Apple's Growth Trails Smartphone Market in 3Q 2013, but Improves in Broader Mobile Phone Market

FirstNTenderbit · Oct 29, 2013

ValSalva said:
Aren't profits what matter most? Apple is targeting the middle to high end which is growing. Android can have the bottom end which is also growing but is less profitable.

Will do good said:
Spot on. Who the hell wants to spends a lot, sell a lot and make a thin profit.

If the OP was about profit then I could understand your point. It's about Apple's 3Q growth relative to the rest of the world's. Not try to be snarky but hijacking the thread to promote a different narrative doesn't really help forward the original topic.

Profit is not the answer to every question.

On topic: I pretty sure Apple will have it's supply constraints relieved in 1Q so I imagine the numbers will look significantly different in the next report.

CEmajr · Oct 29, 2013

ValSalva said:
Aren't profits what matter most? Apple is targeting the middle to high end which is growing. Android can have the bottom end which is also growing but is less profitable.

Profits do matter the most but Samsung has a different strategy. Their strategy is to flood the market with dozens of devices (maybe hundreds) at all price points and form factors. They hope to eventually totally dominate the market and control the marketshare with this strategy as they have done in other sectors such as TVs. Sell cheaper than the existing market leader by accepting much lower average margins and price them out of it. It remains to be seen if they will eventually do this to Apple. Their margins aren't touching Apple's but they're selling so many devices that their overall profit is almost as good.

To the person wondering why they don't have the supply issues that Apple has with the 5S. You have to keep in mind that those numbers from Samsung represent tons of devices. Apple usually only actively sells 3 iPhones at a time. No other smartphone has such front loaded demand like the latest iPhone model and none of the other phone manufacturer's launch their phones on the same date on all carriers in so many different countries. The materials used for Samsung phones are also cheaper and easier to manufacture.

FirstNTenderbit · Oct 29, 2013

fehmann said:
Like he said, "shipments."

Not saying Samsung isn't selling smart phones by the boatload. Just that it's hard to know how far ahead they are when Apple gives us "sales" and Samsung gives us "shipments."

Thoroughly debunked... multiple times on MR. I wish people would stop using this myth.

BaldiMac · Oct 29, 2013

840quadra said:
This was the most potent paragraph from the linked article

With that in mind, it won't be long until Apple slips into 3rd and 4th as adoption of Android continues to grow. Not exactly a bad place, as long as Apple continues to grow, and maintain a reasonable chunk of overall users in an active installed base.

Interesting. I would have the exact opposite analysis of the statement that you quoted.

The growth of "Other" is a problem for the top Android manufacturers, not Apple. Especially since the "Other" category would presumably be competing at the low end of the market for the most part.

Case and point, it's also interesting that Samsung's market share growth is stagnating a quarter after their flagship release.

Oletros · Oct 29, 2013

fehmann said:
Like he said, "shipments."

Not saying Samsung isn't selling smart phones by the boatload. Just that it's hard to know how far ahead they are when Apple gives us "sales" and Samsung gives us "shipments."

Apple gives shipments also.

And really, after 4 years still using the same old boring and meaningless "shipped vs sold" argument.

Count Blah · Oct 29, 2013

springsup said:
NO
From a wise man.

Thank you!!!! Your second Jobs quote was exactly what I was looking for, to counter the Apple fanbois after the iPhone 5s/5c release. This fits EXACTLY what I was trying to tell them, and they would not listen. They put their fingers in their ears and stomped on the ground, refusing to listen to the logic contained in this cold equation.

yablochnik · Oct 29, 2013

springsup said:
My passion has been to build an enduring company where people were motivated to make great products. The products, not the profits, were the motivation. Sculley flipped these priorities to where the goal was to make money. It's a subtle difference, but it ends up meaning everything.

From a wise man.

Somehow I got the feeling that you can easily replace Sculley with Cook and this words will still be true.

Anyway, Apple's doing a good job, at least presently, glad to see the shipments of iPhones have increased.

lilo777 · Oct 29, 2013

BaldiMac said:
Interesting. I would have the exact opposite analysis of the statement that you quoted.

The growth of "Other" is a problem for the top Android manufacturers, not Apple. Especially since the "Other" category would presumably be competing at the low end of the market for the most part.

Case and point, it's also interesting that Samsung's market share growth is stagnating a quarter after their flagship release.

"Stagnating" is better than falling (in case of Apple). And "quarter after their flagship release" is irrelevant since the comparison was made on y-to-y basis (both Samsung and Apple release new models at about the same time of year respectively)

Count Blah · Oct 29, 2013

kobalap said:
What's the point of getting the device to the hands of people if the device itself sucks? The way to get 3x the sales of iPhones, android phone manufacturers are releasing crappy phones that are loaded with bloatware and are hard to use. Despite only having 1/3 of the devices out in the wild, iOS still makes up more internet usage than all android devices combined.

