iPhone Second Quarter 2010 in Bloodbath: Market Share is Declining where All Big Rivals picking up

The Second Calendar Quarter ie April-June Quarter for Apple has been bad in the bloodbath. And this was before Antennagate.

Apple has just reported its Quarterly numbers. iPhone unit sales were 8.4 million, which are down severely from Q1 (8.75M) and down from Q4 of 2009 (8.7M). Apple market share is down again, now to 14% - it is down from the peak from a year ago, in Q3 of 2009, when Apple's smartphone market share peaked at 17%. Since then its clear that Google Android has picked up a lot of market share. But the really bad news is that all of Apple's rivals have been growing since Apple's peak last year. HTC has grown and now is starting to near Apple to rival for 3rd place among biggest smartphone manufacturers. RIM has grown unit sales and market share - ie RIM is pulling away - since Q3 of 2009, Apple has NOT been catching up to RIM. And Nokia is far-and-awawy the planet's best-selling smartphone, which up to Q1 of 2010 had been growing unit sales and market share (and is likely to grow both again this Q2, but we have to wait now a couple of days until Nokia reports its quarterly numbers).

The global smartphone market grew 10% over the past 6 months. Nokia and RIM have grown unit sales and each quarter been flat or grown market share. HTC, Samsung and Motorola each has grown unit sales and market share. Of the major manufacturers over the past 6 months, only Apple has lost unit sales and lost market share. Its peak was 17% a year ago, it is 14% now and falling. Lets see how many 'analysts' report on this fact.

While the gossip in America is that Apple is somehow 'winning' in smartphones - it is gaining in the US market yes, but globally Apple is falling behind. Apple is indeed the most proftiable smartphone maker and its app store has most apps and there are a lot of web views reported by Admob etc. That is all smoke-and-mirrors. The big number that matters - is market share. And Apple's market share peaked in Q3 of 2009 and has been in free-fall since. This is now really dangerous, as there is Apple's Antennagate and Death Grip  hurting this current Q3 (July-Sept) quarter, as IDC reported, two thirds of Apple current iPhone owners are delaying iPhone 4 purchases until Death Grip is fixed, and operators are starting to delay iPhone 4 launches - South Korea's KT was first to do so,. The prognosis for Apple's market share in 2010 is dire.  

Please all who comment - this blog is NOT a financial analysis blog. We don't 'care' about who makes the most profit - so yes, Apple is the most profitable tech company. And we don't care in the 'smartphone bloodbath' about iOS - yes, for Apple it is great news that they have iPod Touch and iPad, but when you consider 'smartphone market share' then the only valid number is number of smartphones sold. That is not some 'weird' Tomi Ahonen outrageous view - all major analyst houses who report on mobile phone market shares and smartphone market shares - that is IDC, Gartner Dataquest, Strategy Analytics and Canalys - they ALL count only iPhone, not the other iOS devices. So don't write the comments here that I should include iOS market share. Yes, that is important to Apple investors but this is not a financial site, we report on the smartphone bloodbath for 2010, and in that race, we can only count real smartphones. Like in cars, Honda makes motorocycles too. If we measure market share of cars, we can't suddenly include Honda motorcycles in counting market share of cars.

And the unrefuted fact is, that with 8.4 million unit sales, down from 8.75 million in Q1, where the global smartphone market grew, Apple's market share has been declining. That is a fact. Apple's iPhone is losing market share. Down from its peak in Q3 of 2009 at 17%, it has been declining and is now at 14%. And this was before Antennagate. Now we start to wait how Death Grip hits Q3 unit sales and market share for Apple over the next 3 months.

Comments

[Brad]

"IDC says smartphone market grew 38% y/y during June quarter, so Apple iPhone grew almost twice as fast. Sales value of iPhones alone $5 billion, $595 ASP. 154 carriers in 88 countries, continue to experience very strong y/y growth in Asia, Europe, and Japan. Strong sales growth from old and new carrier partners. Surpassed 100 million iOS devices cumulative sales. Nice milestone."

