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In three years Apple will still have a minority market share in smartphones

Morgan Stanley’s Web 2.0 update came out yesterday and it’s full of nice charts. Here is one:

Note that the expectation for smartphones to overtake all PCs (including netbooks) will happen when smartphones sell more than 450 million units per year.

In 2013 nearly 650 million smartphones are forecast to be shipped.

My estimate for the iPhone in that year is 180 million. That would give iPhone (excluding iPad and iPod) about 28% share. The last quarterly figure is around 17%.

Perhaps 180 million iPhones per year will be defined as failure by those who consider over 80% share as a threshold for success but I still think it will be a healthy business.

Even assuming a cut in ASP to about $350, Apple will still be able to get about $62 billion in sales from phones (a bigger number than 2009 total sales for the whole company).

I would also add that by the end of 2013 Apple will have sold about 470 million iPhones. Though many will be out of use by then, the installed base will not be small (I’d guess about 300 million). Including all iOS devices, 500 million is a credible estimated audience for developers.

It’s entirely possible that Android variants, offshoots and forks will add up to a bigger number by then, but to pre-emptively declare the platform “war” won because the also-ran Apple will only have half a billion users seems disingenuous.

  • mortjac

    Excellent Horace. I specially like you last paragraph: pre-emptively declare the platform “war” won because the also-ran Apple will only have half a billion users seems disingenuous.

    As a CEO, founder and funder of an app dev company for iOS I'm delighted.

  • dave

    wow

    180 million phones. that is some number.

  • Rob Scott

    A lot of companies will make tons of money in the mobile business for many years to come. It is a huge market and it’s very early in the game. Companies are going to record exceptional results while losing share. This is not hidden to those of us who are a little frustrated with Apple.

    The frustration stems from the fact that we know that Apple can do a lot more. They have done it with the iPod and the question is why not with the iPhone.

    Apple is an extremely talented company with exceptional leadership. But their current play with the iPhone is hugely disappointing. Again I am aware of the growth and the contribution of the iPhone to Apple's bottom line. The frustration is that when they crow about selling 14 million iPhones some of us know that they could have sold 20 million if they wanted.

    My theory is that Apple is addicted to the "best quarter ever" high, and they are currently doing their best to deliver just enough so that they can claim another best quarter ever. Apple can sell 100 million iPhones if they wanted to, but alas we are here with one model in one color in exclusive partnerships. A model that has been for the better part of its life out of stock.

    The second reason why some of us are frustrated is that Apple is a position to lead (unlike RIM and/or Nokia) but they are currently refusing to. Is Apple happy to be a perpetual number two?

    It is not a lack of appreciation or that companies must have an absolute monopoly to be considered winning. The frustration is that some companies can absolutely kill if they wanted.

    These are my views as an Apple fan.

    • asymco

      I think the priority at Apple is still to make "the best products" and plans to achieve dominance (by whatever measure you choose to define it) are considered but not if they detract from the top priority. It's a philosophical, Jobsian, world view. If you make great things, all else follows. As soon as you put "winning" as a priority over "greatness" then you are just as likely to lose it all.

      • Rob Scott

        I hear you. But reconcile this for me:

        Excerpt from Gruber’s: The iPod Juggernaut http://daringfireball.net/2006/03/ipod_juggernaut

        “To commemorate the 20th anniversary of the Macintosh two years ago, Newsweek’s Steven Levy interviewed Steve Jobs. The subject eventually turned to the Mac’s relatively meager market share:

        If that’s so, then why is the Mac market share, even after Apple’s recent revival, sputtering at a measly 5 percent? Jobs has a theory about that, too. Once a company devises a great product, he says, it has a monopoly in that realm, and concentrates less on innovation than protecting its turf. “The Mac-user interface was a 10-year monopoly,” says Jobs. “Who ended up running the company? Sales guys. At the critical juncture in the late ’80s, when they should have gone for market share, they went for profits. They made obscene profits for several years. And their products became mediocre. And then their monopoly ended with Windows 95. They behaved like a monopoly, and it came back to bite them, which always happens.”

