of IDC’s tracker products publish quarterly, but the process of collection is a year-round job that we approach from the top down and the bottom up. Let’s start with the top down. Each quarter IDC reaches out to the companies we cover, and we ask for worldwide/regional/country guidance. Our worldwide team collects these numbers and distributes them to the dozens of regional and country analysts around the world. A remarkably large number of companies participate in this process, as they see the value in a third party collecting and disseminating these numbers. We look at these numbers as the starting point, not the finished product. As they say: Trust, but verify.

The process we use to verify is also the one we use to capture shipments for vendors that don’t guide us or report their numbers through earnings calls. This is a multi-pronged approach that includes our world-class supply-side team, our worldwide tracker team, and communication with IDC’s various analysts tracking component shipments.

IDC’s supply-side team resides in Taiwan, but they spend a great deal of time in China. They are in constant contact with component vendors and ODMs that are building the devices for the major vendors. Their relationships here have taken years to build and require frequent face-to-face meetings. The top-line numbers they collect, which include details such as which ODMs are building for which OEMs, deliver a critical fact-checking data point for our trackers, and help us move closers to a market total that includes smaller players (Others) that we don’t track individually.
Meanwhile, the worldwide tracker team is acquiring numerous import/export records from countries around the world. These files are expensive, big, and messy, and our team spends weeks cleaning them to get at their valuable data, which can include details such as SKU-level data and even carrier-destination for smartphones. This data is then passed along to the local analysts.

Finally, IDC’s various component-tracking analysts are collecting their information about processors, storage, memory, and more. These inputs—which obviously lag shipments of finished products—represent a third top-down data point that we use to triangulate on an industry total.

Bottom-Up Process
While the top-down processes are in motion, our regional- and country-level analysts are conducting a bottoms-up approach. One of the key steps is to reach out to the regional contacts of the vendors to ask for guidance. These calls help both IDC and the vendors track down possible internal errors in shipment distribution.

In parallel, dozens of local analysts are also accessing localized distribution data. Access to this data varies widely by country. In some places it’s a deep a well of important information, in other places it’s very basic, and in some places, it’s simply not available.

Concurrently, the local analysts are having ongoing discussions with the channel. Like distribution data, the level of inputs here can vary widely. In some places, channel relationships drive a great deal of very detailed information. In other places, the channel plays it close to the vest, and the analyst is forced to do more basic checks. In the end, the channel piece is an important part of the overall process.

Bringing It All Together
The various top-down and bottom-up processes culminate with a mad dash to input data, cross-check that data across inputs, fix mistakes, make new ones, fix those, and then QS the finished product. All to publish, typically, about eight weeks after the end of the quarter. Two weeks later, the same teams update their market forecasts. Another monumental effort, driven by a whole different set of processes.

Is the process perfect? Far from it. Do we make mistakes? Yes, but we try to acknowledge them and correct them. Different firms use different methods, but we feel ours is a good one. Sometimes that means we diverge from the pack in terms of a company’s shipments in a given quarter. If you see us doing so, it’s because we feel our process—and the information we’ve collected—has led us to a different conclusion. I should note that this process is becoming increasingly important as the secondary market for products such as high-end smartphones heats up, and a few companies drive real revenue through the sales of refurbished phones. IDC attempts to track these units in our installed base, but we work to keep secondary phone shipments out of our shipment numbers.

If a company says revenues or margin matter more than shipments, that’s not an unreasonable position to take. Especially in a slowing or declining market. However, you can bet that behind the scenes that company is still closely looking at shipment volumes and market share. In the end, markets need shipment data to track the health of their industry and the relative position of the players inside of it.