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The iPhone opportunity: a visual update

In yesterday’s talk Tim Cook described the opportunity he felt Apple faced. To readers of this blog this opportunity has been regularly illustrated, at least on a quarterly basis.  Here is the iPhone opportunity relative to other platforms:

In absolute units by vendor, separated by smart and non-smart phones, the data looks like this:

The pattern of smartphone growth remains consistent even though there was a temporary dip in Q3 for the iPhone (and hence for the green-shaded proprietary OS phones.)

  • Jon T

    Yes, all very well, but we must take into account the law of large numbers…
    ;-)

    • http://wmilliken.livejournal.com/ Walter Milliken

      Which is, “Whenever Apple’s sales go up, we must refer to the law of large numbers”?

    • Anonymous

      What is the definition of this “Law”?
      What stage is Apple in this definition?
      Is this “Law” and/or definition is up to date? Synchronized with 3rd world (emarging countries) movement toward more information and more technology?
      Last Quarter (Apple’s Q4) it grew around 70% but wasn’t it already under this “Law’s” definition?

    • Ronin48

      Yes.  The law that exists only for those who don’t understand simple arithmetic.

  • Peter Sieburg

    This is nice and interesting but how does the first graph look when the revenue is shown instead of the share shipped? There is only so much money in the phone market and Apple is already gobbling up most of it. How does reveue growth look compared to the revenue ceiling that apple is poised to hit? Apple can suck out almost all of the revenue without peaking to high in the percent shipped, won’t that present a more accurate ceiling than the first graph shows?

    • http://twitter.com/nursegirlt Thea

      How do we know what the revenue ceiling is in the phone market?

      • http://www.appleoutsider.de/ AppleOutsider.de – Sebastian P

        You can listen to “The Critical Path” to find out why there is a ceiling.

        I think it was in episode two when Horace said that Smartphone penetration is limited by network penetration, e.g. if there’s no 3G network where you live you don’t buy a smartphone.

        There are limits to smartphone growth. You just can’t pretend as if Africa is a market for Apple at the moment. They are happily tinkering with dumbphones over there on GPRS networks (that’s 33.6 kbit a second max), exchanging MP3s by meeting up and pairing via Bluetooth, re-purposing SMS messages etc. etc.

        And of course they don’t have the buying power.

        A large portion of that wonderful blueish chunk in the first graph is basically off-limits for Apple.

      • Anonymous

        A good point which should be addressed, if at all possible. How much of the blue expanse is actually accessible by high-end smartphones?
        I think the number of people who can afford those phones is increasing every year, but how fast?

      • http://twitter.com/mugli Moritz Mihatsch

        I am sorry to say, but you are using a straw man here and you probably do not even realise it. Africa… uhh! Poor people, HIV, civil war, right?

        No.3.5G network availability in many (if not most) African cities is good and M-DSL and similar solutions were often offered before Europe and at more affordable prices.Yes, there are issues with buying power, but even those are not as relevant for two reasons:1) If Apple or any competitor wants to enter “poor” or poorer markets, they can keep shipping older phones. Apple does that by keeping the iPhone 3GS around and it is well imaginable that they will offer it at an even lower price next year for selected markets.2) Internet consumption in many of these countries is pre-dominantly via the phone and the increase of smart phone penetration and of penetration of better smart phones is impressive. People buy smart phones (and recently started to buy tablets if they can) instead of laptops. And compared to a MacBook a iPhone 3GS is a good deal.

      • http://www.appleoutsider.de/ AppleOutsider.de – Sebastian P
      • Anonymous

        Uh, all of those numbers are high enough to easily afford a smartphone, especially if it’s your only computing device.

      • http://www.appleoutsider.de/ AppleOutsider.de – Sebastian P

        That’s the money you have all year for everything. You have to devide it by 12 to get the monthly amount.

        The country with the best 3G network in Africa, South Africa, has a buying power of 10100 $ a year, that’s 841$ a month for food, shelter, clothes etc.

        In my home country of Germany wellfare is 420 Euro, that’s 559$.

        People in Africa currently own 15$ dumbphones on prepaid basis. You can’t tell me that Africa has enough money to pay for Smartphones that cost 40 times as much.

        And don’t forget that this is the AVERAGE. Meaning that all the rich people’s buying power is distributed among the whole populace to make it “per capita”, from infant to octogenerian. Income inequality plays into this as well as average size of middle class family (if there even is something as a “middle class” in Africa outside of the rich countries like South Africa or Kenya).

        And I don’t say that I know everything about it here. I am just saying that you just can’t lump in developing nations like Brazil and China with countries like Ethiopia in the “dumb phone” category. People in those third world countries in Africa DO own dumbphones just like the ones in Brazil do but none of the africans are likely to ever get a Smartphone in their lifetime. All I ask here is to NOT analyze the growth potential for Apple by listing vendors but rather COUNTRIES and if that is to convoluted, CONTINENTS.