        First, this is an extraordinarily insightful summary of what went wrong at Apple in the late ’80s. Sure, Jobs is far from an unbiased observer of Apple’s post-1985 executive decisions, but it’s very hard to argue with his conclusion. At one point in the ’80s Apple was earning staggering 50 percent profit margins on Mac hardware sales. They certainly profited richly in the short run with that strategy, but in the long run, that sort of pricing clearly limited unit sales growth. There were simply too many people unwilling or unable to pay $5,000 for a computer. Profit and market share certainly aren’t diametrically opposed; the choice is which one you wish to maximize.

        But second, look at that quote in the context of Apple’s iPod strategy. “At the critical juncture […] when they should have gone for market share, they went for profits.” Of all the myriad ways that Apple’s iPod position today differs from their Macintosh position 20 years ago, perhaps none is greater than this: With the iPod, Apple is going for market share.

      • http://www.notesark.com iphoned

        >>Apple was earning staggering 50 percent profit margins on Mac hardware sales.

        They are earning about that in iPhone sales now. How de-javu.

        But with the iPAD they clearly are following a different strategy, trying to block new entrants from gaining a foothold through aggressive pricing an ubiquitous distribution. A much smarter play in my humble (and according to Horace ignorant) opinion. Although, to their credit, the circumstances probably did not allow them to play same game with the iPhone – they needed exclusives to break the carriers' locks and the market uptake was such that it was not practical to up production faster than they did, etc.).

      • asymco

        The phone market is not an open market. It requires placating the famous "orifices". Perhaps Apple realized this and did not even bother with a "blanket the earth" strategy.

      • Joe_Winfield_IL

        Also, Apple INVENTED the tablet market. OK, technically they've been around forever. But all the new devices being rushed to market look eerily similar to iPad and unlike all predecessors. Apple's task was to convince buyers that they needed a tablet, from anyone at any price. They did their homework and put out the right product.

        With iPhone, the sales pitch was much different. They had to convince customers not to take a free (with subsidy) phone, but instead choose their very expensive replacement. To do this, their product had to be really special and very different. They couldn't do mass distribution for reasons that have been covered a thousand times. Apple succeeded in this pitch, but by the time iPhone hit critical mass, Google had thrown a lifejacket to the OEMs making the cheap phones that iPhone sought to replace.

        iPad doesn't have to be that way, because it is built on the back of iPhone success. Mass distribution is easy because every retailer on the planet would love to have it in their aisles for the holiday season, and there are no carriers involved to screw things up. In my opinion, THIS is why iPad has a chance to replicate iPod level market share. Apple will have sold 12-15 million of the things before a competitor can even begin to emerge. With Android 3.0 pushed further back, products like the Galaxy will languish with inadequate software, only bolstering iPad's success.

    • FalKirk

      Rob, I think you're way off the mark here. You seem to be implying that Apple is blowing it by going for profit and sacrificing market share. May I remind you that Apple is selling iPhones as fast as they can make them and that they are making them as fast as they can? I think you're very wrong if you think that Apple doesn't have it's eye on market share.

      But perhaps I've misunderstood. Can you clarify for me exactly what it is about Apple's strategy that is leaving you so disappointed?

      • Rob Scott

        Apple had the lead in both design and user experience, that is eroding fast.
        Android is now comparable and so is WebOS.

        Android has been in couple of instances first with new features both in hardware and soft e.g
        Bigger Screens
        Faster Processors
        Full Multitasking
        NFC
        Compass
        High Resolution Screens
        Etc.
        Apple has been a follower in those if not in most instances.
        Apple is losing share both in use and actual units.

        The gap between the iPhone and other OEM product especially Android products is not as big as some Apple fans imagine it to be.

        Did I state that Apple/iPhone is losing share?

        Apple went for market share (and profits) with the iPod and they did great. Best product, best sales units or unit share. Why not with the iPhone?

        Apple incorrectly believes that they still enjoy a five year lead over other platforms? If that, that is a big mistake.

