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January 12, 2011

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Lars

Hi Tomi..

Good stuff as always.. wonder how their target market subs will react once they start to realize the CDMA platform (still?) has duplex voice-data issues. Basically, or so it would seem, there will be no "FaceTime" video chat with iPhone4 on VZW.. @_@

Cheers!

Michael

Tomi:
Thorough analysis - expected coming from you. A couple of things I'm waiting to see happen...

1. What will AT&T's reaction be. If they spend their ad money slamming Verizon's network and promoting their (AT&T's) line of phones, I believe that AT&T will lose between 5 and 7 million customers in 2011. AT&T needs to address the very vocal segment of disgruntled iPhone owners that get poor reception.

2. T-Mobile has been running ads that seem like a love affair with Apple. They are modeled after the old iPhone ads and talk about how the iPhone is a great phone on a terrible network. Perhaps Apple will get the message and begin selling through TMobile as well.

Lars - As FaceTime is WiFi based video calling, the VZW iPhone should work fine. It only needs the voice circuit to establish the connection, then hand it off to the data circuit.

Don_afrim

I don't see why ATT is going to sell more iPhones than Verizon, if anything I would think Verizon is going to sell more than ATT since it's No.1 carrier and has a more wide spread and reliable network. I think since Apple doesn't have an exclusive deal with Verizon they will soon announce the iPhone on all networks in the USA and start selling unlocked iPhones at Apple Stores just like they do world wide at the latest once the iPhone 5 4G (hopefully penta band) rolls out in June/July.

I project that once the iPhone is available on all networks in the US they will capture 50% of the US market while world wide their market share will grow to 20-25%.

Phil W

The problem is for Apple just to maintain its market share it must increase the number of phones it sells each year because the smartphone market is growing rapidly.

This will be difficult to do as firstly the Iphone will start to look out of date against the newer competition from various manufacturers and secondly because the most explosive smartphone growth outside of the US will be at the mid to low price bracket end in which apple doesn't compete.

The Eco system that Apple is building with the ipad, itunes etc is a good way to bind in existing customers, but isn't relevant to when it comes to attracting new customers.

For that reason I think talk of 20-25% is wishful thinking.

Tomi Ahonen

Hi Lars, Michael, Don and Phil

Good comments, will respond to each individually as usual

Lars - haha yeah.. Actually Facetime is WiFi based, so I think it won't matter (but am not sure, we'll need to monitor the techie blogs)

Michael - thanks! Its a shame sometimes living here in Hong Kong that I can't get access to the domestic marketing activities especially of those countries that I otherwise know very well, having lived there for many years and where seeing the local advertising would be particularly useful haha, like UK, Finland and yes, the USA (lived there only for 12 years haha). So yes, thanks, very good to know about T-Mobile ads and also yes, agree AT&T needs to tread very carefully with any war of words about network capacity.

Don - First on 'why would AT&T sell more than Verizon' - its most of all because of return business, the renewal contracts. There is considerable 'lazyness' by all mobile phone subscribers globally, in bothering to switch networks. We had for example the Swedish Regulator calculate it and found about 70% of all customers will not bother to consider rival networks when it is time to renew a contract. Now, we need to remember that networks in the rest of the world are far better than those in the USA, so the Swedish customer would not feel that the network quality (dropped calls, congestion, lack of coverage) would be a significant issue haha, but still, there is a proven measured factor where most consumers in such contractual situations will continue renewing with the current provider. Same with insurance, home electricity, cable TV, etc etc etc. So that is the primary reason, why it is pretty safe to assume that of AT&T's existing iPhone customer base, the majority will renew with AT&T. The fight between Verizon and AT&T will be more for those who switch networks from any network (including those of Verizon, and those of AT&T) and in that 'net' calculation, AT&T will initially lose significantly more (to Verizon) than what it can gain from all rival networks. And Verizon will initially gain far more defectors than it would lose any left on VZ who wanted an iPhone but were still stuck on VZ. Make sense?

On your forecasts, I appreciate your viewpoint, I do think you are vastly over-optimistic in your projections. For AT&T to capture 50% of the US smartphone market, they would have to use one phone to kick the butts of Motorola, HTC, Samsung, Blackberry and many others. Each of the rivals offers at least one clear 'iPhone Clone' model of similar form factor (think slab touch screen) and each offers many rival form factors, like the iconic Blackberry style - and many of these have very loyal user bases. I think 35% or 40% is a reasonable target market share for US domestic smartphone market - but it may well be less - less - because the US market is like all of the world's smartphone markets now, moving to lower cost smartphones.