        And if you don’t like Africa as an example take Vietnam oder the Philipines or Haiti. You name it. All those countries have GSM networks. I just don’t see them as a “potential” in the coming say five to ten years for Smartphone vendors. Heck those countries are the target of Nicolas Negropone’s 100$ laptop initiative. How on earth are they supposed to afford a 400$ iPhone 3GS? (and please don’t say that a 3GS is just 1$. It isn’t. You pay for the device as if you are paying off a loan in 24 installments. If you weren’t taking the phone your bill woud be 20 to 30$ less a month. At least here in Germany that’s the differents between on-contract and off contract prepaid mobile phone offerings by the carriers)

      • http://twitter.com/mugli Moritz Mihatsch

        You do realise that it sounds silly when you talk about “Africa” buying mobile phones, right? You can try to re-read my post, but just as a little note: I didn’t say that every African will buy an iPhone tomorrow or could do so. I said, that your conception of Africa as monolithic and homogenous is wrong (and to be honest, borderline racist). 

        Some countries are obviously faster than others, but if I can get a decent 3G connection in Battambang (Cambodia) or Kassala (Sudan), the network doesn’t seem to be the primary issue. The fact that the network is available at all, could also serve as an indicator for consumption of that network.

        3G and smart phones in the developing world are a fascinating story to watch and there are loads of factors which play a role here which make the picture much more varied and diverse than you think. Eg. high urbanisation rates / large percentage of populations living in the capital city, second hand (smart) phones, high prioritisation of communication in spending patterns, the fact that mobile internet is often the first internet available and 3G is the first available broadband etc.

      • http://www.appleoutsider.de/ AppleOutsider.de – Sebastian P

        So… Cambodia… that’s clearly in Africa.

        Indeed it IS a “fascinating” story and I really got into detail on my blog about it. I started feeling bad about littering the comments here with hints to visit it and didn’t want to repeat myself over and over again towards different users in different threads.

        But the basic point is this: a 3G network costs billions of dollars. I bet even you can’t refute that. If you read my blog – I linked to buying power for African countries. I also have a website right here listing 3G networks in African nations and it’s about 50/50. I instead chose to link the map for Amazon’s Whispernet as an example where you can get a book on a Kindle in Africa. And the map is pretty white compared to other continents (and please don’t take that as rascism, that’s the background color of the map from Amazon).

        I am not borderline racist. The only reason for you to think so is because you are narrow-minded about other people talking about developing nations instead of judging me by what I say. I tried to be CONCISE and that’s kind of hard when I want to talk about a continent that’s pretty uniform with lots and lots of similarities when it comes to buying power and 3G network development with a tiny few exceptions in Kenya and South Africa.

        And the irony here is that you accuse ME of racism when that uniform blue area in the first graph from Horace is doing exactly that. Lumping all developing nations and third world countries as well as people who still buy dumbphones in the rich nations into one big number for “non-smartphones”.

        Is that racism too?

        Really man. That is so shallow and a cheap ad-hominem.

      • http://twitter.com/mugli Moritz Mihatsch

        Chill man. Really. You said: ” You can’t tell me that Africa has enough money to pay for Smartphones that cost 40 times as much.” And I did say that a statement like that is borderline racist. It isn’t really, but it is so undifferentiated and not thought through, that it is indeed pretty darn close.

        Now, you wanted to include Vietnam and Haiti, which indeed are not in Africa, but I thought if it makes you happy, I can include Cambodia as an example. I prefer not to talk about Vietnam, as I haven’t been there myself, but I considering its fast economic development, I would expect to see quite a few iPhones in Vietnam today.

        If you want to use the availability of products according to the producer as an indicator, and we happen to talk about the iPhone, maybe it’d be more honest to actually see where the iPhone is on offer officially in Africa and that includes countries like Guinea and Equatorial Guinea.

        I think you are making three key mistakes:

        1) You are thinking mono-causal by only looking at buying power, both for networks as well as phones. The iPhone has a much harder stand in countries where services such as BBM were available. (Blackberry therefore has a much higher market presence in Egypt than in other Arab countries.) Equally unions (such as in Thailand) can have an effect on 3G availability. (Thailand therefore has a much worse 3G network than Cambodia which is much poorer.)

        2) You are seeing countries as too homogenous. I completely agree that not everyone can or wants to afford an iPhone. Nevertheless there are substantial urban middle classes or people who are trying to become part of that who are buying smart phones, sometimes of course second hand.

        Side note: It would be interesting to see numbers how large the percentage of second hand phones is in sub-Saharan Africa (and these obviously do not turn up on the graph).

        3) You are really underestimating the efficiency effect of technology in situations where previous generations of technology were not available. E.g. in Egypt, which is higher developed than Sudan, you had DSL. In Sudan you basically did not. Therefore M-DSL was of higher value in Sudan than in Egypt because it was the first broadband. In consequence M-DSL was adopted earlier and more widespread in the country which was less developed.

        Btw… just in case you haven’t realised: I do not disagree with you on the idea that the big blue area isn’t all opportunity. In the last couple of years I bought about 5 dumb phones and only one smart phones. It is your specific argument in regards to Africa and the way you phrase it, I take umbrage with.

