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« Prepping for Q4 and Full Year Smartphone Stats. Some things to look out for | Main | Nokia HMD Comeback? First Year Finishes with 8.7 Million Smartphones Shipped and 1.0% Market Share by Year-End (Updated) »

February 01, 2018

Comments

Jim Glue

Hi Per,

THIS year...not last year, is SUPPOSED to be the super cycle. I was way off with my qtr predictions. Time will tell if it was due to one month delay in putting the iPhone X on sale.

Still....on the plus side: a $100 jump in ASP on 77 million iPhones sold. Apple's financial performance is awesome. Think about it. How many years has the premium segment of the market been mature/saturated? Apple's ability to still grow revenues on top of the base of the already awe inspiring iPhone revenues...phenomenal.

But as for unit share....onward we go down to 10% to 12%. That's a sure thing.

Johnnie Hougaard Nielsen

An important factor likely to dampen smartphone sales is that the real benefit of getting improved specs has become much lower at the same time as non-flagship models down to about $200 have become pretty good. The reasons for a life cycle of 1-2 years have become much weaker, and users are likely to keep using devices for longer. About the only area of notable improvement of results (not spec sheets) in the last couple of years have been camera quality, allowing for instagramming better selfies and foodies.

This can be compared to laptops, when the cheap laptops got to dual-core and HD screens, the reasons to groan over "crappy old hardware" became much less for mass market users.

Huber

@Jim Glue:

Apple is not the only company to raise prices: Samsung also has done this (SGS8+ and Note 8), Google has done this with the Pixel 2 / 2 XL, LG has tried this with the V30 (and failed) etc.

It seems that the "ultra high end" slide of the market actually shows raising prices, while the mid- and low-end shows falling prices. The "high end" seems to be stable, though.

Tommi

What comes to the Apple Watch of which Apple was supposed to “maintain the embarrassment” for another cycle, we heard that Sales of Apple Watch Series 3 models were also more than twice the volume of Series 2 a year ago. In addition to that IDC said Apple is market leader (in units shipped) and increased their market share (market share of units).

Wow. Such embarrasment.

Jim Glue

Hi Huber,

It is one thing to raise prices. It is quite another to sell so many of the higher priced models that your ASP leaps $100 per phone on a 77 million count...with sales of the expensive phone only occurring in the last two months of the quarter.

As I've said before...it's not that Apple is immune to it's market maturing...but that Apple is best prepared to handle that scenario. Consider Apple's performance next to Samsung's with consideration to ASP since the Samsung Galaxy S4 (it was either the 3 or the 4 that represented peak Samsung premium phone).

So far...nobody is stealing Apple's customers away. Apple's install base continues to grow. Platform loyalty remains astronomically high. But this is not for lack of trying. Samsung, Huawei, BBK...everybody...would love a piece of Apple's pie. Not just a piece of the smartphone market, but a bigger and growing piece of the most profitable part of the smartphone market. And they haven't put a dent, not even a little, in Apple's market segment.

Meanwhile...Apple is able to put out an even more expensive phone and sell enough to raise the ASP $100. Apple is also mining their customer base with other offerings (Apple Watch, AirPods, Beats Headphones, HomePod) as well as services. 270 million subscription plans. 1.3 Billion active devices.

I'm not so sure Apple is even going to try to go down the stack that much further. There is more money to be made doing what they are doing (not even including the iPhone, but coming up with more devices and services for those same likely-to-spend customers). But Apple CAN go down further. $350 now. $300...and $250 are targets Apple can hit anytime Apple wants to.

Meanwhile...the competition is already selling phones as cheaply as they can. They all are playing the same game and all combined do not have the financial results of Apple. Not even close. Huawei was just stopped in their tracks with their plans to roll out in the US. (too bad, hope this changes). The Chinese have a LOT of work to do to go upscale with their brands across the globe. The task before them is much larger than Apple's task.

Imagine Apple wasn't selling iPhones or iOS. How would anyone feel about the third place phone manufacturer who's ASP was approaching 4 times as much as everyone else?

Henrik Nergard

If the total sales of smartphones is declining in the future and we will see a coming price war I think HMD Global/Nokia are in a good position. A slim organisation with a relative few people. They also made a permanent price cut for Nokia 8 in India, all Nokia phones there are made localy as I understand it to.

But how will Apple handle a price war? A very big organisation and a expensive new headquarter (the round spaceship) So its in their interest that people buy $1000 phones.

I think the sweet spot are phones around in the $200-300 range. Except for the camera they almost do all the stuff now that a expensive flagship can handle. We see a lot of new Chinese player in that space to. But they often lack the software patents to go to western markets.

Anyway 2018 seems to be a very interesting year in phones.

Johnnie Hougaard Nielsen

Current ability to extract cash from rich customers is not a predictor of future market position. OTOH, dwindling market share for a platform (not an individual brand) is a reasonable predictor of less importance in shaping the future.