        Again Apple can continue to make insane amounts of money while losing share. But is that what we wish for the company?

      • RattyUK

        And Android is missing the one feature that iOS has… Consistency.

      • http://twitter.com/relentlessFocus @relentlessFocus

        This whole idea of Android "winning" over iPhone is a hollywood way of looking at business. Android exists to guarantee and drive mobile advertising to Google. Google is an advertising company and Apple is a hardware company. These business models have to be examined for success based on revenue, not some artificial numbers game.
        Google said at their last quarterly earnings report that they would break out advertising revenue to assure investors that Android was being successful. They said that Android had generated $1 billion in Y/Y on revenue for Google. Apple's last quarterly report showed that the iPhone had brought in $8.8 billion in Q4 or roughly $34 billion on a Y/Y basis.
        So the iPhone is bringing in roughly 34 times more revenue for Apple than Android is for Google. Google is winning?
        I also suggest you start reading Florian Müller, a world renowned expert on Patent Law, an Android phone user and a campaigner against software patents. You might start with his recent blog post here: http://fosspatents.blogspot.com/2010/11/next-andr
        The final mistake you are making in my opinion is to think that the future is going to look like the present. WinPhone7 has a mighty role to play in the future and they're far more a threat to Android than to Apple although clearly will take market share from both. I say they're a bigger threat to Android because they use the same model as Android, an OS to be used by hardware companies. Samsung has suggested that WinPhone7 may be a more important ingredient going forward than Android.

      • Joe_Winfield_IL

        The most relevant defense to your list of features is the Mac story. Over the last few years, Apple has recently been making huge strides with Mac share and unit volume vs. PC. They have managed to accomplish this feat despite creating products with "inferior" stat sheets. Some examples:

        No Blu-Ray support on any of their devices.
        Less upgradeability
        Inferior or year-old Intel chips
        Too few connections
        Proprietary device connectors
        Too few applications
        Etc.

        The products sell because of the overall value proposition that Apple creates. Their devices are differentiated beyond screen size and camera resolution. The innovations in your list are easy to replicate or live without. I'm not saying that Apple is anywhere near perfect. (In fact, I'm concerned about their position on services – in particular mapping and voice recognition). But by and large, fast processors and compasses don't change what a smartphone is hired to do.

        To me, the genius of Apple products and design is the basic understanding of functionality. As an example, SJ made a bet that 3rd party APIs and Flash, while a massive opportunity, can cause more harm than good. The increased utility of the iPhone with these features isn't worth the increase in debugging + the decreased overall performance. Apple decides what their users will value most, and leaves out everything else. This decision has been controversial, but iPhone demand is still growing faster than production capacity. There is nothing stopping Apple from jumping to the forefront on everything you listed, except that the net effect would be a drop in margins with little increase in volume. Apple frustrates many users and potential customers because of the totalitarian control, but it is also fundamental to what makes the company great.

        Apple is still THE innovation leader in the smartphone sector, but their innovations are all about making products work. Often these are proprietary and cannot be compared against the competition in a meaningful statistical analysis. Take the new MBAir. The initial reviews from tech pundits said sarcastically "Apple Invents the Netbook" because of the weak Core2 processor and small size. Then they brought it into the lab and tested speed on common tasks as well as battery life. The product excels in benchmark tests, even against comparably priced competitors. Add on the "it just works" factor, and Apple has a huge hit – with low resolution screen, year old processor, no SD card slot, no optical drive, etc..

      • Pol

        Well put, Joe. Apple competitors are able to equal or beat some features, but not the whole. Apple succeeds in making its products much greater than the sum of their parts.

      • FalKirk

        @Rob: Thank you for your long and thoughtful response. We disagree on several points.

        "Apple had the lead in both design and user experience, that is eroding fast."

        You think so? I don't. As to user experience, the customer satisfaction surveys say that the iPhone is still head, if not head and shoulders, above the competition.

        As to design, well, I think I'll let the 25 million iPhone 4 unit sales speak for themselves.