      • http://www.appleoutsider.de/ AppleOutsider.de – Sebastian P

        Hey sorry but what do you expect? I am still pretty miffed about that HIV comment of yours. I’ve been thinking about that for two days straight trying to wrap my head around what you meant there… at first I thought “Right on – those people need affordable meds first, let’s get rid of patents on HIV meds” but then I expected a “What do you mean by ‘them’?” reply to that… Maybe you meant that I was thinking that Africans are dumb, violent and uneducated, having unprotected sex all the time… but that could be helped with a 100$ laptop and Internet connection or an affordable Smartphone.

        So render me puzzled (still) about that statement.

        But let’s get back to emerging nations. After I read your comment this morning I thought about it on my drive to work and how and why those countries have 3G networks. I thought about the possibility that they are the result of tourism. I think I read that a celltower with 360 degree coverage in a country that is not using the 3G spectrum could cover a very large area (radius of up to 50 miles or something if put up high enough). If you as a tourist with a simcard from another country come to that city and just use your phone for a minute, you pay 2.5 Euro per minute, of which most likely 2 Euro go to the cellphone provider in that country. I read that such a cell tower would only cost about 18000 Euro. That’s basically 9000 phone minutes to pay for that whole tower just by providing service to tourists.

        The question then is how cynical do you want to think about this? The total cynic that I am would say: most likely the cellphone provider is half-owned by a foreign company, like Vodafone. With tourists the target audience, prices would remain high, in the end resulting in the same problems you have with tourists in Haiti living in expensive hotels and right outside of those gated communities of hotels the starving people wouldn’t even think about getting a cellphone. Those cellphone companies in the emerging markets? Nothing else than a new form of imperialism, with the first world serving themselves and siphoning all profits from the emerging markets.

        On the other hand I read articles on how resourceful people are in Africa when it comes to 2G networks and how they use them on the cheap with their featurephones, building their own version of the Internet solely based on incredibly slow connections using WAP.

        Then again I don’t agree with the utopian way of thinking of Nicolas Negroponte. I remember back in 1998 when I first got AOL and read an article in “Wired” (which I bought for 20 Deutsche Mark at the train station’s bookstore, imported from the US of course). He kept telling the world that all the third world needed was cheap computers so they could educate themselves to pull themselves up on their on bootstraps.

        All I could think was that what they need down there is a reliable source for fresh drinking water. Wells. So I wrote him an email, most likely just as annoying as I’ve been in the comments here the last two days ;-) He even replied insisting that his idea was the solution. 14 years later the 100$ laptop is still not in sight. And people are still starving and people still die of Malaria and HIV in the hundreds of thousands.

        And on top of that the cynic in me think about the possibility that due to the nature of mankind people who would get an internet connection down there would do the same as they do in the first world. Bill Maher keeps saying that republican voters live in a bubble and I think he’s right. When I think about the reports from Africa about the health minister of South Africa telling people that they only need to take a hot shower after sex to avoid an HIV infection… female circumcision, Hutu and Tutsi in Rwanda, the cynic in me has to expect that should the internet reach all of these people one day they would just use it to further their narrow-mindedness and backwards thinking by connecting to each other on facebook, self-pollinating their backwards thinking. You know, basically what you implied with your civil war/HIV statement.

        But then I think about “The Skeptics Guide to the Universe” and how Dr. Novella keeps mentioning people on the podcast who contacted him telling him that he is the reason why they stopped being true believers. The Internet really WOULD be a chance for some of those people who don’t know a different perspective, be it just a tiny amount at first, to educate themselves. To get a different perspective. To reach out to other people to find out that they too can think for themselves. That it IS a good idea to get them all 100$ laptops or smartphones or iPads. AND fresh water supplies, not the one first and the other later like I kept telling Mr. Negroponte back then.

        Horace replied to me an hour ago here in the comments that Apple says they will have their own approach to prepaid phones. To be honest this really sparked my imagination and I really think that they could do it. They might be able to bring an iOS device to every living being, making that large blue area seem much more of a target market for Apple to me right now.

        But I still think that we need to talk about the challenges in those markets and not analyze them from a purely vendor-based perspective. Income inequality, buying power and cellphone service development need to be talked about because all these multiple facets really don’t fit in this graph.

        Who knows maybe if the graph hadn’t been vendor-focused then it wouldn’t have needed to be that tall to see them all. We’ll see. I bet Horace will find a way to get us data that will make us think about these emerging markets and the third world. The more Apple focuses on them the more we will focus on Apple doing that.

    • Anonymous

      Revenue Ceiling? 

      Apple has only 10% of the mobile phone handset market, a market which is still growing larger.

      Apple can easily triple its annual phone unit sales over the next few years and it would still only account for 20% of the handset market.

      Even with a modest ASP decline, Apple will still obviously at least double its iPhone revenue over the next 18-36 months, (f not triple it.)

      • Watcher

        The point is not obvious at all without data detailing the expected growth of the smartphone market.

