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January 27, 2014



"They have no more cards (like giant screens) to play."

Invoking this mantra ad nauseam does not make it true. I only need to repeat what I already wrote earlier:

Again a shade of that underlying deprecatory attitude that Asians can only copy, not innovate.

In 2011 Samsung was widely accused of copying Apple unashamedly, from the design of the its phones to the details of TouchWiz. Of being incapable of competing with its own strengths, only by mocking Apple customers in its advertisements. Of being a simple Android rider without innovations of its own.

In the same year, Samsung brought a novel form factor with the Galaxy Note, and rejuvenated the use of the stylus. In the USA, everybody was disparaging this oversized device. It became very popular in Asia, then in the rest of the world. Now everybody is producing phablets. Even Apple is rumored to follow suit.

About 8 months after Siri, and before Google Now, Samsung released S Voice in its Galaxy line.

Samsung can innovate, and does have a number of cards to play. NFC is one. Remember that contactless payments are bigger in Asia than in Western countries. Camera is probably the likeliest. Samsung has excellent camera technology, but has not yet been integrating it properly in its higher-end devices.

Samsung has space to surprise us, especially in these are areas, where Apple is demonstrably weaker than the competition.

Which, by the way, means it also has some means to counter the uniform Android UI that will probably take hold, as ville surmises.


"Can't it be that all this is an indicator that the smartphone craze is reaching its peak?"

My guess: progressive market saturation (unavoidable) and the impact of economic woes in developed countries (cannot be mitigated).

On the other hand, LG did well. Let us see how well HTC, Sony and the Chinese perform before arriving at a conclusion.


Pekka has a good point.

Now that the cheapest Landfill Android is counted as a "smartphone," it doesn't make much sense to analyze the smartphone market share as separate from the dumbphone market share. That seems like a potential weakness in recent Tomi analyses.

I wonder how the trends look if you combine the two product categories.


I am wondering how many of these 51M iPhones were sold in the USA?

In 3Q, I believe some 40% of iPhones were sold in the USA. I suspect this share will be even higher in 4Q. However, I cannot find the numbers to prove or disprove my hunch (yet).



As long as the cheapest 'Landfill Android' can do 90% of what the iPhone can do (and they can!) it's all the same market. The gap between feature phone and low end Android is significantly larger than between low end Android and current high end phones, similarity of price nonwithstanding.

All you try to do is twist the numbers to make them look more favorable for Apple. Ignoring the developments at the low end is also not going to help. Since these phones can do most of what their more expensive counterparts can do they will eventually start to cannibalize the high end and force prices down.

Any company acting like this has been bitten in the ass in the past.


According to IDC Apple grew its market share _of_all_phones_ from 7.8% in 2012 to 8.4% in 2013. That removes the question of "is this cheap Android feature phone or smartphone? and "is full touch feature phone with browser actually a smartphone?". Smartphones are fast replacing feature phones but that does not convert feature phone users to smartphone users.
In few years Apple is getting "bitten in the ass" as a consequence.


@Winter, the percentage of iPhones sold outside the US increased in Q4. Tim Cook said that sales in North America were down Ciscal Q1-14 vs Q1-13, partly because they screwed up and ordered too many 5c and not enough 5s, and also because carriers like AT&T and Verizon stopped giving away early upgrade subsidies. That was offset by the NTT DoCoMo rollout and pulling up the China launch date.

@RottenApple, yes, that's certainly how the market is interpreting things (i.e. that the smartphone market has reach saturation). With growth on the low-end, companies have three options. They can cut costs like crazy to compete in the low end, they can fight for the slower growing high end, or they can go do something else entirely. It doesn't seem wise for Apple to go low-end. They have never successfully launched a low-end product in their corporate history, and they don't have the infrastructure to be all things to all people like Samsung. Samsung's own below-expectation results show that there is a limitation to that strategy, as well.

The iPod shuffle comes closest to being a "low-end" product, but even it was priced significantly higher than its competition. Apple has so far chosen to maintain its high ASPs (they were within a few dollars in Q1-14 vs. Q1-13). They already make up a majority of the high-end, and while there is certainly room for taking more there (e.g. with a larger iPhone), there is a lot of pressure on them to enter a new product category entirely. Wearables makes the most sense, as they are the kinds of things that people replace regularly, or have multiple items. Bringing on an executive from a luxury fashion retailer shows the direction they would head in, and it isn't the low end.


@RottenApple, a Ford Fiesta gets you from Point A to Point B just as well as a BMW 7-series. No matter where technology takes the low-end phone, there should be a significant market for the high end for some time to come.