        The extensive list of Android hardware enhancements is impressive, but I don't agree with you that it's definitive. Apple has chosen to bring out a phone once a year. There are disadvantages to this strategy, but I think the technical and marketing advantages far outweigh them. Once that strategy is chosen, there is no way that Apple can hope to keep their most recent phone continually ahead of the 30 or more competing Android models that will come out after the iPhone's introduction. The best strategy in that case – and not coincidentally, the area where Apple is strong – is to introduce innovations that have depth rather than breadth. Examples of this would be the retina display and FaceTime.

        "Apple is losing share both in use and actual units."

        I don't agree with this either. Everyone (except Apple) is in a panic because Android is selling so many phones. As Asymco has pointed out several times, when the entire field is increasing by over 90% a year, market share is the wrong place to focus one's attention. Think of this in terms of a battlefield. The opposing armies (Android and iOS) are not currently fighting each other, rather, they are both sweeping aside the hapless resistance offered by the dumb and smart phones. But something else is going on too. Both opposing "armies" are positioning themselves for the real fight yet to come. Android is flooding the low ground with troops. Apple is taking the high ground with customer satisfaction, customer loyalty, ecosystem, product breadth (iPod Touch and iPad) and generalship. When the war between iOS and Android finally comes, Android may have more troops on the ground, but I'll take my chances with Apple's superior positioning and leadership.

        "Apple went for market share (and profits) with the iPod and they did great. Best product, best sales units or unit share. Why not with the iPhone?"

        Very different markets. If you recall, Apple DID NOT lower the price of the iPod. They started out with a premium price and they stuck with a premium price. It was only AFTER the iPod completely dominated the high end of the market that Apple began introducing mid-level and then lower-level offerings.

        The phone market is not the same at all. Even if we ignore the carriers (which is a pretty big thing to overlook) Apple simply can't follow the iPod strategy. Taking away memory, size and features from the iPhone does not make it a Nano – it makes it a piece of junk.

        However, in a way Apple already is following the iPod strategy. Their iPhone Nano is the iPod Touch. It has almost everything the iPhone does, except the phone. It's cheaper, it appeals to Tweens and it has virtually no competition. What more could you ask?

        In summation, while I believe that you have taken a thoughtful position, I don't think you've carried your reasoning far enough. Apple is not losing to Android, Apple is fully aware of the importance of market share and Apple is carefully placing itself in a position to both simultaneously maintain profit margins, gain market share and change the world. From where you sit, Apple is being outclassed and outplayed by Android. From where I sit, everything is going according to plan. They'll be lots of bumps and detours along the way. And Apple may not ultimately get what they want. But at this point in the game, I think Apple is the team to beat.

      • Narayanan

        Good points.

        Historical comparisons suggest that in an ultimate battle you need strategic alliances, apart from the superior positioning and leadership.
        As someone who is seeing a flood of cheap Androids in the major Asian markets(ie; major growth areas), I am also getting fidgety about Apples limited production causing vacuum fill by the competition. Apple has created the market interest, but seems incapable of filling it quickly enough.

      • FalKirk

        First, it's pretty clear that Apple was unprepared for the success of the iPhone 4.

        Second, this past quarter Apple surprised everyone by producing and selling 14.1 million phones. There was some talk that Apple sacrificed margins in order to rapidly accelerate production although I don't think this has been verified.

        Apple is a very well run company. They're selling phones as fast as they make them. I think we can all feel pretty confident that Apple is ramping up production like crazy. We know the interest is there. I expect the product to be there too. Apple may not be able to keep up with demand in the busy holiday quarter. But keep an eye out for results from the first quarter of 2011. Last year Apple stunned the financial world by selling more phones from January to March than they had in the previous October to December quarter. I don't think a repeat of that performance in 2011 is at all out of the realm of possibility.

      • Alexkhan2000

        Agreed, FalKirk. Very good points which you laid out in a clear manner.

