iPhone Market Share Dips Slightly as Android Increases Lead in Global Smartphone Race

[Merkie]

People suggesting Apple is "losing the race" are not thinking clearly.

First, you're judging the performance of Apple in a race they are not competing in. Apple does not care about market share. So anyone suggesting Apple is losing is false, Apple is not even competing.

To support this statement, first let's take a look at the growth of the installed base of smartphones:

In a year time, the installed base of smartphones has almost doubled. Where does this growth come from? I don't have any quantitative sources to support this, but it may seem logical to any of you that most of this growth occurs fom the transition of feature phones to smartphones. Just look at how far $50 will get you these days.

These cheap phones are what is causing Apple to "lose" market share. For every iPhone Apple sells, probably 10 or more <$100 Android smartphones are sold (off-contract ofcourse). Today it's maybe 10, tomorrow it could be 20.

Now we know what causes Apple to lose market share, the following question can be asked: should Apple be worried about losing market share? The short answer is: not so much. As someone else stated, Apple does not compete on razor thin margins. They are not in the market share business, but in the money making business. And they still make a lot of money (I believe only Apple and Samsung are actually capable of making money off selling smartphones).

Ofcourse, there are a lot of obstacles down the road which should worry Apple. They might need to worry, they might be in trouble, but if that's the case, it's due to whole other reasons than simply losing market share. I bet you that no one in Cupertino really cares about how much cheap Android phones that probably don't even have access to the Play Store sell. What Apple should be worried are questions like these:

- The iPhone is one of the best smartphones around, but smartphones are becoming a commodity. How long until "good" is "good enough"? The iPhone was clearly a better phone than cheaper phones two years ago. But look at the recently introduced Moto G, which costs a third of the iPhone. It has great specs, great battery life and is just a really good device to work with, unlike comparable low-end smartphones from two years ago. Apple has to maintain its advantage over phones like these, which can be hard.

- Apple might be losing ground in the high-end segment of the market (which is what Apple should be worried about). The numbers in this news post don't say anything about that, but big screen Android smartphones that are significantly cheaper than the iPhone are on the uprise. I think Apple really needs a larger screen iPhone.

- The subsidy model for smartphones in the US may be going away. The US is still the most important market for the iPhone, but what if your iPhone is going to cost $700 (like the rest of the world), instead of $200. Will customers keep preferring it over Android phones which cost maybe $300 or $400?

Matters like these are matters Apple should be worrying about. Not market share. Market share is literally a joke.

 

[SPUY767]

The low-hanging fruit is easier to pick.

 

[peterdevries]

Microsoft had the patience and money to ride the storm out and really work in growing the platform. That patience is paying dividends.

I'm quite interested to see how this develops, because there might be a large amount of first-time windows phone users in this market growth.

As a company we just switched to Windows from Blackberry, and although all (yes all) people consider it a step forward, most people that have used an iPhone or Android still consider windows phone lacking in many ways. I returned my Nokia 925 and am now in the BYOD program. I hated that thing. Good build quality, horrible usability.

 

[kalsta]

A $50 or $100 Android phone, bought by low-income people that never download Apps or use the web or even email, and a $600 iPhone isn't even in the same market, and shouldn't never be compared as far as "Market share" goes.

These low-end phones are used only as phones or for SMS, not as smart phones. The users of these devices are completely different from iPhone users.

There is no money to be made from these people, either directly or through the ecosystem.

Over the last few days we've been reading about the launch of the Mac 30 years ago, and how it was conceived as 'the computer for the rest of us'. The previous article reports that 'Caroline Rose, who wrote the Macintosh's technical documentation, said the team had tears in their eyes and became depressed when it was announced the price of the Mac was raised from $1,995 to $2,495 to offset the massive marketing costs, because the people they built the computer for wouldn't be able to purchase it.'

But here we are 30 years later, and it seems the Apple iPhone is too good for the unwashed masses. Are you guys all shareholders? You sound more like the John Sculleys of that period of Apple history, than the passionate Mac team we've all been reading about—the team that would have taken lower profit margins to see a Mac in the hands of as many ordinary people as they could.