What comes next is anyone's guess, and it isn't clear that Samsung, Apple, or Google for that matter are more in tune with what we'll be using in 2024 any more than it was clear in 2004 what we'd be using today. But what does seem clear is that Tomi Ahonen's one-size-fits-all race to the bottom strategy doesn't work. Just a few short years ago, Nokia was in the same position Samsung is in now, with a tightly vertically integrated global operation capable of making a margin at all ends of the market. What did them in wasn't Stephen Elop (though he certainly hastened the inevitable), but the fact that they got blindsided by Apple, and unlike Samsung didn't embrace Android. Not having a viable solution at the high end did them in, and all the supposed advantage of the "installed base" at the low end meant nothing, as it collapsed almost as quickly. Samsung seems to be a smarter company than Nokia and is certainly a faster follower, but it could get blindsided as well.

As for Apple, a big part of me thinks that the reason they are rebuffing Carl Icahn and hoarding cash is that Tim Cook realizes that he or his successor will need some of that cash eventually to be able to pour into finding the next big thing that will reignite the money machine. To his credit, he hasn't panicked and done an overpriced and/or ill-advised acquisition (Google paying $3.2 billion for Nest looks like such a deal), but a good strategic fit is still within the realm of possibility.


@KPOM: >>a Ford Fiesta gets you from Point A to Point B just as well as a BMW 7-series

ROFLOL! Have you ever driven a BMW 7? It is much _better_ than a Fiesta and has much more features.

The iPhone on the other hand is inferiour to any Android phone with its restricted walled garden OS - hell, you cannot even send an Email with an MP3-file as attachment!

Such comparisons always make me laugh - the last iPhone which was superior to the competition was the iPhone 4. Since then, it's all downhill.


A lot of the questions, being posed here as to how many iPhones were sold in the US (less than 1/3) ve overseas, the fact that the ASP increased to $636 reflecting a marked choice of the 5S, etc were all posted on the other thread (the Nokia thread), since that was active when the Apple earnings release came up.

If you look at the iPhone market share of total mobile phones sold it is a straight up line, and went up again this quarter, and is not approaching 9%. That is an astounding fact. The most expensive phone having 9% unit share. It is like Ferrari having 9% unit share of the entire car market or Rolex having 9% unit share of the entire watch market. It is unprecedented.

The iPhone is growing slower than the "smartphone" market - however you define it - but it is growing slightly faster than the overall mobile phone market.

When you add the market that counts - smart mobile devices (iPhone, iPad, iPodTouch) - Apple has an even larger share.

But all this is un-important. Market share is a lazy person's counting game. But I get it, that is the focus of this blog and Tomi's.

Apple needs to focus on two things - and they are.
1 - They need to launch a larger screen phone - coming this September - that will fit within a similar volume as the 5s. That is the major advantage Samsung has over Apple. People that prefer 5" class devices are excluded from buying Apple.
2 - Increase distribution. Today, still less than 1/2 of mobile operators officially distribute the iPhone. DoCoMo (already on line), China Mobile, Reliance, Megafon, Vimplecom, etc are coming on line in Q1.

That is why I keep on saying that it is Q4/2014 that will see the natural Apple vs Samsung share. So far the indications are that, whenever Apple is distributed by all the operators in a market (see US, Japan, Australian, UK, etc) the iPhone market share is in the 17%-50%+. I believe that larger screens will bump those by about 5% points in advanced economies.

Until then, iPhone growth will be simply be by increased distribution. So China, Russia, India, South America, Central/Eastern Europe will be the Q1-Q3 growth areas.

Come Q4 the advanced markets will surge with the large scene iPhones.

In the meantime, Apple earnings are stuck in the $14/share/quarter range. So the stock will not move up markedly from where it is.


Let's look at the change in iPhone market share in some 'advanced economies' comparing Q4 2013 with Q4 2012.

Australia -3.3%
France -3.4%
Germany -4.4%
Italy -10.3%
UK -2.5%
USA -5.8%

It will be interesting to see when Apple release their phablets how well they sell. Can Apple maintain the fiction that they are the innovators and Samsung are the copycats when they keep slavishly copying Samsung's designs?

We all remember how Steve Jobs said: "the 10-inch screen size is the minimum size required to create great tablet apps.” and we all remember how sales of the iPad mini quickly overtook the sales of the iPad (maxi?) once Apple relented and copied the smaller, neater Android tablets.

Can Apple keep producing lower functioning clones of their competitors products and maintain the 'we are the innovators' story line or will this move further erode the perceived 'coolness' of the iPhone?

Huawei are the dark horses for 2014, their products are damn good and very keenly priced too.


@Won the Lottery

Who says Apple will release phablets. They will release 4.8" phones.