    • http://wmilliken.livejournal.com/ Walter Milliken

      Just because Apple is eating somewhere around 75% of the industry profits now doesn’t mean they can only increase their profits by another third — the fallacy there is the assumption that the amount of money available in the market is fixed, which is not true.

      It’s true that they could only increase their share of the market’s profits to 100%, but that says nothing about what the ceiling on their actual revenue could be, since the people who are currently buying cheap non-smartphones could decide to buy more expensive iPhones, increasing the total value of the market. The whole pie is always 100%, but the pie itself can get bigger. Apple might max out at 75% of the profits, but if the total market value doubles over the next few years, they’d still double their sales and profit in dollar terms.I think the relevant question to ask is “What fraction of the total market will eventually be willing to pay Apple’s prices to get an iPhone” — that is where the real ceiling is. Right now, that fraction is about 10%. If we simply extrapolate all the current smartphone market shares to the point where the market is essentially 100% smartphones, then Apple’s sales (and presumably profits in absolute terms) would roughly double or triple.I’m not predicting this — there’s no guarantee that the late smartphone adopters will follow the same pattern, since they’re more concentrated in the third world, and the market there is very different. But in theory, there’s plenty of headroom for Apple to grow sales by 2x-3x without ever taking more than a modest quarter of the market share.

    • http://www.asymco.com Horace Dediu

      Total phone revenues have increased dramatically. In Q4 2007, the year iPhone launched, the industry was generating about $38 billion in revenue. In Q4 2011 the total was over $62 billion.

    • http://twitter.com/asymco Horace Dediu

      Here is a chart showing the revenues from mobile phone sales for the major branded vendors. If you took Apple out, the industry would indeed seem to have a “ceiling”. Apple’s sales can be seen as additive.

    • http://twitter.com/asymco Horace Dediu

      Here is a chart showing the revenues from mobile phone sales for the major branded vendors. If you took Apple out, the industry would indeed seem to have a “ceiling”. Apple’s sales can be seen as additive.

    • http://twitter.com/asymco Horace Dediu

      Here is a chart showing the revenues from mobile phone sales for the major branded vendors. If you took Apple out, the industry would indeed seem to have a “ceiling”. Apple’s sales can be seen as additive.

  • http://www.appleoutsider.de/ AppleOutsider.de – Sebastian P

    Horace I have a 24″ monitor and even I had to disable some menu bars to make those graphs fit my browser window.
    Don’t you think that it’s kind of a distortion of data representing 100% with such a wide vertical scale? I know that the x-axis is time not a number but still I feel that what you are trying to do here is putting the piece you want to look bigger in the pie chart to the front or to the back, e.g. by making these images so high you are trying to get your point across that there’s still a lot of market share left for Apple to conquer.

    I know this isn’t data fudging but it’s pretty darn close.

    • javbw

      Then your resolution is set incorrectly. a 24″ panel should display around 1900×1200 (HD)  – and the image is only 817 pixels tall. it should fit in your display very easily. my 1440×900 15″ display will fit it. 

      You must be running the display in a lower  resolution, making things larger yet fuzzier and hard to read, or your machine is overloaded with useless toolbars. Either way, you need to fix your machine, not ask Horace to resize his graphs. 

      • http://www.appleoutsider.de/ AppleOutsider.de – Sebastian P

        Let’s just assume that I did not lie about disabling something to see the whole image and that I am not too dumb to set my resolution correctly, ok?

        Why is there a need to make this image over 800 pixels tall when the average monitor resolution is most likely around 768?

      • javbw

        Lie? if you have a 24″ monitor, then you have the monitor set incorrectly. 

        Again, Native resolution of the display is high, but people lower the effective resolution via OS settings to make everything “bigger” onscreen. Negating the reason for having a large Monitor, unless they are knowingly running it in lower resolution for a visual impairment. Which means they know that have the unit setup sub optimally for some content – like tall images. 

        a low effective resolution is a very common misconfiguration. Thinking that I’m accusing you of lying or “disabling something” again leads me to believe you simply are not knowledgeable about the basics of displays or how the OS can use a display. Having a plethora of toolbars indicates a novice user as well. 
        a 13″ MacBook Air will show the full image vertically in a browser window. Your “correctly configured” 24″ will not? Really?Now you switched the argument form “my giant monitor can’t show Horace’s medium sized image” to “why do we need medium sized images?” 1024×768 is a tiny resolution. unless you are on an iPad [landscape] or an 11″MBA, or some netbook, a modern computer should show the image without issue. But even then, clicking on the image will open it in another window, where the browser will auto-scale it to fit if it is too large. A solution to your issue has been provided for even your misconfigured setup, with just a simple click. The graphs size is the (minimum)  necessary to  achieve the goals: – To show the gulf between the dumbphones and smartphones while 

        – Keeping the participants in the smartphones discernible.
         
        Microsoft’s Slice is very small, but it does exist. Horace has talked about visualizing data for 20 years via graphs. Visualizing data is an art, and Horace is very good. I would love to see larger and larger graphs, showing even more detailed data and ideas. I enjoy them as they are. Configure your machine correctly and enjoy them as well. 