 

[teme]

It's funny that when there's positive news about Apple's market share, Apple fans brag how well Apple is doing and how it rules the competition. However, when there's negative news about Apple's market share, suddenly Apple fans find reasons why it's not important at all.

 

[RobertMartens]

Apple likes to concentrate at the top for profitability sake, but that will lead to OSX-like marketshares. I believe Apple will be happy with that as long as they can maintain the current level of app developer support.

Apple sell expensive phones because they are top quality designs. They are not making phones for rich people, they are making the best phones and that costs money.

The whole problem with selling phones with many screen sizes is that it makes it too hard on the developers. That has always been the issue. It hasn't gone away.

 

[Merkie]

It's funny that when there's positive news about Apple's market share, Apple fans brag how well Apple is doing and how it rules the competition. However, when there's negative news about Apple's market share, suddenly Apple fans find reasons why it's not important at all.

Market share is never important, regardless of how "well" Apple is doing.

 

[peterdevries]

loooooong post...

Absolutely agree. What will help Apple also in the long run, is that conversion from Apple to Android or other platforms is the lowest in the industry. The introduction of a bigger iPhone would lower that even further, because many people currently lack a large iPhone in the product lineup (@Gudi: we know your opinion about a large phone, so don't even bother).

Apple has now amassed a user group that has invested heavily in its ecosystem. I personally have several hundreds of dollars in apps that I would lose if I would move to another system. With that in mind the functionality etc of Apple mobiel products is good enough for me to keep in. I guess it's the same for many people here.

 

[teme]

Market share is never important, regardless of how "well" Apple is doing.

How so? Do you think AppStore would still be #1 choice for developers, when iOS market share is 10% and Android has 80%? Many people buy iOS products, because most apps are available on iOS, and not necessarily on other platforms.

 

[RedOrchestra]

Market share is never important, regardless of how "well" Apple is doing.

UNTIL it affects the bottom line.

 

[840quadra]

I agree.

A $50 or $100 Android phone, bought by low-income people that never download Apps or use the web or even email, and a $600 iPhone isn't even in the same market, and shouldn't never be compared as far as "Market share" goes.

These low-end phones are used only as phones or for SMS, not as smart phones. The users of these devices are completely different from iPhone users.

There is no money to be made from these people, either directly or through the ecosystem.

Perhaps that was the case long ago, however Apple has (more or less) entered the cheap phone market by keeping the 4S in Production. Currently many carriers offer it free, or at ultra low prices. This makes it fair game for the iPhone to be viewed as competition for the low priced Android options.

 

[maflynn]

Market share is never important, regardless of how "well" Apple is doing.

Marketshare is always important, just look at BlackBerry. If the platform is not doing well, then developers will stay away, and carriers will be reluctant to carry the phones and consumers will be wary.

Regardless of how people explain away the the importance of marketshare, without it, apple is not selling phones and not making money.

People said the same thing with BlackBerry especially when they had 2 billion dollars in the bank, now look at where they are

 

[springsup]

People suggesting Apple is "losing the race" are not thinking clearly.

First, you're judging the performance of Apple in a race they are not competing in. Apple does not care about market share. So anyone suggesting Apple is losing is false, Apple is not even competing.

To support this statement, first let's take a look at the growth of the installed base of smartphones:
Image

In a year time, the installed base of smartphones has almost doubled. Where does this growth come from? I don't have any quantitative sources to support this, but it may seem logical to any of you that most of this growth occurs fom the transition of feature phones to smartphones. Just look at how far $50 will get you these days.

These cheap phones are what is causing Apple to "lose" market share. For every iPhone Apple sells, probably 10 or more <$100 Android smartphones are sold (off-contract ofcourse). Today it's maybe 10, tomorrow it could be 20.

Now we know what causes Apple to lose market share, the following question can be asked: should Apple be worried about losing market share? The short answer is: not so much. As someone else stated, Apple does not compete on razor thin margins. They are not in the market share business, but in the money making business. And they still make a lot of money (I believe only Apple and Samsung are actually capable of making money off selling smartphones).