Jim Glue

Apple has already been successfully selling against the cheap commodity competition for years. If you count the Mac....for decades.

Rich customers. You mean the 1st world economies...and the middle class that exists to lessor or greater degree everywhere else. Yes. I am comfortable that the world's future will still be shaped primarily by the advanced economies.

As far as a price war...what could possibly think that Apple would be hurt worse? These Android companies outside of Samsung are already subsisting on meager margins or are subsidizing their money losing smartphone divisions.

Samsung has the most to loose...but we will see quite a few Android companies exiting the market...and those that remain will not be living large on what's left. The only company set to have a thriving business in such a market is Apple.

Per "wertigon" Ekström

@Tomi:

Yes, you are right. It's an interesting break in what has been a clockwork trend, but all good things come to an end. If this is indeed the end of growth in the market, then Apple will perhaps grow itself slightly for a couple of years, before the slow glide to destroyed market share begins.

I think the smartphone durability is good enough for most people and that is why we are seeing this trend. There are 7B humans in the world, and of these maybe 5.5B to 6B will have a cell phone e.g. smart phone. If the annual market hovers around 1.5B phones, this means that cell phones will be replaced every 4th year on average. But, batteries are never built to last that long in smartphones, so something smells here.

But, shouldn't there still be some room for feature phone conversion growth? Or have we already reached the point where the only people left buying FPs are either stubborn grandmas clinging to what they know or people with a vested interest in staying anonymous, for various reasons (criminals, yes, but also people in witness protections, secret service, etc).

@John:

Yes, Apple does have double standards. Last year Apple was essentially flat YoY for a 13 week cycle - but managed to squeeze by an "impressive" 4M growth by channel stuffing and that extra week.

This year Apple was flat for a 13 week cycle - which tells us two things:

1. They did marginally better than last year.
2. They would have reached around 82M for a 14 week cycle.

Did they channel stuff this year? Quite possible, Apple do want to keep their numbers up as much as possible. It's nothing I can prove however, so I will leave it as mere speculation.

@Everyone:

I do believe this year will lead to some growth to Apple, but given this years ratio compared to previous years, the christmas sales are a bigger and bigger proportion for each year to Apple. Also, if sales collapsed in China, then CNY will NOT save Apple. Instead, we should see an even lower result next quarter, roughly 48 million or so. This depends on how much second half of christmas offset the loss of the CNY, this will all depend on how beloved Apple is in China and more importantly, in the west.

The best case is around 55M for Apple, but they will not beat their old record of 61M. That is just wishful thinking.

Unless, all chinese were waiting for the CNY to get a hold of an iPhone and that is what affected the deficit for Q4... Again, wishful thinking if you think that. :)

Johnnie Hougaard Nielsen

Android as a platform has a stable and growing success, meaning importance to the world. Emerging economies are going to play a larger and lager part of shaping the future of the world, instead of stagnating countries like the US and Japan (two of the major Apple strengths).

It is not at all important whether the bigger brand owner is Samsung, BBK, Huawei, Xiaomi, LG, or whatever. As long as there is a good market for Android smartphones, some companies will prevail in nibbling market share away from Apple (and probably also Samsung), with much more healthy profit margins than extracting to the pain point.

Apple is an anomaly, and has been spectacularly unable to do anything beneficial with the pile of money they're sitting on. And no, don't worry, I'm not of the delusion that they're collapsing anytime soon :-)

obarthelemy

@Jim Glue: thing is, the competition hasn't been standing still. Apple used to have a monopoly on sexy + easy. They no longer do: since about the move to metal unibody, they've look and elt just like everyone; and playing catch with the move to 18:9 + bezel-less doesn't create a difference, it merely cancels the previous lag. The Notch is a nice branding gimmick, but it isn't superior design. The same thing has happened with laptops, though not desktops (which is kinda cancelled out by the Mini and Pro fumbles).

I think in the long run, Apple needs to provide something extra, or at least something distinctive, to justify higher prices. Force of habit and strong lock-in muddle the issue, but I feel the HW design no longer sets them apart (here's a $130 phone: https://cdn2.gsmarena.com/vv/pics/xiaomi/xiaomi-redmi-5-plus-2.jpg ) , they're having issues with the OS's reliability (and the features are at par, no more), and are lagging at each and every aspect of cloud & services.

Now, I've been thinking that for years, and it clearly hasn't materialized yet. There certainly is a luxury market of people buy expensive stuff mostly because it's expensive. 10-15% of the overall market ? What a coïncidence ^^

Tester

@obarthelemy:

"Now, I've been thinking that for years, and it clearly hasn't materialized yet. There certainly is a luxury market of people buy expensive stuff mostly because it's expensive. 10-15% of the overall market ? What a coïncidence ^^"

This is called a "bubble". Inside a bubble the normal rules of a market do not apply and weird things happen. But a bubble comes with its share of problems - for once it is not infinitely sustainable. And Apple is increasingly retreating their entire business into that bubble with little to no effort to expand beyond it. Any new product they release? Deadlocked to the existing Apple 'ecosystem', i.e. it only peddles to the same people that already own an iPhone.