So if the iPhone 4 and similar rivals (Samsung Galaxy S etc) are selling for about 199 dollars with 2 year contract, there will also be similar smartphones from LG or HTC or Motorola, with 3 inch touch screens and 5 megapixel cameras, that will cost maybe 49 dollars or even zero dollars for 2 year contract. That is what I mean. And globally obviously in most markets where phones are sold without subsidy, the iPhone 4 sells for about 600 dollars while similar touch screen smartphones sell for as little as 150-200 dollars in unsubsidised form today.

As to world growth for Apple, if you mean the CDMA version alone can generate 20% more sales outside of the USA, that is utterly impossible, sorry, the math does not bear it out. That would mean 7 million extra sales of CDMA iPhones in the next 12 months, above and beyond those sold to Verizon. Please understand, this will not happen. There aren't enough CDMA operators/carriers with any potential to sell that amount of smartphones in the rest of the world, outside of North America and Western Europe. That would be 60% more sales of just CDMA phones, in the market where Apple has been selling GSM variant iPhones of only about 12 million units per year. It won't happen, please understand how impossible the math is. But if you mean 'all iPhones including GSM and CDMA' then yes, 25% growth in the rest of the world is quite feasible, in fact, I model Apple to do better than that.

Phil - Very good points and we agree, yes the big growth is now in the lower end of smartphones by price, and Apple is abandoning that market to its rivals. There is a dangerous long-term effect to Apple too, in that, in that it now allows rival phone makers to get the users 'familiar' with their way of working, signing up to the Android or Ovi or other app stores, etc, and then 2 years from now when they upgrade, they will prefer the existing brand of smartphone and it will be far more difficult to steal those customers then, if they are already familiar with, and comfortable, using the touch screen form factor smartphones from a rival. What is perhaps even worse, for Apple, is how Apple is resisting most industry standard initiatives, no micro SD card support, no removable batteries, etc which are standard items with most rivals - and these will become barriers to switch to Apple in the future, by experienced users of a rival phone brand.

Also agree about the eco system, its a great way to bind existing customers, not very relevant in capturing rivals.

Thank you all for writing

Tomi Ahonen :-)

Romain

Hi Tomi,

I was surprised too that Apple invested in porting their iPhone to a technology with such a small footprint (globally, not only in the US) and, more important, that doesn't really have a bright future (if at all) since all carriers, including in the US, have settled on 4G technologies (LTE/WiMax) that have nothing to do with CDMA.

But maybe there's more going on behind the scenes: for instance, maybe it is part of a broader deal with Verizon, like a exclusivity on the future LTE version of the iPhone (most probably the iPhone 6, seems unlikely for this year's iPhone 5, or whatever they call it) ?

BTW Tomi let's make some predictions: what's your take on a CDMA version of the iPad ? Some rumors have conjectured it could be the next step...
I don't really see this happen, with Verizon's mobile hot spot feature you don't really need an iPad with cellular connectivity (unless of course your "primary" phone isn't on verizon)

Oh and one last thing: isn't it time we revisit our definition of a smartphone ? I mean, does the Nokia C5 really compete with even the cheapest Android or BlackBerry phone ? What proportion of Nokia "smartphones" really connect to the Web, or have apps installed ? I bet much less than other platforms.
I'd be interested to know Nokia's market share on the mid/high smartphone segment (ie, basically, smartphones with a QWERTY keyboard and/or a touch screen). Do you have any data on that ?

Leebase

Thanks for planting your flag. I think you misread the importance of the Verizon iPhone in the US. It has nothing to do with CDMA. The only important news is the end of exclusivity, and it was stated that Verizon does not have an exclusive agreement.

Let's pause to remember that Apple needed to change the business model for smart phones. The last thing the networks wanted was to become a "dumb pipe". In order to entice the networks to allow the iPhone to be the iPhone (no carrier apps, iTunes instead of the carrier music, etc.) they HAD to offer exclusivity as the carrot. If the iPhone had not taken off so spectacularly, Android would never have been able to follow. Android was the "chance to have the appeal of the iphone without having the iphone").