Ofcourse, there are a lot of obstacles down the road which should worry Apple. They might need to worry, they might be in trouble, but if that's the case, it's due to whole other reasons than simply losing market share. I bet you that no one in Cupertino really cares about how much cheap Android phones that probably don't even have access to the Play Store sell. What Apple should be worried are questions like these:

- The iPhone is one of the best smartphones around, but smartphones are becoming a commodity. How long until "good" is "good enough"? The iPhone was clearly a better phone than cheaper phones two years ago. But look at the recently introduced Moto G, which costs a third of the iPhone. It has great specs, great battery life and is just a really good device to work with, unlike comparable low-end smartphones from two years ago. Apple has to maintain its advantage over phones like these, which can be hard.

- Apple might be losing ground in the high-end segment of the market (which is what Apple should be worried about). The numbers in this news post don't say anything about that, but big screen Android smartphones that are significantly cheaper than the iPhone are on the uprise. I think Apple really needs a larger screen iPhone.

- The subsidy model for smartphones in the US may be going away. The US is still the most important market for the iPhone, but what if your iPhone is going to cost $700 (like the rest of the world), instead of $200. Will customers keep preferring it over Android phones which cost maybe $300 or $400?

Matters like these are matters Apple should be worrying about. Not market share. Market share is literally a joke.

Good post, but I disagree that Apple should not be concerned about market-share at all. They should not be obsessed with market-share, but they should care about it.

Right now, Apple is very, very far from competing on razor-thin margins. They have incredibly high margins (they don't release them, but it's estimated to be anywhere from 50-60%). Those kinds of margins are unheard of in the consumer electronics industry.

Apple can very well afford to lower those margins and stop hoarding such massive amounts of money. It's not really a loss for them, since they don't know what to do with all that money anyway. If it increases the quality of products lower down the market, that will only squeeze their competitors even further.

If all Apple cares about is profit, they can keep on making it while their platform erodes. I believe Apple is still the most profitable PC manufacturer, despite their platform being only 10% of the market. It would be a horrible waste of an opportunity if Apple let their platform fall to those kinds of figures and didn't do anything about it because they were still the most profitable smartphone vendor (targeting the so-called "high-end" of the market).

 

[kalsta]

Apple sell expensive phones because they are top quality designs. They are not making phones for rich people, they are making the best phones and that costs money.

I agree that Apple makes 'quality designs', and yet, they also have the highest profit margins in the industry. That's often lauded as the only metric that really counts by many MR members, and you're seeing it again on this thread. I'd like to know when Apple's cash reserves will be high enough to start passing on some savings to its customers. Heaven forbid they should do that some time before the smart phone market is saturated. It doesn't look like it though.

 

[teme]

Perhaps that was the case long ago, however Apple has (more or less) entered the cheap phone market by keeping the 4S in Production. Currently many carriers offer it free, or at ultra low prices. This makes it fair game for the iPhone to be viewed as competition for the low priced Android options.

In Europe many phones are sold without contract. iPhone 4S costs 350-400 euros, which definitely is not in the cheap phone category.

 

[BvizioN]

How so? Do you think AppStore would still be #1 choice for developers, when iOS market share is 10% and Android has 80%? Many people buy iOS products, because most apps are available on iOS, and not necessarily on other platforms.

And you really think people from these 80% Android would be running their apps like they do on iOS? Lots of them under $100 would simply just use it on old fashioned way without even being bothered to go on internet.

 

[osofast240sx]

A few more years of this trend and iPhone will become the third player in quite a few markets.

You have to compare with other premium phones. Apple only makes flagship phones, compare their flagship phones to the other manufacturers flagship phones it's a whole different story

 

[Stella]

UNTIL it affects the bottom line.

Developer interest and iPhone success go together.

No developers = few applications = consumer interest drops.

A strong eco-system is important for smartphones. After all, what good is a smartphone that has no apps?

 

[kalsta]

Apple can very well afford to lower those margins and stop hoarding such massive amounts of money. It's not really a loss for them, since they don't know what to do with all that money anyway.

Perhaps some of the shareholder-members here are holding out for dividends.