      • Anonymous

        You shouldn’t berate someone when you are in woefully short supply of facts. There are other potential reasons (browser zoom, too many toolbars etc.) Some of your comments are valid (see the smaller players etc.) but others are weak. Most laptops come with 1366×768 13/14/15″ screens so that pixel height has most certainly not gone away. Anyway, you don’t need to be a snide bugger to make reasonable points

      • Javbw

        Toolbars and other settings were mentioned. If a person with a 24″ monitor is complaining he can’t see 817 pixel tall image, and some kind of vision impairment settings are not being used, then it is misconfigured, plain and simple. If he wants to change the argument from “I can’t see all of it on my 24″ monitor” to ” 768 should be optimum size,” that’s completely different, and I suspect he’s complaining now for complaining’s sake.

      • http://www.appleoutsider.de/ AppleOutsider.de – Sebastian P

        I understand your need to justify Horace’s choice. Problem is that you are talking about something that is beside the point.

        My point was that when you can make look things bigger by choice of representation. When you chose a pie chart and present it in 3D, you can make slices look bigger by putting them to the front or to the back.

        By chosing this towering graphic you make the market look big because of how the reader perceives towering graphics, and I addressed the point regarding Tim Cook’s statement that there’s still a big market out there to conquer.

        But it is nice that you focus on resolutions ‘n stuff.

      • jawbroken

        This isn’t at all analogous to distorting the volume or area in a 3D pie. No piece of data is privileged by stretching it vertically. I don’t know why you’ve chosen to take this as a deliberate attempt to mislead you.

      • http://www.appleoutsider.de/ AppleOutsider.de – Sebastian P

        http://www.w3schools.com/browsers/browsers_resolution_higher.asp 

        Only 40% of users have a resolution big enough to display the 800 pixel graphic without scrolling, e.g. 60% of the users WILL have to scroll.

        You can pretend all you want that a user IS NOT perceiving the market as “large” when they have to scroll AND that it is distorting the data when you can’t see all of something to be able to process the visual information, e.g. COMPARING shares. How are you supposed to compare the large dumbphone share with the iphone when you can’t see all of the dumbphone share?

        And please don’t reply by saying you can adjust the display size of web pages easily. Nobody is going to do that in this ADD age of the internet.

      • jawbroken

        Kind of irrelevant when clicking the image loads it on its own and most, if not all, browsers resize it to fit the screen.

      • http://www.appleoutsider.de/ AppleOutsider.de – Sebastian P

        Which will then still make it a towering graph filling the whole height of the users browser window.

        Anyway I posted about this on my blow in detail, see my comment below.

      • jawbroken

        You’ll have to link a psychological study showing that increasing the y-height leads people to misinterpret the data in specific ways to get me interested in this particular crusade.

      • http://www.appleoutsider.de/ AppleOutsider.de – Sebastian P

        Judging by your line of argument I doubt that you are interested in anything that doesn’t agree with your opinion.

        I made my point several times. “non-smartphones” is not a uniform group and when you scroll you can’t compare.

        Because right now I’d have to ask you to link a study that users know how to show an image in a new window or are even willing to do anything other than scrolling to see all of the graph.

      • jawbroken

        You’ll have to link a psychological study showing that increasing the y-height leads people to misinterpret the data in specific ways to get me interested in this particular crusade.

      • Anonymous

        To put it in more layman terms: If the chart is shortened, say by half, then the market shares of Bada, Windows and other smartphones would all but disappear.
        Yes the vast blue opportunity is pronounced but it is not exaggerated.

    • jawbroken

      They need to be tall to keep the smartphone data understandable while maintaining a linear scale, pretty simple. Accusations of “data fudging” seem like extreme reaching, I don’t think there’s any merit in what you said. There’s not a lot of information at the top of the charts anyway, so the ability to view the full height at once on smaller monitors without zoom doesn’t seem particularly important.

      • http://www.appleoutsider.de/ AppleOutsider.de – Sebastian P

        Well since I didn’t accuse Horace of data-fudging and “I think” isn’t an argument, feel free to try again.

      • jawbroken

        You definitely did make that accusation, here and in your other comments, by suggesting that he is trying to misrepresent the size of Apple’s opportunity by stretching the chart vertically. Whether you followed it up with a glib disclaimer is irrelevant.

        I see you chose not to respond to my explanation of why the charts have to be tall.

      • http://www.appleoutsider.de/ AppleOutsider.de – Sebastian P

        To be honest I don’t understand what you mean by “there’s a lot of information at the top of the charts”. I am adressing the first chart.

        And I clearly said IT ISN’T data fudging. That was my sentence. Let’s pretend we are eating soup and I say “I know this isn’t coliflower soup but it’s pretty darn close” then accusing me of saying I pretend the cook made coliflower soup is a strawman.

      • jawbroken

        I said “not a lot of information”. Once you see it’s a wide expanse of blue it’s not so important to have it all on screen at once on a small screen.