Back to the current story. Yes, the iPhone has a "rich people's profile". But there IS no price difference between the iPhone and it's competition in the USA. All the phones are subsidized. The expensive part is the data plan which all smart phone accounts are required to buy. There is no premium paid for buying an iPhone verses buying a Galaxy S phone. There has been a $100 option for the iphone since it's second year. And NOW, there is a $49 option. If an American consumer can afford ANY smart phone plan, they can afford an iPhone. So if any of your analysis of the US was based on the pricing of the iPhone affecting sales, you need to go back to the drawing board.

Everyone who wants an iPhone has NOT switched to AT&T. AT&T is the most reviled of all American phone networks. Yes, it could be said that the vast success of the iPhone is one of the reasons AT&T is reviled, but nevertheless -- your analysis is wrong about that. Even so, AT&T was signing up vastly more folks on the iPhone than Verizon was with their android phones. This in spite of Verizon's two for one android sales and "all smart phone's for a penny" sales. That's WHY Verizon caved to the iPhone in the first place.

There will be some canabilism for sure. I do not expect iPhone sales to double. You will find out, though, that for ever 3 iPhones Verizon sells, at most 1 will be a lost sale from AT&T.

Balancing out the good news in the US for the iPhone on Verizon will be the roll out of the 4G/LTE networks. There will be Android phones for these but no iPhones. And I doubt that even this summers iPhone 5 will support 4G yet due to batter issues. Android manufacturers are more than willing to put out phones with crappy battery life than Apple is.

I think you will find that carrier network loyalty (or at least loathing of AT&T) in the US has been a far greater damper on iPhone sales than your analysis has accounted for.

As for the rest of the world: 4%, really? You want to speak of the iPhone's percentage of all mobile phones and not just smart phones and then compare that to the Macintosh's percentage of the PC market? The iPhone has 3 to 4 times the percentage of the smart phone market than the historical percentage of the Mac in the PC market. And Apple has had no problem haveing a WONDERFUL business at that.

Lee

Bob Shaw

Tomi - As always thanks for a great analysis. It appears that we are reaching a point especially in the top segment of the smart phone market where the smart phones are becoming very comparable in terms of features and functionality. Also performance wise the differences are shrinking between them. I feel there is small preference for Apple if customers value more ease of use, the same for Blackberry if customers value more security and the same for Nokia if customers value more the hardware especially the camera.

I think we are going to enter the next phase of smart phone competition especially in the highest segment where customization to sub segments will be the basis of competition.

One thing that did not happen much with PC and will happen more with smart phones is going to be customization. The main reason is that PC does not have the power and memory constraints that characterizes a smart phone. So a vendor can load all the features/functionalities on a PC and a customer can pick and choose what to use out of it. So customization was not that important in PC. In smart phones no matter what segment, trade offs will have to be made in terms of what to include and what to exclude because of power, memory and other limitations. Secondly smart phone is more personal than a PC and anything that is more personal has more opportunity for customization.

Going forward the one size fits all mindset for smart phones will not work and the vendors ability to understand the needs of different sub segments and offer customize products for each sub segment will lead to competitive advantage.

Vendors like Nokia who have shown ability to customize will be at a competitive advantage. Already we are seeing Nokia do that with N8 targeted more at entertainment/general user market and the upcoming E7 targeted more at enterprise/business users.

Also going forward all vendors will have to adapt but Apple will have to adapt lot more than other vendors. Further any advantage that a vendor will generate will last for very short time and thus new advantages will have to be continuously generated at a faster and faster rate.

Lastly a separate point, as pre paid becomes more dominant among customers than post paid and competition amongst carriers become more intense, the carriers ability to hide the real cost of the smart phones from the customers is going to diminish. I think the halo effect of iPhone worked when customers had little or no choice in terms of alternative similar smart phones and the real cost of iPhone was hidden from them due to post paid plans. Once the cost of smart phones becomes transparent, I don't know how much premium, if any, will customers pay for iPhone compared to other similar smart phones.

Leebase

http://www.thedailyshow.com/watch/tue-january-11-2011/verizon-iphone-announcement

For those of you who don't live in the US, and don't understand just how reviled AT&T is, watch the very funny video I've linked to. It's from a popular comedy show, a "fake" news show, doing a send up on the Verizon iPhone announcement.