And you can re-do the market share above as a % of total phones sold in those countries, and you will see that the share continues to increase modestly (abt 1% point).

And either way, what is the point? Apple, by definition started with 100% of the tablet unit market share, which would inevitably decline.

Similarly it started with 100% of the modern, full browsing internet smartphone market - despite some wanting to claim that email devices (aka blackberry) and two-button menu driven devices (aka Symbian) were smartphones.

Similarly Apple had 100% of the graphical user interface PC market when it launched the McIntosh.

Similarly Apple had virtually 100% of the ultralight/ultrathin flash laptop market when it launched the MacBook Air.

Apple has ALWAYS been in this position - i.e. launching a new category starting with 100% market share, then dropping to the 5% level. The only thing new here is that with iPod/iPad/iPhone it has staying above 15% for such a long time.


I'm a bit confused about how to look at the numbers.

Apple's marketshare of smartphones is down, which is bad.

But Apple's marketshare of all mobile phones is up. Isn't that good?


Sander van der Wal

This is getting more and more pointless. The race is about mobile OS'es and ecosystems, and mobile phones are just one of many mobile devices being powered by a mobile OS.

Consider this, tablets can have a SIM, and are therefore a kind of phone. Thing is, it doesn't do voice, which makes it a non-voice phone.

So, counting the voice-enabled subset of phones did make sense in the previous decades, when voice was the main function of a phone. Nowadays, voice is one of the many functions, not the biggest, and dwindling.

But still, it is the sole criterium on which mobile devices are judged to be relevant to a company's succes in business?


@Sander van der Wal
Anything to deny that Android is cleaning out the slate. Android is on more than half of the tablets.

But here are the numbers for tablets:

Apple at ~30%

"Digitimes reckon the white box constituent of the total was 33.8% of the total which is virtually all of the Other category. Android they report at 51.2% of the total and Windows 3.9%."


>>And either way, what is the point? Apple, by definition started with 100% of the tablet unit market share, which would inevitably decline.

No they didn't, you're as ignorant on tablets as you are on smartphones.

Let's ignore Nokia's and Samsung's mobile internet devices because you'll no doubt claim they don't count.

Archos were making internet enabled touch screen tablets back in 2007, they had the Opera web browser and Adobe Flash support.
Smart Devices were making the SmartQ range of touch screen tablets back in 2009, they originally ran Ubuntu and later swapped to Android.
Apple released their first iPad on 3rd April 2010.


"Consider this, tablets can have a SIM, and are therefore a kind of phone. "

But most tablets do not have a SIM card, which makes the categorization of mobile devices based on old criteria even more complicated. I agree it is time to review classifications and refresh the relevant criteria.



A small correction:

> If you want to be a market leader you have to play the market leader game like a market leader.
> If you want to be a niche player - which is what Apple is -

Apple is *not* a niche player, at least not according to the textbook.

According to Michael Porter [1], there are three major strategies:

- Cost leadership
- Differentiation
- Niche

Apple plays the *differentiation* game, which allows them to charge much higher values than Samsung.

Samsung is gaining market share because they play the cost leadership game.

Of course, Samsung is making inroads in differentiation, with their top of line smartphones. But that doesn't make Apple a niche player, not yet.



@foo, that's a valid point, but not one that Tomi recognizes. As far as he's concerned, Apple would be better off selling iPhones for $10 if it got them 75% market share. And even though iPads are part of the same "community"/ecosystem and many have SIM cards, they don't "count" since that would skew the numbers in their favor as they still have a plurality of that market after 3.5 years. All the doom and gloom about Apple's dependence on subsidies ignores that fact. iPad is unsubsidized, even in the US. Yet it has a plurality of the market in a year where Apple actually RAISED the selling price of the 2nd iPad mini quite considerably.

@WonTheLottery, Microsoft had "tablets" long before Nokia or Samsung. And it's a stretch to call the Nokia Internet tablets of 2006 in the same category as the iPad or Kindle Fire. For all intents and purposes, Apple invented the category of the modern tablet (thin, multi-touch device running a mobile-oriented OS with a healthy app ecosystem). Apparently it was in development before the iPhone, when Apple realized they could shrink it, add a cellular radio, and have a killer phone, and decided to release the iPhone first. Whether it was genius, luck, or a little of both, they figured out how to crack the nut that Microsoft and the others were unsuccessful in doing for 10 years prior. The iPhone's ecosystem made iPad credible, and as was the case with phones, Google was a successful follower.


"iPad is unsubsidized, even in the US. Yet it has a plurality of the market in a year where Apple actually RAISED the selling price of the 2nd iPad mini quite considerably. "

It seems extremely unlikely that more iPads than Android tablets were sold worldwide in 4Q 2013.

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