The product line is not black and white, as you seem to imply. Apple can release an upper-mid tier product. Sell them unlocked for $349-$399.

I don't see anyone calling for an unlocked iPhone for $100.

Nale72 · Oct 29, 2013

kobalap said:
What's the point of getting the device to the hands of people if the device itself sucks? The way to get 3x the sales of iPhones, android phone manufacturers are releasing crappy phones that are loaded with bloatware and are hard to use.

If they are all that crappy and suck, how come they year after year outsell Apple? How can they have a better growth than Apple? Wouldn't people see through them selling useless phones year after year. Wouldn't they buy an iPhone the next time in that case? Have you actually used a modern Android phone (with objective eyes)? I believe it's amazing how much bang you get for your bucks when it comes to some Android phones compared to the 5C for example.

I certainly hope that the guys at Apple don't have the same opinion, but instead realize that there are a lot of really good Android phones out there. They won't just go away by themselves due to selling cheap crap that people will stop buying. They are a real threat.

I'm not saying Apple is doomed, but it's old and incorrect to brush off the Android phones as cheap crap.

MrX8503 · Oct 29, 2013

Why do people continue to think Apple cares about market share? Look at their PC business, they have almost no marketshare in that arena. They care about profits because it allows them to keep creating what they want to create.

Apple was nearly dead at one point, when a company experiences something like that, no amount of cash flow will make them feel secure.

lilo777 · Oct 29, 2013

MrX8503 said:
Why do people continue to think Apple cares about market share? Look at their PC business, they have almost no marketshare in that arena. They care about profits because it allows them to keep creating what they want to create.

Apple was nearly dead at one point, when a company experiences something like that, no amount of cash flow will make them feel secure.

Apple cares about market share because it affects profits. The more important thing for most on this forum is not how market share affects Apple but how it affects them and small market share in computer related products is never good because software developers accessory and peripheral device developers simply do not develop for such products (Macs would be a case in point)

BaldiMac · Oct 29, 2013

fehmann said:
Like he said, "shipments."

Not saying Samsung isn't selling smart phones by the boatload. Just that it's hard to know how far ahead they are when Apple gives us "sales" and Samsung gives us "shipments."

1) Apple does report shipments; however, they also report channel inventory, so sales are transparent.
2) Samsung doesn't report shipments or unit sales. These number are simply estimates by IDC.

ElTorro said:
Yes, but Apple is not the most profitable smartphone manufacturer anymore

Source?

and with margins going down it will be less and less profitable,

Margins have started to rise again last quarter and into next quarter based on forward guidance (and adjusting for additional deferred revenue.)

so they need to increase market share to compensate. But it looks like out of all smartphone manufacturers, Apple is the only one losing market share.

Maybe out of the top few manufacturers.

lilo777 said:
"Stagnating" is better than falling (in case of Apple).

Yep. I didn't comment on Apple though.

And "quarter after their flagship release" is irrelevant since the comparison was made on y-to-y basis

The comparison in the table in the OP was YOY. The comparison that I made was to the previous quarter. It's only "irrelevant" because it doesn't fit your point.

autrefois · Oct 29, 2013

ciaran00 said:
"Shipments".

Retailers must have massive warehouses to store all those millions of phones over the years that you think people aren't buying. I wonder if Samsung et al. pay them storage fees?

People often point out the difference between sales and shipments. Yes there is obviously a difference, but at some point you've got to admit that people are actually buying the phones. Apple's marketshare is going down.

At some point, people are going to realize that Apple is starting to lose the smartphone wars. But as long as Tim Cook et al. are rich though, I guess that's all that matters.

BaldiMac · Oct 29, 2013

lilo777 said:
Apple cares about market share because it affects profits. The more important thing for most on this forum is not how market share affects Apple but how it affects them and small market share in computer related products is never good because software developers accessory and peripheral device developers simply do not develop for such products (Macs would be a case in point)

And yet the iPhone dominates in developer support, accessories, and peripheral devices despite having a relatively small market share.

ElTorro · Oct 29, 2013

BaldiMac said:
1) Apple does report shipments; however, they also report channel inventory, so sales are transparent.
2) Samsung doesn't report shipments or unit sales. These number are simply estimates by IDC.

Source?

Margins have started to rise again last quarter and into next quarter based on forward guidance (and adjusting for additional deferred revenue.)

Maybe out of the top few manufacturers.

Yep. I didn't comment on Apple though.

The comparison in the table in the OP was YOY. The comparison that I made was to the previous quarter. It's only "irrelevant" because it doesn't fit your point.

It helps to read other techsites, not only ones that glorify Apple.
http://www.phonearena.com/news/Samsung-tops-Apple-as-most-profitable-smartphone-manufacturer_id45699

lilo777 · Oct 29, 2013

BaldiMac said:
And yet the iPhone dominates in developer support, accessories, and peripheral devices despite having a relatively small market share.