So, Tomi, when you are absolutely surprised to find out just how popular the iPhone turned out to be on Verizon...you'll understand.

Lee

Baron95

I think your analysis of the 2011 sales split between AT&T and VZ got the numbers about right, but for slightly different reasons.

Some here asked "What will AT&T do"? Wrong question. It is what they HAVE DONE already.

AT&T has:

1 - Become the exclusive provider in the US of the iPhone 3GS at a price of $49 - $150 cheaper than ANY VZ iPhone.

2 - Allowed many customers to upgrade to iPhone 4 up to 6 months ahead of their contract end date - re-locking them for another 2 years.

3 - Become the exclusive provider or arguably the best phone to date on the market - Moto Atrix.

---------------

Other items, you failed to consider. Most iPhone customers on AT&T are on family and friends plans and work plans (my case). I can not pick up and leave AT&T for VZ that easily.

Likewise, *A LOT* of VZ smartphone customers are on work plans (mostly on RIM, some on Windows and Android) or, again, family and friends plans. Many, many who wanted an iPhone could not pick up and leave VZ. So the pent up demand is HUGE. That is why is reserving a full weak exclusively for their existing customers to pre-order, than they open it to new users.

Another very, very large group of people, watched in horror, how abysmal Cingular/AT&T's network was. Particularly in the media centers of New York and San Francisco it is truly awful. Many iPhone potential buyers simply refused to go to AT&T.

----------------

Lastly, iPhone demand....

Arguably, the iPhone 4 was the only iPhone that was truly "complete" and highly desirable. You saw the huge spike in demand when it launched. I myself (not really an Apple fan) upgraded from 3GS (company paid) to 4G (out of pocket - first time ever buying a phone with my money).

So what can we expect in 2011? iPhone 3GS selling for $49 on AT&T and iPhone 4 selling for $199/$299 on both AT&T and Verizon. Similar story worldwide.

Then comes July. Most likely iPhone drops to $99 with the new models coming in, and then, assuming new iPhones are good, sales really go up to a new level.

Also, don't discount the iPad phenomenon. Smartphone buyers want their favorite apps (purchased or free) to work seamlessly on both the phone and the tablet.

That will be true for Apple and Android

It will not be true for Nokia. It will likely not be true in 2011 for WP7 and Rim.

So Apple and Android will take off in 2011 and will pull away from the pack even more.

Baron95

Bob Shaw said...."Once the cost of smart phones becomes transparent, I don't know how much premium, if any, will customers pay for iPhone compared to other similar smart phones."

What makes you think that the iPhone would EVER be more costly to make than other similar smart phones?

Apple develops one model/year with *HUGE* economies of scale. Apple is selling at a rate about 50M iphone 4s, 25M iPads and 80M iPodTouchs per year - these are all basically the same device (same OS, processor, connector, etc, etc). They NEVER EVER customize their devices to operators or countries - It is virtually the same.

Apple's cost advantages are *HUGE*. Contrast that with Nokia - 3 OSes, dozens of devices/year, each with different carrier crapware.

In addition, each device Apple sells, is another registered iTunes account with a credit card to buy Music, video, apps, etc - with Apple getting a nice 30% cut of ads or sales.

If Apple EVER needs to be in a price war, they will win. But guess what, they won't need to be. When you can only buy Beatles songs from iTunes. When Apple hs the best Phone/Tablet/PC synergy in the industry. When Apple has a well choreographed launch machine - tablet in the spring, phone in the summer, iPod in the fall, Mac in the winter.

Well, dream on - taking Apple on price - good luck with that.

Want to take on Apple? Do what Samsung did with Galaxy S or Moto is doing with Atrix and Xoom tablet. Get on a popular OS and leapfrog on features.

That is the ONLY way.

Nokia will never crack the US market with a device like the N8. Ever.

Baron95

Romain said..."was surprised too that Apple invested in porting their iPhone to a technology with such a small footprint (globally, not only in the US)"

That is because you don't understand Apple or Brand value development.

Apple would easily spend $1B, $2B, $3B to maintain/grow brand equity.

For the reasons I stated above (AT&T network quality and inability of some users to leave VZ), a large number of Apple customers, potential customers plus the press, etc were dissatisfied with the iPhone being only on AT&T.

The investment is minimal - replace the radio subsystem and change the length of the antenna cuts.