      • jsm

        >>Android may have more troops on the ground, but I'll take my chances with Apple's superior >>positioning and leadership

        Well . That could be a problem for Apple. Once you have more cheaper but kind of work OK smart phones on par or slighly less than iPhone, naturally more will buy those instead of the iPhones. Yes Apple at this time may have bigger profit margins, but going forward it will be an issue especially if more people buy android phones which work on par or slighly less quality than iPhone.
        In this case, apple will end up selling less phones with greater profit margins but not sustainable. Ultimately this will lead to Andriod ecoSystem thriving well. And apple gets back to niche status and I am sure apple stock would take a big hit as a result of this.

        By having larger market share by selling more iphones now with it's app store, apple can tie the iPhone user to its products only. For eg. let us say you buy good number of apps from app store, then they are only portable to your iPhone not any other phone. This will further let the customer buy iPhone for any future upgrade instead of looking for the other smart phones.

        Going forward I see bleak picture for Apple starting 2011 if they continue with same strategy with limited carrier support for iPhone around the world. (Do not bring any statistics from 2007 – 2010 they would all be meaningless looking forward)

        Hope to see your reply

      • FalKirk

        Hey jsm: thoughtful post. I disagree on several points. Let me lay out my position and please let's know what you think.

        "Once you have more cheaper but kind of work OK smart phones on par or slighly less than iPhone, naturally more will buy those instead of the iPhones."

        Not sure this is true. In some instances, good enough wins, but in other instances, value wins. Take what's happening in the computer industry right now, for instance. Pundits keep postulating that netbook, notebook and desktop sales are down because of the recession. But that totally fails to explain why sales Apple tablets, notebook and desktops – which sell at a premium – are all way up. If cost were all that mattered, then price would always be the deciding factor. And it's decidedly not.

        Further, are Apple iPhones really more expensive than those of the competition? The iPhone 4 sells for $199 and the iPhone 3GS sells for $99. Most of the Android phones are sold for similar prices. And even if they're sold at a discount, is a hundred or hundred and fifty dollar difference really going to be so large a price to pay if people see value in the iPhone?

        "By having larger market share by selling more iphones now…"

        But Apple can't do this. Right now they're selling phones as fast as they make them. Even if Apple gave away it's phones for free, they wouldn't be able to sell a single additional phone and they wouldn't gain an ounce of market share. Lowering the cost of a product that has more demand that supply is, frankly, just plain silly. It's throwing away profit for absolutely no reason.

        "I see bleak picture for Apple starting 2011 if they continue with same strategy with limited carrier support for iPhone around the world."

        Since Apple is selling every phone that they make, adding an additional carrier would not, could not, increase sales. It would just be a waste of time. When Apple starts to meet the demand for its phone on its current carriers, then it would make sense to add additional carriers.

        Your thoughts?

      • jsm

        >> "Right now they're selling phones as fast as they make them"

        This is mostly due to upgrades coming from orig. iPhone and iPhone 3G owners. This is expected during first 3-4 months with good bit of features from iPhone4. Would the demand hold like this going forward? Doubt it. So take this statement from Apple with grain of salt. Don't believe everything they say in conf. call. This is pure marketing strategy nothing less.

        App store is a great way to lock the user to Apple iOS devices since these apps are not portable to other smart phones. Now by having limited carrier support for iPhone, Apple is letting Android smart phones to grow in market share. Now customers who prefer other carriers where iPhone is not available, there choice will be to go with Andriod . Once they use ( average Joes and Janes) they will be reluctant to buy iPhone in the future since they want to go with a phone which they are already familiar with.
        (Just like an average windows user will never switch to Mac due to new OS /new learning curve etc).
        Since there are good quality apps available on the app store which Android market place cannot compete with, I think it's in best interest for apple to increase the carrier support to attract those who currently own feature/dumb phones but don't want to switch carriers.
        If apple does not do this quickly my thinking is they will not able be to recover.

        At the same time google is not asleep at the bed. There is good chance they may make Android 3.0 to match most of the features that are available in iOS 4.1. And also what if google gives the users the ability to port apps to various Android smart phones. This may make an attractive option for owning Android Phones for avg. Joe and Jane (Not sure carriers would allow this to happen but you never know).

