An interesting article here, looks at how Apple’s iphone has blown away the competition in terms of profitability. Though only 3% of the handset market, the iphone has generated more profit for Apple than the other manufacturers combined. In a way, it’s not surprising. Apple do not sell cheap handsets, and they have also dictated the price plans to the mobile operators. In fact, when you throw in the app store, everything that Apple do is geared towards high profit.
The key point, however is that Apple are neither after the biggest slice of the market nor the biggest selling handset. I suspect they are quite happy with their 3%, but highly profitable share. I have argued many times on this blog, that the iphone is a niche product when looking at the overall handset market. I say that, because many marketers and ad agencies seem to think that it is the ONLY handset out there. Or at least the only one worth thinking about. As Android takes a hold with some great handsets from Samsung and Motorola, then the iphone’s share of the smartphone market may indeed fall. But with the kind of profits that Apple are showing, why should they worry?
Reports of Apple’s iphone sales for the last two quarters of 2009 show (relatively) slow sales and no increase in market share.
The third quarter saw 7.4m iphones sold and the Xmas period was a poor 8.7m. Blame it on the recession? To some extent yes, but if you compare it to the market leaders, Nokia and Blackberry, Apple’s 17% share of the smartphone market remained the as the previous quarters. In fact Nokia had a good end of year with handset sales bouncing back.
The market will only get tougher for Apple with other manufacturers from Motorola to Google releasing some quality, Android-based smartphones. The next upgrade for the iphone will be in June 2010, so there will likely to be a slow down in sales until at least that point. In the meantime, RIM will continue to grow their market share, not least due to growing interest by the teen phone market.
In the UK, a YouGov study found the iphone to be one of the most-loved coolest gadgets around. Why, when there is such popularity for Apple’s phone, will their market share decrease? In part, it’s one of cost. Whichever way you look at it iphones are pricey. However, the phone only appeals to quite a specific demographic. Generally 20-50 year old creative and media types. So lots of journalists, lots of journalists who will write about how great it is!
Given the success of the iphone, and the billions that Apple earns from apps, I’m sure the company is not very worried. They claimed at their ipad press conference that they were bigger than Nokia. Bigger profits-wise. However Apple have never aimed at monopolising the market. Whilst every other phone manufacturer has developed all flavours of phone – touch screen, keypad, media players etc – Apple has a one size fits all approach. And if you don’t like it, then buy someone elses. That’s not to say that the company doesn’t listen to its customers or the market, far from it. They are currently searching for a better mobile phone browser for example. However, those needs aside, the latest sales figures could be an indication that their phone sales have peaked.
I said at the end of 2008 that the iphone was niche. I still stand by that and I am of the firm view that Apple’s 17% share of the smartphone market is their peak. The iphone will remain much loved but only account for around 15% of the smartphhone market at best.