Even if Apple sold just 1M CDMA phones in VZ, they will gain so much good will and enhance their brand so much, it is a no brainer.

You are thinking in terms of costs or price - so is Nokia.

Apple is thinking in terms of value.

You will never get it.

Phil W

So Baron95,

"Apple develops one model/year with *HUGE* economies of scale".

So the fact that, according to IDC, in Q3 Nokia sold 110 miliion phones (of which 26.4 million were Smartphones) and Samsung 71.4 million phones compared with Apple's 14.1 million doesn't matter?

I'm afraid I struggle to believe that Apple can better Nokia or Samsung on component or production costs.

The N8 will sell bucket loads, but you are right there, not many will be in the US. I don't think Nokia really expects it to. Nokia is looking to the Meego devices to start the long haul back into the US market. It won't be easy and it won't be quick, nobody is expecting it to be.

kevin

Phil W,
If we're talking about large touchscreen display smartphones with 8GB or more of flash RAM, Apple is in the same class. If we're talking about anything else, then Apple is not in the discussion.

Nokia sold 26.4m smartphones, Apple 14.1m. But mentioned here because it is really relevant, Apple also sold about 8m iPod touch and over 4m iPad, so the volumes are similar.

The most expensive hardware components in a touchscreen smartphone are the flash RAM and the large 3.5-4.3" display, not the phone components. So the large number of non-smartphones sold does nothing for RAM and large displays, as even most of Nokia's smartphones don't come with 8GB of RAM nor do they have a 3.5"+ displays. So clearly, Apple does greater volume on both of those and gets discounts. Also, in exchange for Apple's assistance with capital investments, Apple received favorable long-term pricing. (I expect but don't know what discounts Samsung's chip or display units give to their mobile unit.)

In software, iOS is leveraged across the same Apple products and AppleTV, plus the far more expensive Mac line, as OS X is the base software and most of the Core was developed first for the Mac. MeeGo will not have that same base, though the Qt layer has a larger base.

kevin

Tomi,
- As usual, thanks for a comprehensive overview. Most important, if you could do something about the cost of international roaming, that would make GSM more valuable and make me very happy. ;)

Here are my thoughts on your piece:

1. The casing is changed because buttons on the side of the iPhone were moved, partly due to using a CDMA antenna and components. The gap on top of the iPhone have been moved to the left and right sides, near the top. The antenna gaps on the sides near the bottom, which were the focus of antennagate, remain exactly where they were on the GSM iPhone.

2. COO Cook explicitly pointed out that the Verizon iPhone is not exclusive. So I wouldn’t be surprised if there is a deal with T-Mobile – but not until later this year. From what we have seen so far, Verizon got no concessions from Apple – no logo, no pre-installed apps, no distributor limits, Apple warranty and service, iTunes Store, App Store – so I think Verizon probably did get a period of sales exclusivity. By the way, Sprint and T-Mobile combined have fewer subscribers than either Verizon or AT&T.

3. If AT&T alone could've gotten a 33% to 45% growth in iPhone for Apple, then with Verizon, Apple will certainly do more than 50% growth with iPhone. Not 90% but more like 65-70%, which is a difference of about 3m iPhones. Several reasons as follows:
-- Verizon’s churn rate increased from 3Q07 thru 4Q09. Then it started going back down. My interpretation is that Verizon customers who were willing to switch to AT&T for iPhone did by the end of 2009, and there aren’t very many left. Yet a Changewave survey in Nov 2010 found that 34% of non-AT&T customers would’ve bought an iPhone if it was on their carrier. As Leebase wrote above, AT&T is disliked by many non-customers, who would never switch to AT&T.
-- Verizon’s website went down several times on 1/11. Most observers think it was caused by iPhone visitors.
-- I believe Verizon agreed to Apple’s terms because they see that iPhone has been able to get people to switch carriers and sign up for data plans. It has been the main source of AT&T's growth. Now they get that boost and dent AT&T at the same time. Verizon's plan for a huge iPhone marketing campaign, replacing their Android spend, shows that they see iPhone as their big weapon for the next few months (until LTE phones arrive).
-- The cost of the data plans is still the key factor in smartphone uptake. The $15 plans which started in 2H 2010 will increase the number of smartphone subscribers as contracts turn over. On AT&T, iPhone garnered more than 80% of its smartphone sales, and on Verizon, which still has a low smartphone uptake, I would expect it to get at least 40% of its smartphone sales in the coming year.