        It's about time apple increase the market share now than wait a few years without ramping up the production when its too late.

        I am sure Apple is well aware of what I mentioned above but not sure why its not expanding to other carriers around the world .

        My thinking is if Apple continues with this approach , It will be too late after a year or so.
        In this case Apple's iPhone may get a niche status and I am afraid only majority of current iPhone owners will be upgraders to newer iPhones and resulting in stagnant installed base for iPhones. If you have more installed base now , then more stability it may bring to Apple from other smartphone OS threats since users are locked to iOS eco system.

        >> "But that totally fails to explain why sales Apple tablets, notebook and desktops – which sell at a premium – are all way up"
        But as you know Mac is in niche status no matter how you see it.

      • FalKirk

        “This is mostly due to upgrades coming from orig. iPhone and iPhone 3G owners.”

        I think you are seriously mistaken if you think that iPhone sales are mostly powered by upgrades. Apple sold 3 million iPhones in the last 3 days of June, and 14.1 million from July through September – a 90% year over year increase. Will demand like this hold going forward? We’ll have to wait until we see the numbers in January, but sales momentum continued to rise last year with the 3GS and there is every reason to believe that it will this year too.

        “Don't believe everything they say in conf. call.”

        And by the way, I do believe everything Apple says in their earnings conference calls – because Apple is subject to severe legal penalties if they, in any way, attempt to deceive or delude investors.

        “Once they use (Android) they will be reluctant to buy iPhone in the future…”

        I doubt this for two reasons. First, I don’t think the App lock is as big as you think it is. Second, I don’t think that many Android users even know they are losing Android more less developing loyalty to it.

        “It’s about time apple increase the market share…”

        Again, Apple cannot increase market share until they are able to produce more phones. At this point in time, Carriers do not matter. Production matters.

      • asymco

        As FalKirk points out the iPhone has been growing at nearly 100% for its entire existence. My own analysis of the market in 2007 assumed 100% growth rate was what Apple was capable of holding for at least three years. I am now revising my growth rate to be maintained at nearly 100% for another year and 70% to 50% thereafter. The iPod and iPad will add significant volumes with iPad following the same growth pattern as the iPhone and the iPod (touch) perhaps evolving further into a communications device.

        The result will be an iOS installed base will reach half a billion users by the end of 2013.

        Arguably this is a failure as it may be only 10% of the 5 billion total market for such devices. It's quite possible that Android (or some OSS variant) will reach 1 billion users by then. However, what has to be considered is that the quality of that iOS audience is going to be very high for advertisers and for app developers. Half a billion users may not be too small for a significant share of developer attention.

      • dchu220

        "You have to learn how to walk before you can run"

        People are always complaining that Apple doesn't move fast enough. If you've ever studied lean manufacturing or six sigma you will realize that companies that claim to be predicated on speed are usually the slowest of the bunch because they spend most of their time fixing their mistakes.

      • kevin

        Apple believes 3.5" is the perfect spot for screen size, so Apple says so what to bigger screens. If you haven't noticed, Apple is still trying to make the iPhone smaller (and thinner).

        Even though some Androids might have faster CPUs, is it really noticeable to the user that the phone works faster or the UI is more responsive? Apple optimizes its software and hardware in an integrated way. The cost to using those faster CPUs is lower battery life.

        NFC is still vaporware for Android, as is 2.3. We'll see what a "few weeks" really means, and we'll see how well it's done. Cut and paste came later for iPhone, but it's arguably the best. Front-facing video camera came later for iPhone, but it's arguably better than the Android app options.

        The iPod, iPad, and even AppleTV are different from the iPhone, for now, as there is no required intermediary. By potentially dominating in both of those other form-factor products, it will keep the iPhone as a solid player (though not dominant) in the smartphone market. It's possible when we get to LTE, the business models will change.

        I want the best for Apple, but I don't want them to sacrifice the core aspects of an iPhone, just to make other iPhone models that would supposedly to lead to "domination."