Somebody must be wrong.

[Mark]

Yes, Brad, it's you. Increasing sales of a product by 61% is not the same as the whole market increasing by 38%. So, say 41 million were sold in Q2 2009 then from your quote 55 million were sold in Q2 2010. Even on these numbers Apple's share is 15%.

Which is err... a drop from their peak.

[Tomi T Ahonen]

Hi Brad

iPhone PEAK market share was 17% in Q3 of 2009. It is now 14%. Is this progress or are Apple losing the game? Android shot past them in Q1 in the US market and Q2 in the world market. Apple activates 93,000 new phones daily, Google Android devices activate 160,000 devices daily. Who is winning? RIM grew unit sales since Q4 of 2009 by 1.2 million units per quarter. Nokia grew unit sales only in the first quarter (we need Q2 numbers later this week) by 700,000. (this in only 3 months). HTC grew unit sales from Q4 1.2 million smartphones per quarter. But Apple lost unit sales by 350,000 in the same period. Nokia market share up from 39% to 40% (in 1 quarter). RIM up from 19% to 20%. HTC up from 6% to 8%. But Apple iPhone is down to 14%.

The numbers do not lie. This is the first site where you can read the numbers. Do you Brad want to wager a bet that when IDC, Canalys, Strategy Analytics and Gartner Dataquest report on Q2 global market shares of smartphones - all of them - all of them - will report Apple iPhone market share has fallen? Or do you feel that when Apple reports Q1 sales of 8.75 million and Q2 sales of 8.4 million - that somehow this caused a 'growth' in market share? Please do come back with your opinion on this Brad, I'd love to hear how you see it.

I will be here when the four major analysts report. I will stand by my number. It is 14% today. That is severely down from Apple's iPhone peak market share of 17%. Apple is losing in the market share game. Sorry.

Thank you for writing, do come back with your own opinion on Apple's market share, Brad

Tomi Ahonen :-)

[Sam]

Geez Tomi, you are getting crazier and crazier all the time. It's like this is a personal vendetta for you. Did Apple do something to you to make you skew facts into the realm of irrational? I drop by from time to time to laugh at how out of touch you are. You never disappoint.

Leebase has the facts right. You can argue all you want about who has more buy-one-get-one-free phones out there, Apple will keep trucking their money to the bank.

[Enyibinakata]

Tomi,

Your brave forecast is looking accurate thus far - thanks maybe to the antennagate.

What does it take to be a good analyst?

[Enyibinakata]

Sam,

Market share matters and Apple knows this fully well which is why its spreading iOS to more devices. It lost the marketshare war to MS Windows and is loath to repeat that again. It may make all the profits now but dont forget that its rivals are not standing still. Tomi has no vendetta in my opinion. He has been very effusive with praise for Apple and more articulate in this than most fanbois who stop at 'awesome', 'OMG' etc. Who else has gone as far as say that iPhone will define how phones are defined (BC / AD iPhone). He made a brave forecast earlier this year that iPhone's market share has peaked and is only anxious to be proven right as his rep is on the line. He is far from crazy, he is the best analyst in the game IMHO. A mobile market oracle. Dont let your love for Apple cloud your judgement, show some R-E-S-P-E-C-T !!.

[Anders S. Løvlie]

Mark: Sorry, I may be forgetting my high school math, but how is it possible that Apple is losing market share compared with Q2 2009, if they grew sales by 61% while the total market grew 38%? You say they increased from 41 to 55 million, but that's not 61% growth - that is 34%? Sorry if I'm the one getting it wrong, just can't make the numbers match.

[Tomi T Ahonen]

Hi Mark, Leebase, Sam Enybinakata and Anders

Thank you for the comments. I will reply to each individually as we always do here at the CDB blog

Mark - thanks.