Finally, for Apple, this phone is just a stepping stone to a Verizon LTE phone. Verizon will take 3 years to have LTE cover the US, so a Verizon phone must have CDMA as the fallback. Apple is ensuring that when the iPhone LTE arrives, it won’t have any trouble with the CDMA piece. As I've said before, Apple is not in a rush, because with LTE and faster processors, a smartphone will even more so a smaller personal computer.

Phil W

Hi Kevin,

I was very careful in my wording as Baron95 was implying that Apple was much better than everyone else. I can accept that Apple may be comparable and I think that is what you are telling me.

I haven't checked the RAM issue, but I will take your word for it. The display issue has some merit in that Nokia's smartphones have different sizes, but the quantities of each Nokia model will still be pretty significant and I would be surprised if Apple gets much more leverage than Nokia.

I also may be underestimating the impact of the OS costs, but I was focusing mainly on the BOM costs and the OS costs are essentially spread across millions of units aren't they. (Ok maybe not for Meego initially.)

The one thing I would have thought was in Nokia's favour is that it has its own manufacturing facilities. It does outsource as well, but I understand that all of Apple's manufacturing is outsourced.

Phil W

Again @ Kevin,

Just checked and the N8 has 16GB internal memory and the C7 8GB internal memory. The E7 will have 16GB of internal memory as well. The C6-01 only has 340MB.

Now if the rumours of 4Million N8s being sold this quarter are anywhere near true and then factor in the C7 and potential E7 sales (not on sale yet I know). That suggests that Nokia's purchase of RAM will be pretty significant.

As I don't know any real numbers and the E7 is vapourware until it actually goes on sale, I won't make direct comparisons with Apple's buy, but I would suggest the advantage is not as much as some people think.

KDT

Phil,

When it comes to flash memory, Apple has been the number one consumer since the iPod Nanos became popular (around 2005). For 2010, (guessing on the 4th calendar quarter), Apple will sell:

About 45M flash based iPods - 2GB - 64GB
About 48M iPhones -- 8GB - 32GB
About 14M iPads -- 16GB - 64GB
About 1.2M AppleTV's - 8GB

And a wild guess, about 4M SSD equipped MacBooks -- 64GB - 256GB

Bob Shaw

In terms of cost of components advantage, Samsung I think would be ahead of Apple and Nokia. Samsung has a large base of smart phones and dumb phones but more important Samsung makes component for other vendors like Apple, Nokia etc. My understanding is that Samsung is the biggest manufacturer of Displays.

Leebase

Why all this talk of Apple needing to cut their prices? We all know that they could, but they haven't had too. Tomis is just wrong that the only way to succeed in mobile is to have the largest market share. That may be all THIS blog is about, but that's not the real world.

Apple does not compete in commodity businesses. Not with Steve Jobs at the helm. The first thing he did when he returned was cut a bunch of product lines (like laser printers and digital cameras) where Apple added nothing to what anybody else in the industry did.

Apple is competing against Nokia, but Apple is not playing the same game Nokia is. Nokia, compared to it's normal competitors, is doing great. But Apple, playing a different game, has taken a huge chunk of Nokia's potential profits.

The iPod, iPhone, iPod Touch, iPad, iTunes, App Store, iBook Store, Apple Tv, Macintoshes -- that is Apple's game. Apple has developed an end to end "virtuous cycle" of interrelated products that all are highly profitable and work to enhance the sales of each other. Even Macs have seen their highest levels of market share than ever due to this vitual cycle spilling over onto them.

I realize, that like it's outsized mega-profits are not what this board is about -- all but the iPhone are also not what this board is about. Ok. Fair enough. But without at least considering these things, folks will NEVER understand Apple's game plan and will continually make absurd proclamaitions about Apple's demise in mobile.

Examples of absurdity: predicting Apple would be victim of a blood bath in 2010. Evaluating iPhone's sales quarter to quarter when Apple has an annual product cycle. Calling Apple's profits "temporary profits". Even AFTER the year that was, holding out hope that Apple would indeed be categorized in the "victim of bloodbath" category.

Let us remember that the prediction was that Apple at peaked 3Q 2009 at 17%. Even if Apple's 4Q numbers fall short of 17%, that will not change the fact that Apple's 3Q 2010 was 20%. You can never use any other quarter of the year to judge Apple's peak than the 3Q, the one that follows the introduction of the latest Apple phone.