It used to dominate smart phone market share not so long ago. Situation changed and the consequences might follow soon. It still has significant market share though so it is unlikely that it will face Mac-like situation any time soon.

BaldiMac · Oct 29, 2013

autrefois said:
Retailers must have massive warehouses to store all those millions of phones over the years that you think people aren't buying. I wonder if Samsung et al. pay them storage fees?

People often point out the difference between sales and shipments. Yes there is obviously a difference, but at some point you've got to admit that people are actually buying the phones. Apple's marketshare is going down.

This argument is so tired because both sides take extreme views. The difference between shipments and sales is not as big a deal as some make it out to be, but it's not insignificant. Take the difference between Gartner's estimates (end user sales) and IDC estimates (shipments) for 2012.

Gartner 2012 Android Smartphone End User Sales: 446.8 million
IDC 2012 Android Smartphone Shipments: 493.4 million

Assuming both estimates are in the same ballpark, that implies that almost 10% of Android shipments in 2012 were not sold to end users.

At some point, people are going to realize that Apple is starting to lose the smartphone wars.

Only if market share is the only metric in this "war".

----------

ElTorro said:
It helps to read other techsites, not only ones that glorify Apple.
http://www.phonearena.com/news/Samsung-tops-Apple-as-most-profitable-smartphone-manufacturer_id45699

Yet another site comparing Samsungs operating profit to Apple's net income.

lilo777 said:
It used to dominate smart phone market share not so long ago. Situation changed and the consequences might follow soon. It still has significant market share though so it is unlikely that it will face Mac-like situation any time soon.

Apple never dominated smartphone market share. The iPhone peaked around 25%.

Dmunjal · Oct 29, 2013

BaldiMac said:
Only if market share is the only metric in this "war".

What other metric do you follow? Apple used to lead in total revenue, growth, profit, and market share.

Now revenue growth has slowed, profit and market share are both shrinking.

The other metric I see mentioned is that web usage is higher for iOS. True but that is also misleading. Most Android browsers use Desktop or even iPad user agents for browsing.

Apple is doing well but they should be doing a lot better given their enormous head start, outstanding talent, and billions in the bank.

http://seekingalpha.com/article/1783112-apples-earnings-mediocrity

I hope to see new product categories in 2014.

kobalap · Oct 29, 2013

Nale72 said:
If they are all that crappy and suck, how come they year after year outsell Apple? How can they have a better growth than Apple? Wouldn't people see through them selling useless phones year after year. Wouldn't they buy an iPhone the next time in that case? Have you actually used a modern Android phone (with objective eyes)? I believe it's amazing how much bang you get for your bucks when it comes to some Android phones compared to the 5C for example.

I certainly hope that the guys at Apple don't have the same opinion, but instead realize that there are a lot of really good Android phones out there. They won't just go away by themselves due to selling cheap crap that people will stop buying. They are a real threat.

I'm not saying Apple is doomed, but it's old and incorrect to brush off the Android phones as cheap crap.

I didn't say all android phones suck. But here are 10 examples.
http://phandroid.com/2013/08/26/worst-android-phones/

Notice that even Samsung put two dogs out that made it to that list.

For every GS4 (which btw, has its own bloatware and non-sensical features), there are numerous crappy android models from every vendor.

There is a reason that less than half of smartphone internet traffic is generated by Android phones despite Android market share. I suspect its because there are so many models running around in the wild that are quite frankly, terrible phones. And the worst of it is that the people that who can least afford to switch out the sucky phone for the good phone are the ones that are stuck with these crappy phones.

At least when one buys any current iPhone, be it a 4s, a 5c or 5s, they are all consistently good phones.

absurdamerica · Oct 29, 2013

FirstNTenderbit said:
Thoroughly debunked... multiple times on MR. I wish people would stop using this myth.

Exactly. To believe that ******** myth you have to believe that retailers are stocking their shelves with "shipments" of products that never sell, and continue to do so, quarter after quarter, eating huge losses in the process.

If Android phones weren't selling Best Buy/Wal Mart/CostCo etc would stop ordering them. They haven't. If you want to see a case where they did look no further than MS Surface.

ValSalva · Oct 29, 2013

Winni said:
Because with that strategy, you will eventually OWN the market.

At this point there's no realistic chance of any one company owning the mobile market.

springsup said:
I think Steve's thoughts there translate perfectly to the iPhone.

What he's saying is that as long as Apple was making a profit and was financially healthy, they could afford to sacrifice some short-term profits in order to spread their products.

He's saying that what went wrong at Apple was that they became greedy - they had an early advantage, and they stubbornly believed their product was so superior that they could demand much higher prices forever. Ultimately, the competition caught up with 'good enough' products for much lower prices, and it destroyed Apple's future in PCs.