Leebase - 61% growth may seem good, until you notice that the whole market has grown dramattically in the same period of time. Apple had a reported market share of 17% of smartphones in Q3 (July-September quarter) of 2009. Go check IDC or Gartner or Canalys or Strategy Analytics. Its a fact. Now go do the math for 8.4 million smartphones out of a total smartphone market of about 59 million units for Q2. You see that Apple's market share currently is 14%. That is a serious decline - and in the same time Nokia, RIM, HTC, Samsung and Motorola among smartphone manufacturers and Android and RIM among smartphone operating systems have grown market share. Those are the facts. I report facts here on this blog.

And when I report smartphone market shares, that is not the cheap dumbphones you refer to. I said as 2009 ended, that the fight for global smartphone operating systems was heating up - as Android was ramping up - and promised to track this market battle. I am reporting it now. Dumbphones have nothing to do with smartphones. Samsung's smartphones, Motorola's smartphones and Nokia's smartphones have grown unit sales and market share since Q3 of 2009 while Apple's has declined.

Sam - what number did I 'skew' ? Apple itself reported 8.4 million unit sales in Q2. Apple itself reported 8.75 million unit sales in Q1. What part of decline in unit sales do you not understand? Need to go get some remedial math courses, Sam? What number did I skew?

Enybinakata - thanks for the kind comments and endosement! Yeah, it was a brave forecast, but note, Antennagate had no time to impact Q1 sales - because almost all Q1 Apple iPhone 4 sales were those who preordered it or who stood in line to get one. The story didn't break until the second day, would be reported in the main stream press by the 3rd day, and by then the period had ended. No, Antennagate had no material impact to Q2 sales of iPhone 4

Anders - I am not comparing market share to Q2 of 2009 - by that measure, the market share is up one percentage point - I have said again and again, that the peak of iPhone was Q3 of 2009 when its market share was 17%. If you want to put the scale of the loss - it means in the past year, Apple has now lost nearly one out of five customers in its market share (drop from 17% to 14%) and declining. And now it faces Antennagate when it should be racking up sales before Samsung's Galaxy is on every network, before Nokia's N8 rolls out, before HTC has released another 6 smartphone models and before Microsoft's Phone 7 luanches later this year. This is Apple's last good moment, and it is suffering from Antennagate. This is not good..

Thank you all for writing

Tomi Ahonen :-)

[Brad]

Tom,

Thanks for inviting me back. The quote I supplied said year over year Apple grew market share. That is true. You said they were down from last quarter, that is also true but as you have noted elsewhere in your blog Apple has a unique selling pattern with Q2 being their low point (especially this year where everyone knew the new phone was coming). You point out the lost sales in Q2 - but is that unusual for Apple or the normal pattern for Apple.

Looking ahead Apple claimed today they are selling every phone they can make (If you go and try and order one note the delivery date). You claim they are in big trouble because of the "Antennagate" so Tom give us a prediction. I claim Apple will gain smart phone market share in Q3 and Q4 as it ramps up its manufacturing. Your prediction?

As to the big loser, it is clearly Nokia. We can look at market share in a number of different ways: Share of profits (Ok, we won't discuss it), Share by units sold (what you like), Share by revenue (my favorite). The problem in looking only at number of units sold is what is the definition of a smart phone (Heck, what did you write about - 10 different categories)? Is a smart phone that costs 150 Euros (revenues to company) the same as one that costs 500 Euros? Most people would say not. Nokia's problem is that they can only sell "dumb" or "inexpensive" "smart" phones where as Apple, HTC, and the others are selling "smart" "smart" phones. What's worse is people don't really want Nokia's "smart" phones so they have to sell them at a discount and don't make any money on them (ok, ok, we won't talk about profits).

My predictions before Nokia releases. Apple passes Nokia in smart phone revenues this quarter (or comes very close) and by a large margin next quarter. Apple claimed it earlier but in terms of mobile products (for Apple, Iphones, Ipads, and Ipods but NOT portable computers) I expect Apple really did pass Nokia in mobile revenues to become the largest mobile manufacturer.