Of course they won't grow their customer base like that - and certainly not their market share.
And on the desktop market they pretty much dropped the ball. If you want a high performance system - don't buy Apple!

This will work as long as the products remain viable - but once the bubble pops - behold the cliff! According to Tomi's own theory this would mean the end of it all. And this WILL eventually happen if Apple does not change strategy. Whether it happens in 3, 5 or 10 years may be everyone's guesss, but let me tell you one thing: When it happens it will come without warning.

NobodyMakesMoneyWithAndroid

"This is called a "bubble". Inside a bubble the normal rules of a market do not apply and weird things happen."

It's also called demographics and of course marketing applies there as well.

Per "wertigon" Ekström

@Nobody:

Do not kid yourself. Rich people ain't stupid. They are willing to pay premium for as long as that premium can be converted into a tangible asset (less trouble with breakdowns etc).

Now, what happens if that premium tax is paid, but not delivered on?

Apple used to be the best computers money could buy; they aren't anymore. The reputation is still there, but for how long?

Apple used to give a clear edge over Android for a user - but they do not offer that any more, either. Some nice perks, sure, but hardly any must have features. If you believe that you are blinded by the Apple commercials.

The *only* thing Apple still has going for it is that their ecosystem as a whole is far less hassle than the Frankenstein network system messes of Linux and Windows machines that are more commonly found. Trouble is, the cost is more than twice the frankenstein systems. And even there, the rot is starting to show.

SpectreMeltdown

Apple is going to win big. Companies and inviduals now realizes that the only way to go is the iPhone.

With Android you do not get security or other updates. There is now over 2.6 Billion Android phones that will never get a fix to the Meltdown and Spectre flaws. Everybody should just throw their Android phones in to the recycling bin because those phones aren´t secure anymore (well they haven´t been in the first place).

With Apple you get your updates and Apple is very serious about the security.

SpectreMeltdown

"Apple used to be the best computers money could buy; they aren't anymore."

Says who?

"Aerospace engineer Dr. Craig Hunter reviews Apple’s 18-core iMac Pro: A bargain at $11,199"

Per "wertigon" Ekström

@Spectre:

Says most of Apples old customers not stuck drinking the cool-aid.

https://www.forbes.com/sites/ewanspence/2017/04/11/apple-macbook-customer-satisfaction-fall/amp/&ved=2ahUKEwiytPfqvY7ZAhVFbFAKHfWOArIQFjABegQIERAB&usg=AOvVaw2vpb0BhhQRjZShMlz99M9u&ampcf=1

SpectreMeltdown

"Says most of Apples old customers not stuck drinking the cool-aid."

When it actually is only one guy writing for Forbes trying imply that zero evidence is something.
Next time try to refer to the "real" authorities like this:
www.pcmag.com/news/351659/readers-choice-awards-2016-laptops-desktops

There you have how satisfied people are for what they have. Apple tops every single category where they compete.

Jim Glue

The world is better for having both Android and iOS. Apple's premium only strategy would never bring computing to the masses of the world. But without Apple, the masses of the world would not be buying smartphones and we wouldn't have anything like the app ecosystems of Android and iOS.

Google and Apple are only competing on the margins at this point. Google's business model requires them to own as much data as possible. That's why Android is free...and GMail, Google Calendar and most all of the other Android services. All that data feeds into Google's Ad targeting machine and advertising comprises over 90% of Google's revenue. As such, Google also supports the iPhone every way it can. Google's ownership of Android isn't about making money from it...but about preventing Microsoft (or Apple) from locking them out of mobile.

Apple, on the other hand, sells premium hardware and best of breed user experiences. iOS, Facetime, Apple Mail, iCloud, Apple Music, iMessage, Apple Stores, Apple's office apps...they just enable Apple to offer a total experience that nobody else can.

Apple makes a range of complimentary hardware that all work seamlessly together. Each one makes getting the next more likely and more beneficial. Apple calls this the virtuous cycle: Mac, iPhone, iPad, Apple Watch, AirPods, Apple Tv, HomePod. Nobody else can put together anything like this seamless, "just works", lineup.

Over the last couple years, Apple has been building up their pay services as yet another very important revenue source. App Store, iCloud, Apple Music, Apple Pay. But even though the revenue generated is worthy by itself...the purpose to to make the overall experience the best.

There is room for both approaches. There are fans of and customers for both approaches.

Per "wertigon" Ekström

@spectre:

Go back. Read article again. Then go to that source article.

It's not just him. 🙂

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    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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