If all Apple cares about is profit, they can keep on making it while their platform erodes. I believe Apple is still the most profitable PC manufacturer, despite their platform being only 10% of the market. It would be a horrible waste of an opportunity if Apple let their platform fall to those kinds of figures and didn't do anything about it because they were still the most profitable smartphone vendor (targeting the so-called "high-end" of the market).

Couldn't have said it better.

 

[840quadra]

Marketshare is always important, just look at BlackBerry. If the platform is not doing well, then developers will stay away, and carriers will be reluctant to carry the phones and consumers will be wary.

Regardless of how people explain away the the importance of marketshare, without it, apple is not selling phones and not making money.

People said the same thing with BlackBerry especially when they had 2 billion dollars in the bank, now look at where they are

I agree marketshare is important, for sure! The question Apple leaves me with, is how little marketshare of the overall Smartphone world, do they need to retain to maintain profitability.

In the case of the Mac (talking late 90s, early 2000s) they did reasonably well with low marketshare in the PC market, however I am curious if they could do as well after years of relying on profits from the massive iPod, and now iOS devices.

 

[RobertMartens]

Perhaps that was the case long ago, however Apple has (more or less) entered the cheap phone market by keeping the 4S in Production. Currently many carriers offer it free, or at ultra low prices. This makes it fair game for the iPhone to be viewed as competition for the low priced Android options.

It's not free, it is subsidised, very different.
And keeping a former high end phone on the market is not the same as entering the low end market.

Also, Apple doesn't touch razor thin markets. In fact it is always making 25% margins. I believe no one else comes close.

 

[Merkie]

How so? Do you think AppStore would still be #1 choice for developers, when iOS market share is 10% and Android has 80%? Many people buy iOS products, because most apps are available on iOS, and not necessarily on other platforms.

There are ways to attract developers besides market share. Look at the revenue generated by the App Store compared with competing stores. App Store revenues are still much higher, despite "losing" the race.

 

[peterdevries]

I'd like to know when Apple's cash reserves will be high enough to start passing on some savings to its customers. Heaven forbid they should do that some time before the smart phone market is saturated. It doesn't look like it though.

Why should Apple do that? The profit should first go to the shareholders, because they invested in the company.

Last year Apple provided their Office suite for free to everyone (that sued to cost $79, including a free iCloud account. Apple also distributed OS X Mavericks for free.

It might sound harsh, but Apple doesn't owe its customers anything.

BMW is doing fantastically as a car manufacturer, but that company doesn't owe me anything just because I drive one. Not now, and not once it is in danger of losing market share.

 

[alexgowers]

Android is in a race of it's own to the bottom and it'll win it every time. I'm no genius but apple and google are at polar opposites.

Google doesn't care about providing good hardware and software integration to make a single great product, instead they are happy to let it be a pot lock crap shoot for the user to pick a good handset and to me that was microsofts old route too. Even they have since gotten control over some hardware aspects because they realise offering the best hardware/software combo is what the consumer wants. Even google has tried with nexus' but failed to compete with cheaper alternatives in their own field.

The question is if apple sold their os and did a google would they make more or less profit than they currently do with their model vs google.

The answer is no, apple makes all the profit in the industry still no matter the share android gains.

From the point of view of apple, they are providing the best phone/os/and doing it in a great way. They charge the right amount and it's a holistic approach i and many can appreciate.

 

[Merkie]

Marketshare is always important, just look at BlackBerry. If the platform is not doing well, then developers will stay away, and carriers will be reluctant to carry the phones and consumers will be wary.

Regardless of how people explain away the the importance of marketshare, without it, apple is not selling phones and not making money.

People said the same thing with BlackBerry especially when they had 2 billion dollars in the bank, now look at where they are

Market share is a very vague indicator of how well a company is performing. If Apple's market share would suddenly severely drop, then yes, there would be a problem. But you can't identify the problem using market share. Market share could be a sign of things going bad, but it does not have to be. Always put market share in context when supporting an argument.

Every company that fails will lose market share. But not every company that loses market share fails.

PS. Apple has about 100 times more money in the bank than $2 billion.