One more thing. There is some confusion between manufactures and operating systems. Nokia is a phone manufacture with 3 operating systems. Android is an operating system. HTC is a manufacturer supporting at least two operating systems. Apple is a manufacture with one operating systems (as is Rim). It doesn't really make sense to lump Nokia, HTC, Android, Rim and Apple, for example, together. Let's all try and talk about cell phone manufactures or cell phone operating systems. Finally, if you want to talk about cell phone operating systems it is really hard to see how you can not talk about Ipods and Ipads since any company targeting the operating system will also be targeting them.

[Mark]

@Leebase

I'm sure Tomi will answer you but while we're waiting can you do the following..

1) Choose a major analyst - or take averages from any or all of them
2) Write down their unit sales for smartphones over the last two years for each company and/or OS
3) Work out the absolute unit growth for each

It's important you do this so you don't let arbitrary percentages quoted in earnings calls confuse you.

That's the point he's making. You also seem to have missed Tomi's specific acknowledgement that Apple are the most profitable tech company on earth. Sure, Apple make way more profit than Nokia but that's not what the discussion is about.

From my point of view this is an interesting number - in Q3 2009 when the 3GS was due for release numbers spiked considerably on Q2 even though the new model was coming. That didn't happen this year. We also know that the rate of sales to existing customers was much higher for the iPhone 4 than the 3GS too. Of course you could argue that this has been distorted by lack of availability but I'm not so sure about that.

I don't know why this analysis upsets people. No-one's saying Apple don't make money, merely that their share of the smartphone market is stagnating.

As for Nokia, they have huge problems at the high end and having no compelling challenger in that segment for well over a year isn't going to change that overnight. Another interesting number will be how the N8 does against the iPhone 4 and Android handsets in Q4 when Nokia actually get round to releasing it. I think the results may surprise a few people although equally I don't think it'll sell anywhere near the same volume as the iPhone.

[Randall Arnold]

Brad, it would be nice to separate cell phones and operating systems into distinct categories as you suggest, but that's getting increasingly difficult. You touch on that with the comment about iPods and iPads.

In several years we'll all laugh about how quaint this time was. That will be when "mobile computer" is the more ubiquitous term than "smartphone", and choosing among various operating systems will be a snap, Oh, for the ones that aren't designed to be bricks of walled gardens, that is.

[Enyibinakata]

Apple fans dont need to be upset at this. Apple has a solid foundation and will continue to release exciting products. Marketshare was bound to decline as competition heats up. Their marketshare is bound to decline even further given the capacity of the competition.

Just look at Samsung with the Wave and Galaxy S and they are just getting started. What if sleeping giant Nokia awakes ?. Apple needs to build its own manufacturing factories pretty soon as depending on others for parts wont cut it.

I am enjoying this battle as it will ensure better deals for us the consumer. Apple cannot continue to charge an arm and a leg, HTC, RIM and Moto cannot afford to be complacent and Nokia cannot continue to release quirky UI.

We win despite our choice of vendor.

[Gareth]

Market share is completely irrelevant. It simply does not matter. Apple are not in the market share game for any of their products. They are in the profit share game, and they are winning.

Profit matters, not market. Maybe Apple will end up with 10% of the market, but if it's the most profitable 10% then they are unlikely to care. Apple do not want to be Nokia. Who does? Their products suck. Apple could buy Nokia for cash, today, and have a billions in change left over.

What if Nokia wakes up? Please! They have had three years to respond to the iPhone, and what have they done? Nothing. What have they done in the last 10 years? Nothing. They had it, and then they lost it, big time. They have shipped the same phone over and over again, and no one cares. Can you actually buy an N8 yet? It was announced months ago!

Market share is irrelevant. Apple make more money from a smaller market share. Who doesn't want that?