        You appear to be suggesting the chart was made taller in order to misrepresent the data or to trick people in some way when the simplest explanation is, as I said in my original comment, that in order to maintain a linear scale while having the smaller datapoints be legible it is necessary for the chart to be tall vertically.

      • http://www.appleoutsider.de/ AppleOutsider.de – Sebastian P

        No I am suggesting that with the current height the user isn’t able to interpret the data correctly. Stop saying I am insinuating that the data has been altered. I didn’t say that.

        I say that THE USER, the layman, isn’t able to interpret it correctly when the post is titled “The iPhone opportunity”.

        I say that the data, as presented, is leading the reader to a specific conclusion, furthered by the statements of Tim Cook and Steve Jobs before him that the potential is still great.

        See my blog for further elaboration.

    • Rudolf Charel

      I would advice you to use Safari. Right click on the image to see it in a separate window.

      You are now able to increase or decrease the image to fit your screen.

      Horace is not trying anything other than giving readers the full scale of the market in an easy to comprehend image.

    • http://www.asymco.com Horace Dediu

      The reason the graph is tall is so that the smaller valued vendor data can be discerned.

      • http://www.appleoutsider.de/ AppleOutsider.de – Sebastian P

        I know this all must be really annoying.Sorry in advance.

        I understand that that is the reasoning behind the height of the graph the question is – if Windows Phone would still be at 2.7% market share (Q4/2010) would the graph have been 400 pixels high and if it wasn’t 1.5% now but rather 0.5% would it have been 2400 pixels high?

        (taking Gartner numbers from here http://www.zdnet.com/blog/hardware/gartner-windows-phone-market-share-crashes/16279 )

        I don’t understand why it is necessary to show the height of Windows Phone with 8 pixels when 4 would’ve just be just as good. Or 1.

        Am I really that off with my feeling that the reader perceives the size of the market as “large” by chosing to present it in such a towering manner? And that it’s quite ironic that this is exactly what happens when I follow the advice of the other commentators to just open the image in another tab where it’s auto-squeezed?

        And is it really a good idea to juxtapose Windows Phones sold against Nokia featurephones sold in third world countries and emerging markets?

        I don’t know. I still think this graph is intensely leading the reader in a certain direction without giving context about the data that is presented and just leading in with a single sentence about what Tim Cook said and the title you chose.

        Again I hope you aren’t annoyed by my comments and that you don’t think that I’m a troll or something. I just think that things can’t be simplified like this to get the point across that Apple might not run into growth problems within the next 10 months, at least in the Smartphone market.

        I saw your other comment about the Android numbers, which sounds like another way to say there’s room for Apple since those aren’t Android phones sold but rather shipped compared to Apple who really sold those phones. To me that sounds like the Smartphone market simply didn’t grow that much and that many users in the first world really didn’t buy a Smartphone to use it as such. You can then argue that that leaves room for Apple but you could also say that those people never really wanted a Smartphone and aren’t really a possible customer.

        Meaning: I don’t understand why it is rationalized that a current Android user is a possible future Apple user when you could just as easily say that he wasn’t a possible Smartphone user in the first place but rather someone who just didn’t get a featurephone pushed onto them when their contract was up but rather a carrier Android phone since there simply aren’t any more featurephones available in the carrier’s points of sale.

      • http://www.appleoutsider.de/ AppleOutsider.de – Sebastian P

        I know this all must be really annoying.Sorry in advance.

        I understand that that is the reasoning behind the height of the graph the question is – if Windows Phone would still be at 2.7% market share (Q4/2010) would the graph have been 400 pixels high and if it wasn’t 1.5% now but rather 0.5% would it have been 2400 pixels high?

        (taking Gartner numbers from here http://www.zdnet.com/blog/hardware/gartner-windows-phone-market-share-crashes/16279 )

        I don’t understand why it is necessary to show the height of Windows Phone with 8 pixels when 4 would’ve just be just as good. Or 1.

        Am I really that off with my feeling that the reader perceives the size of the market as “large” by chosing to present it in such a towering manner? And that it’s quite ironic that this is exactly what happens when I follow the advice of the other commentators to just open the image in another tab where it’s auto-squeezed?

        And is it really a good idea to juxtapose Windows Phones sold against Nokia featurephones sold in third world countries and emerging markets?

        I don’t know. I still think this graph is intensely leading the reader in a certain direction without giving context about the data that is presented and just leading in with a single sentence about what Tim Cook said and the title you chose.

        Again I hope you aren’t annoyed by my comments and that you don’t think that I’m a troll or something. I just think that things can’t be simplified like this to get the point across that Apple might not run into growth problems within the next 10 months, at least in the Smartphone market.

        I saw your other comment about the Android numbers, which sounds like another way to say there’s room for Apple since those aren’t Android phones sold but rather shipped compared to Apple who really sold those phones. To me that sounds like the Smartphone market simply didn’t grow that much and that many users in the first world really didn’t buy a Smartphone to use it as such. You can then argue that that leaves room for Apple but you could also say that those people never really wanted a Smartphone and aren’t really a possible customer.