  • Unique

    Market share doesn't mean anything when you look at Apple's profit margin. Take my post with a grain of salt.

    • Alexkhan2000

      Yup.

      Do you want to sell 1 million units of something to make $100K or 100K units of something and make $1 million? Apple is doing the latter while the rest are doing the former.

      Apple is making approximately 50% of the profits in the handset market and 35% of the profits in the PC market. By profit share, Apple is the dominant company that towers above all other hardware makers.

      There is no other parallel I can think of in any other industry. Would Mercedes or BMW have such a profit share in the auto industry? Would Chanel or Louis Vuitton in women's handbag market? Would Rolex or Cartier in the wristwatch industry?

      • Pol

        Spot on, Alex! Most equate winning with gaining the greatest market share, when profit is actually the end game. With the Mac, Apple rakes in a 35% share of profits with only 7% market share. No worthy competitor has emerged to challenge the iPod in MP3 players. That is not the case in smartphones. Nevertheless, the Mac has proven that Apple's business model can win the greatest piece of the profit pie, even with inferior unit share. With little to differentiate one from the other, the Android clone makers will have to compete on price, hence generating lower profitability.

      • http://www.notesark.com iphoned

        Mercedes and BMW are not engaged in a platform war. The analogy is way overused.

      • Alexkhan2000

        True, but the platform also isn't as vital to this industry as many make it out to be – certainly not like the PC industry. The likes of Nokia, HP, and RIM going it their own way to differentiate their wares seems to be a validation of this.

      • unhinged

        I beg to differ. Any of the top tier manufacturers in any industry is in a platform war with the low-cost alternatives.

      • Iosweekly

        Here are 2 other appropriate analogies in my opinion.

        Apple is to consumer electronics as:

        1. Cirque de soleil is to circuses (small amount of the marketshare for total circus performances, but massive profit share due to a superior product at premium pricing)

        2. Pixar studios is to animated feature films (1 movie a year in an industry which sees dozens of animated movie releases, yet that 1 movie product pulls in on average at least 10 to 15% of the gross of animated film ticket sales, and even more in the long tail of merchandise licensing & DVD / digital sales)

        I think those 2 examples are a better analogy than the car industry, and funnily enough 1 of them is also a entity guided by steve jobs (who actually purchased a fledgling pixar from geroge Lucas)

  • OpenMind

    Why one has to fail for another to success? iOS could have minor market share and major profit share, and Android could have major market share and tiny profit share. Both are success for their respective creators. Apple reap the money in its way, Googel reap the money through ad. Consumer can have choice of a beautiful affordable device, or whitewash dirty cheap device. Who are the losers then? Well, Android OEM, like Motorola $0.79 profit per sale. After Motorola fails, another OEM will pick up the loser flag and carry on till fail, a race to the bottom for OEM.

  • Joe_Winfield_IL

    Did anyone see this interview with Eric Schmidt at this week's web 2.0 conference? I'm too lazy to go back through and find the point in the very long video, but he made a very firm point about the need to focus less on share among market participants and instead shift attention to the explosive growth of the overall market. I was surprised at his stance given the opportunity he had been handed to brag about Android success.
    http://tech.fortune.cnn.com/2010/11/16/full-video

  • Psymac

    Let’s also remember that Apple’s huge profits, irrespective of market share (discussions of which I find amusing), allow it to invest in R&D and strategic acquisitions that others can only dream about (and giving Apple months if not years of lead time). Given the well documented profits developers make with iOS, I don’t think they care much about Android market share, “fragmented” as it is.

    • dchu220

      The argument about Apple's huge profit share is not the most important metric. Plenty of companies had huge profit shares right before their market collapsed. To better understand this, you must study the theory of Asymetric Competition.

      The key factor is if the market for mobile computing remains not good enough. In this situation, Apple's integrated structure has a clear advantage over modular structures like Android. If the market is good enough, then Android will have an advantage and many problems such as the Android Market can be fixed over time.