[Alex Kerr]

As I've always said they would be, Apple and iPhone are niche. It's all they will ever be, end of story. If developers want to make loud noises about the money they're making (or rather not making if you read Tomi's stats in earlier posts) then cool. I'd love to see some of the great iPhone apps on other platforms, and developers are foolish if they don't make the most of the opportunities out there.

The real race is potentially between Android and Nokia. Last figures I saw recently was Android activating 160,000/phones day, Symbian selling 260,000 phones/day. Android's just out of single figure millions installed base. Symbian's on somewhere around 350 million. BADA is nowhere important. Microsoft and Windows Phone are heading very rapidly down the drain. RIM is a big player too though. It's the facts that matter, not the upside-down hype we all hear.

At the end of the day, it's the users that matter. And the users have Symbian in greater numbers than anything else, this will not change any time soon.

[Timo Koola]

I must say that I agree with Gareth. Market share as shipped units is pretty much irrelevant measure. Even if you are not running a financial blog I'd question why use it as a measurement. Why is it better to ship three 150€ devices with a lower margin than one 450€ device with a fat margin? Yes it is the common way, but it doesn't make it any better. They are not talking about replacing Steve Jobs, are they?

[Dardano]

But Tomi, isn't it a huge increase compared with Q210 vs Q209?

I think the reason they fell so much is because in Q210 a lot of people were waiting for the iPhone 4 since it was supposedly such a huge improvement over the last generation. Now they have this whole issue with the antenna that probably will hurt it's sales in Q3.

[Timuke]

Connecting People vs. Collecting Profits?

[Arief]

i don't know what happen in USA or europe. But in Indonesia (based on what i know and see, no number here..):
1. Qwerty handset is cool and king.
2. Blackberry is king because it has blackberry messenger. so yes, even RIM only sell a $250 handset, they still get monthly income from blackberry messenger service.
3. Nokia is almost killed by blackberry, no upperclass people use n97/n97 mini/e90. majority use blackberry onyx. but nokia start gaining user again with its nokia messenger and cheap handset like c3, e63 and e71.
4. Sony erricsson, samsung, LG and motorola start gaining user with android.
5. Iphone? not many people use it. handset too expensive, bundling too expensive, app store not really working here.

well, mostly people use handset to communicate and texting, so no wonder blackberry and qwerty phone is a win here.btw full blackberry service (email,bbm,facebook,browsing,etc)is range between $8-14. so its not that expensive anymore...
before you point that indonesia is a third world country, remember e90 is launched first in indonesia. yes, most of us are poor, but not that poor. there are people who spend $1-2 US dollar/month for 150 sms, but there are also people who spend $20-40/month.

[Mark]

"Market share as shipped units is pretty much irrelevant measure."

Not if you're transitioning to a services company it isn't.

Honestly that's a pretty silly thing to say.

[Steve]

Huge profits do not equal longer term success, dominance or survival. The technology sector is littered with companies that were once highly profitable but who's products were commoditized:
IBM, DEC, SGI, Tandem, Sun, Quantel Paintbox, etc.

Their declining market share means that longer term Apple will be locked into an ever shrinking 'luxury ghetto'. They won't be able to maintain the customer and developer base they need to grow their (app)ecosystem. It looks like they won't be able to gain MicroSoft-like market dominance by which they can lock competitors out due to network effects.

The whole point of Android is to make sure Apple doesn't gain a death grip on the mobile market. Android erodes the value of their walled garden and limits the possibility to charge entry fees. The competitiveness of the Android market is a huge success for Google:
- it erodes Apples power to create a walled garden
- it grows the number of mobile users and thereby the number of clicks on their ads
- it decreases Apples ability to skim carrier revenue, keeping mobile data traffic artificially expensive

Apple's complete reliance on the high-end consumer market makes them highly vulnerable. Apple understands this and they are desperately trying to tap into and expand revenue streams like advertising, content distribution etc. Just like MicroSoft.

Remember Sun being 'the dot in .com' (yes I'm that old)?

Tomi keep up the good work.