        Meaning: I don’t understand why it is rationalized that a current Android user is a possible future Apple user when you could just as easily say that he wasn’t a possible Smartphone user in the first place but rather someone who just didn’t get a featurephone pushed onto them when their contract was up but rather a carrier Android phone since there simply aren’t any more featurephones available in the carrier’s points of sale.

      • http://www.asymco.com Horace Dediu

        There are several points you make that are combined into one argument. The problem of tall charts is one of visualization. The problem of addressable market opportunity is another. I don’t see how the chart implies anything more than what the various shares or unit volumes are. The question of addressable markets for Apple are a matter of strategy. Tim Cook has mentioned that they treat the entire phone market as addressable. He also mentioned that they will address prepaid in a “creative way”. Even though I called it the “iPhone” opportunity I think it’s more accurate to say “iPhone and any future product that will compete with phones”. This phrasing is more accurate but does not make an easy story to tell.

      • http://www.appleoutsider.de/ AppleOutsider.de – Sebastian P

        I agree with you wholeheartedly. Thanks for the reply.

        To be honest I am excited about Apple’s plans to bring affordable iPhones to market. Just imagine if their plans will make us end up with an iPhone 3G type Smartphone that would be affordable for people living in third world countries who currently use featurephones. That would be the most profound form of aid the first world would have ever given to their former colonies. Imagine if Nicolas Negroponte’s 100$ laptop idea would be fulfilled by Apple bringing Smartphones or iPads to that price range. Thanks for pointing that out, I didn’t think about that possibility until now. Incredibly good point because I think Apple, compared to Negroponte, could do it. They could do that.

        Wow.

        Again, thanks. 

  • Nathan Gallacher

    I find it really interesting that even though iPhone sales did dip in Q3, the Android group of products essentially took up most of the slack in the market. What does this suggest for smartphone demand? Horace, you have always stated that iPhone sales are limited by supply. If Apple were to somehow massively boost their manufacturing capacity, do you think smartphone sales overall would increase proportionally? Or would the iPhone just eat into the market share of other smartphone vendors? The top graph suggest the latter to me.

    • http://wmilliken.livejournal.com/ Walter Milliken

      Most of that taken-up “slack” seems to be in Samsung, and looks like it might coincide with the release and ramp-up of their Galaxy S2 line. It looks to me like the release of the iPhone 4S cut back strongly on Samsung’s growth, more than that the Androids were taking up slack in the iPhone sales. I.e. it may have more to do with the relative phasing of the release cycles (Galaxy S2 came out in Q2, I believe), as potential iPhone owners were just beginning to anticipate the expected release of the iPhone 4S in Q3, though that didn’t happen until Q4.

      Note also that a lot of the Q3 “slack” that Samsung seems to have filled appears to be more due to Nokia’s substantial slide in market share over the middle of 2011.

      • Anonymous

        ” it may have more to do with the relative phasing of the release cycles
        (Galaxy S2 came out in Q2, I believe), as potential iPhone owners were
        just beginning to anticipate the expected release of the iPhone 4S in Q3″

        I think you’re right.

    • http://www.asymco.com Horace Dediu

      I found that top chart peculiar as well. It’s almost as if the value for Android was based on the total value for smartphones minus the known values for all the other platforms. The Android shipment data remains suspicious. If we are to believe it perhaps increased iPhone production could meet more of the demand currently filled by Android.

  • Pieter

    Thank you again Horace. Would love to know what the total annual worldwide potential revenue is for the smartphone market. That is taking into account affordability as well as a two/three year life cycle of mobile phones.  Interesting to compare the revenue with other industries. I expect it to be a massive market dwarfing most other consumer product markets.

    • http://www.asymco.com Horace Dediu

      The notion of “affordability” is problematic. I’m thinking of a way to discuss this but I’d like to start by pointing out that many people of limited means find the means to buy narcotics, alcohol and gambling not to mention various other forms of legal entertainment. Prior to the introduction of certain technologies it was always assumed that they could not be “afforded” by the masses. The answer to this puzzle is not to ask how much money is spent but rather to ask what jobs people have and then understanding that people will find the money to get them done.
      See you at Asymconf (www.asymconf.com)

  • http://www.appleoutsider.de/ AppleOutsider.de – Sebastian P

    Alrighty, I created an animation showing the difference if you just squeeze the height by 50% and elaborating on why I think this is misleading to the layman.

    http://www.appleoutsider.de/2012/02/16/vertical-challenge/ 

    I hope I’m allowed to use the graph as base material, if not I will of course take it down.

    This isn’t about blaming Horace for anything or me hating Apple or whatever. I think that readers need context and I think for a site that is optimized for a resolution of 1024×768 (the layout is roughly 1024 pixels wide) it’s weird to use graphs that have a larger vertical size.

    • Mark Newton

      I don’t see that the aspect ratio of Horace’s graph in any way exaggerates or diminishes his point. Apple has enormous scope to continue growing both iPhone sales and market share for many quarters to come.