There are two ideas of what Apple is:

1. A company which builds the best products it can, or
2. A company which makes as much money as it can.

If you believe that Apple's goal is to make the best products, who cares if their profits fall? So long as they remain healthy, they can afford to lower their prices because it means more people have access to better products. That's the point Steve was getting at; it's not about making obscene profits; the vision was to "make the thing an appliance and get this out there to as many people as possible"

---

If anything, Steve's comments are even more fitting of the smartphone market. The global technology industry is much more developed than it was in the 90s, and the so-called 'race to the bottom' has happened much faster than it did in the PC industry as a result.

Look at the iPhone's market share since launch to see just how fitting those comments are. The iPhone initially took the world by storm, and early Android devices (like the G1 and G2) couldn't hope to compete. Apple stuck to its guns, insisting that their product was superior and they could demand much higher prices for it, which left an enormous space for the competition to enter. Apple made ridiculous profits for a number of years, but now their profits and market-share (especially outside the USA) are falling.

They went for profits instead of market-share, and it could very well have cost them their future once again.

I see your point. But IMO Apple is not being greedy now. Back 20 years ago Apple was not trying to innovate and was milking what they had for as much as they could. Currently Apple is actively trying to innovate (some may argue not hard enough) and has long term goals and plans.

Mobile is much more competitive than the PC wars 20 years ago. The market is almost a couple of orders of magnitude larger. Given this larger market, winning market share is not realistic. There's plenty of room for Apple to protect its brand and be the Mercedes/BMW brand and make huge profits for years to come. It does seem this is their aim, like it or not.

But of course it's a balance. Price yourself too high and you are out of business. But too low and you dilute your brand and margins fall. No one seems to like Apple's balance right now

FirstNTenderbit said:
If the OP was about profit then I could understand your point. It's about Apple's 3Q growth relative to the rest of the world's. Not try to be snarky but hijacking the thread to promote a different narrative doesn't really help forward the original topic.

Profit is not the answer to every question.

On topic: I pretty sure Apple will have it's supply constraints relieved in 1Q so I imagine the numbers will look significantly different in the next report.

As you know (not to be snarky, but because I do believe you know

), Apple is a publicly traded company and so profits, in some way and at some point are the answer to the most important questions. Market share and profits are intimately related. How can you talk about market share without mentioning profits? If Apple sold phones at a loss they might win the market share war. But that's not the ultimate goal of business.

840quadra · Oct 29, 2013

lilo777 said:
"Stagnating" is better than falling (in case of Apple). And "quarter after their flagship release" is irrelevant since the comparison was made on y-to-y basis (both Samsung and Apple release new models at about the same time of year respectively)

I fully agree with your second point, Sales of iPhones will also go down quite drastically after the newness of the current device wears off. That said, Overall sales (of both platforms) also may have a lot to do with their loyal customer base being eligible for subsidy renewals.

Samsung and Apple could both release phones much more often, however as they get more people into their respective camps, it would be difficult for many of the customers to justify buying them when they are released.

.

BaldiMac said:
Interesting. I would have the exact opposite analysis of the statement that you quoted.

The growth of "Other" is a problem for the top Android manufacturers, not Apple. Especially since the "Other" category would presumably be competing at the low end of the market for the most part.

Case and point, it's also interesting that Samsung's market share growth is stagnating a quarter after their flagship release.

Actually, some of the "low end" other devices are not that bad. They also often have features people like to check off when comparing to an entry level iPhone 4s.

As I commented on with regards to lilo's post, I see Apple as having the same peaks and valley's in their overall sales year. Samsung continues to grow, and continues to move into the space Apple once had a strong lead.

I honestly feel that this is a Good thing. Apple needs this pressure to remain honest, and hopefully innovate, and keep pressure on Samsung to do the same.

BaldiMac · Oct 29, 2013

Dmunjal said:
What other metric do you follow? Apple used to lead in total revenue, growth, profit, and market share.

Apple never lead in market share. Growth is a red herring. The financial numbers require a bit more context than "number get smaller."

Now revenue growth has slowed, profit and market share are both shrinking.

Yep.

The other metric I see mentioned is that web usage is higher for iOS. True but that is also misleading. Most Android browsers use Desktop or even iPad user agents for browsing.

Anecdote does not equal fact.

Apple is doing well but they should be doing a lot better given their enormous head start, outstanding talent, and billions in the bank.

And somehow that equates to losing.

roadbloc · Oct 29, 2013

ValSalva said:
Margins are dropping. Isn't that all the more reason to focus on the middle and high end? Why sell 50 million phones with barely any profit margin?

Because then people buy your cheaper products. Then more of the market is yours.

Apple's Growth Trails Smartphone Market in 3Q 2013, but Improves in Broader Mobile Phone Market

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