Lee

Phil W

Thanks KDT, I wasn't adequately considering Apple's other products. So apple wins hands down for RAM buy.

Bob, I knew Samsung would be up there with the others for that very reason.

I just wasn't happy with the blanket assertion by Baron65 that in cost terms noone could compete with Apple. Knowing that Nokia has long been held up as a model of inventory and supply line management and given the sheer volumes of the components it buys, it has to be up there as well.

The discussion here has set me straight me that Apple has a strong position as well.

It would seem that all three companies have their own particular strengths.

Thanks Kevin, KDT and Bob for the debate.

kevin

Phil,
The models you mentioned were a negliglible part of the 26.4m sold in Q3 and will be a small part the 30+ million smartphones Nokia will sell in the Q4.

What about all the rest of the S60 smartphones - C5, other E-series, other N-series, 67xx, 6210, 58xx, 5730, 5630, 5530, 5250, 5235, 5230, 5228, 3250, etc?

In any case, people more knowledgeable than me have said Apple is the largest purchaser of flash RAM in the world. RAM experts claim Apple's actions move the price.

kevin

Phil,
One other thing: Outsourced production in China often is cheaper than using your own manufacturing facilities, depending on where they're located.

Apple does a huge amount of business with about 3 or 4 contract mfrs in China. Apple's cost of goods sold in 2010 will be about $45 billion, so just getting 2% is almost $1B in revenue.

kevin

@Bob,
Samsung makes huge quantities of components; they make Apple's A4 processor. That's not the question.

Samsung operates each of their units separately - with revenues and profits associated. So how much does Samsung semiconductors, or Samsung display charge Samsung mobile for the chips and displays? If the semi unit gives mobile a better price than they give Apple or Nokia, semi takes the hit, not mobile, and risks that Apple takes their huge buys and A4 to Toshiba or someone else, to get as good a price.

Anyone know how Samsung operates?

Phil W

@ Kevin,

Yes I wondered about the logic of my comment almost as soon as I had written it. I was thinking the outsourcing company would be adding a cut onto the costs to make its profit. But that is flawed thinking as the point is that these outsourcing companies are huge and focused on one thing which means they can do things cheaper. If it wasn't cheaper then why is Nokia playing with outsourcing at all?

A bit silly on my part, thanks for the comment.

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Available for Consulting and Speakerships

  • Available for Consulting & Speaking
    Tomi Ahonen is a bestselling author whose twelve books on mobile have already been referenced in over 100 books by his peers. Rated the most influential expert in mobile by Forbes in December 2011, Tomi speaks regularly at conferences doing about 20 public speakerships annually. With over 250 public speaking engagements, Tomi been seen by a cumulative audience of over 100,000 people on all six inhabited continents. The former Nokia executive has run a consulting practise on digital convergence, interactive media, engagement marketing, high tech and next generation mobile. Tomi is currently based out of Hong Kong but supports Fortune 500 sized companies across the globe. His reference client list includes Axiata, Bank of America, BBC, BNP Paribas, China Mobile, Emap, Ericsson, Google, Hewlett-Packard, HSBC, IBM, Intel, LG, MTS, Nokia, NTT DoCoMo, Ogilvy, Orange, RIM, Sanomamedia, Telenor, TeliaSonera, Three, Tigo, Vodafone, etc. To see his full bio and his books, visit www.tomiahonen.com Tomi Ahonen lectures at Oxford University's short courses on next generation mobile and digital convergence. Follow him on Twitter as @tomiahonen. Tomi also has a Facebook and Linked In page under his own name. He is available for consulting, speaking engagements and as expert witness, please write to tomi (at) tomiahonen (dot) com

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Tomi's eBooks on Mobile Pearls

  • Pearls Vol 1: Mobile Advertising
    Tomi's first eBook is 171 pages with 50 case studies of real cases of mobile advertising and marketing in 19 countries on four continents. See this link for the only place where you can order the eBook for download

Tomi Ahonen Almanac 2009

  • Tomi Ahonen Almanac 2009
    A comprehensive statistical review of the total mobile industry, in 171 pages, has 70 tables and charts, and fits on your smartphone to carry in your pocket every day.

Alan's Third Book: No Straight Lines

Tomi's Fave Twitterati