      Horace is making a very clear point that the ‘law of large numbers’ does not yet apply to iPhone.

    • Mark Newton

      I don’t see that the aspect ratio of Horace’s graph in any way exaggerates or diminishes his point. Apple has enormous scope to continue growing both iPhone sales and market share for many quarters to come.

      Horace is making a very clear point that the ‘law of large numbers’ does not yet apply to iPhone.

      • http://www.appleoutsider.de/ AppleOutsider.de – Sebastian P

        I don’t think that he shows that at all. He just shows a graph which lumps all non-smartphones together, not analyzing which of the markets where these “dumbphones” are sold are even a potential market for Smarthone vendors.

        Read my blog for further info I can’t repeat myself here in every comment. the tl;dr is: Africa, Brazil and China are all in the giant blue blob and they aren’t equal and asymco.com is optimized for 1024×768 with the graph being 817 pixels high. Saying that this isn’t misleading to the layman while titling the post “The iPhone Opportunity” is pretty blasé.

      • berult

        Many an artist throughout history has used the finest, most deliberate poetry, the finest, most deliberate brush stroke to capture a ‘coarse grain’ epiphany…

      • http://www.appleoutsider.de/ AppleOutsider.de – Sebastian P

        I don’t think that he shows that at all. He just shows a graph which lumps all non-smartphones together, not analyzing which of the markets where these “dumbphones” are sold are even a potential market for Smarthone vendors.

        Read my blog for further info I can’t repeat myself here in every comment. the tl;dr is: Africa, Brazil and China are all in the giant blue blob and they aren’t equal and asymco.com is optimized for 1024×768 with the graph being 817 pixels high. Saying that this isn’t misleading to the layman while titling the post “The iPhone Opportunity” is pretty blasé.

  • Nate

    I think Sebastian P. is guilty of a good point made in (at this point) a way that is irritating the rest of the commenters. Horace, any chance of an article looking at the portion of the non-smartphone market from a perspective of Apple’s chances of conversion? I’ve seen first-hand that the function phones are “hired to do” can be quite different in places like West Africa than the US and Europe. Just for example, rather than every individual owning a mobile, in several communities in Accra small shops had multiple mobiles that people could use for a fee.

    • http://wmilliken.livejournal.com/ Walter Milliken

      I think this is a good notion, but I suspect it’s going to be hard to quantify until after the fact. There are going to be too many things feeding into the conversion rate, including device cost, availability of used devices, “killer functionality” that’s of direct economic benefit to the user, and ownership costs.

      It also sounds from Tim Cook’s recent remarks that Apple is pushing for carriers to switch to post-paid subsidy models. This may work in China, but I’m not sure how well it will play elsewhere.

      How Apple sells its devices into those markets is going to be a key issue, and I wouldn’t bet against them simply letting old devices migrate there via the secondary market — there are going to be a *lot* of used iPhones available in a couple years, and if all they need is a new battery to be useful, they may fill the low-cost device niche better than anything Apple can make as a new device. The key question there will be how well they compete against new, low-end Android devices.

    • http://www.asymco.com Horace Dediu

      The think that I learned while at Nokia and also observed in other markets is that most technologies become cheaper over time and that there is no distinction between what poor people use and what rich people use. They just use them in different times. The less advantaged populations tend to adopt later, but they adopt the same. The obstacles in the way of the spread of technology are seldom financial. They are more often regulatory or tax (i.e. policy) or infrastructure oriented. The barriers are coming down more quickly now than ever. The thing to remember is that even the cheapest phones of today were considered miracles for only the wealthiest to afford a few years ago.

    • http://www.asymco.com Horace Dediu

      The think that I learned while at Nokia and also observed in other markets is that most technologies become cheaper over time and that there is no distinction between what poor people use and what rich people use. They just use them in different times. The less advantaged populations tend to adopt later, but they adopt the same. The obstacles in the way of the spread of technology are seldom financial. They are more often regulatory or tax (i.e. policy) or infrastructure oriented. The barriers are coming down more quickly now than ever. The thing to remember is that even the cheapest phones of today were considered miracles for only the wealthiest to afford a few years ago.

  • http://www.appleoutsider.de/ AppleOutsider.de – Sebastian P

    Hi there,

    so with the 3GS gone tell me again about the iPhone Opportunity in developing countries and the 3rd world.

    I am all ears.

    In the meantime I’m going to ask Marco Arment about how the Samsung verdict doesn’t impact customers. Ok, customers that don’t live in the first world that is, maybe Marco didn’t think about them. Which must mean your point didn’t really come across now, did it?

    I know, gloating is bad but honestly… the one laptop per child initiative took more than a decade and every smartphone that works like a 4.1 Android or an iOS 4 iphone would be more than enough for a child at a cheaper price point and lower power consumption but NO the Samsung verdict was nothing bad for the world *gnarls teeth*

    And we all know why the 3GS got scrapped. All screens go to the iPad mini.