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« Obviously my forecast was totally wrong on US Midterms. What happened to Democrats?GOTV sy | Main | So What Do We Learn From the Nokia N1 Tablet on Android? »

November 07, 2014

Comments

AndThisWillBeToo

@RottenApple
LeeBase talked about Apple market share development as it took place. His exact words: "So for 4 years Apple has had declining market share". No it has not.

And what comes to your "would've" scenario, you really think that after growing from 7% to 16% Apple growth would have suddenly turned into decline if there had been no Nokia collapse?
Keep that view, I'll keep mine.

RottenApple

@AndThisWillBeToo:

Yes, it would have stopped. Not turned into an outright decline but it'd certainly have plateaued.

Where else should have they gotten additional market share - even the Nokia collapse only provided them with a 4% increase. Nokia's self-destruction provided both Apple and Samsung with a large amount of customers that under normal circumstances would have bought another Nokia phone.

KPOM

@RottenApple, I'm not sure how many Apple buyers would have purchased a Nokia instead had they switched to Android or if Meego had achieved the 10-15% market share you seem to think was possible. Nokia had virtually no market share in the US, which is Apple's biggest market. Given Apple's fairly small market share in Europe outside the UK, my guess is that Apple's current market share in continental Europe is what they would have had with or without a strong Nokia. If there were no Android, Apple would have more, but that's a different story. Apple is also big in Japan, but they were a CDMA country and Nokia pulled out of that market during the OPK era (apparently concluding that Japan was another "backwater" like the US).

@Baron95, anti-trust law likely would prevent Apple from buying up ARM unless they agreed to continue letting ARM license its technology to others. They could face similar resistance if they tried to buy out their supply chain.

@LeeBase, Tomi's delete instincts notwithstanding, he's tacitly agreeing with you when he talks about "scale." Scale means lower costs, which you can do the math to determine what happens when you combine it with steady or rising revenues. And you are correct in pointing out that Apple has massive scale despite a relatively small market share, given the sheer size of the market and the part of the market where Apple's share resides.

Maggan

Scale is nice to have, I realise that. But how much difference is there between the ability to source materials and components at the best price when you sell 150 000 000 phones each year (Apple) as compared to 300 000 000 phones (Samsung)?

Both those numbers are staggeringly high, it's difficult to imagine that Samsung gets significantly lower prices on components and materials than Apple. And they have many more models, somewhat limiting the quantities they can source due to different needs for different phones. So it seems as if a lower number of models would be better from a sourcing perspective?

Of course, for their own stuff they should get better prices, but that is not due to scale but due to their diverse nature. And the component part is another division that needs to bring in sales, so they won't sell at rock bottom prices even to another Samsung division.

Still, with the scale Samsung is at, they should be able to compete on price and continue to drive market share, just not maybe at the same pace as the rest of the industry. Akin to how Apple's growth has developed. Unless Samsung really goes for Xiaomi's throat, as they should be perceived a bigger threat to Samsung dominance than Apple, being such a fast growth company.

But Samsung has gone to war with Apple instead. So regarding the market share wars, they might have won the battle but on focusing on Apple they really lost the war.

Of course, there's the cushion afforded by high market share and revenues, so Samsung could refocus and rebound. It won't be easy though. It seems they need to drop the Apple-envy and shore up for the onslaught of Xiaomi and Lenovo.

/M

KPOM

@Maggan, you may well be right that Samsung is fighting the wrong battle and that they should be more worried about Xiaomi taking their customers than Apple. That said, it's obvious why they want to compete at the high end of the market (and it isn't "market share" or "scale" that they are worried about).

Now that Apple has entered the large phone market, we'll see what, if any, impact that has on their overall share of the market. The current quarter is being skewed by mass upgrades by several generations of existing Apple users (5, 5c/5s upgrading to get larger screens). The number of actual Android "switchers" isn't very big if estimates from analysts are accurate. But then again, supply is still tight so we'll get a better sense in Q2 of next year once the iPhone 6 and 6 plus are in the middle of the cycle.

Samsung did say that they plan to reduce the number of models quite substantially next year. That will probably help on both fronts, since it will let them focus their marketing efforts and achieve better scale.

KPOM

@Baron95, I wouldn't be surprised if Samsung Mobile "buys" NAND from and RAM at the same price as Apple through a most favored nation clause. As long as at least one third party (particularly someone significant like Apple) is paying that rate, they can probably justify it to the tax authorities. That said, you are right that Apple's economies of scale go far beyond what their market share would suggest.

KPOM

@Tomi, no I disagree with you about Apple's market share. I think they will have a higher share of the total mobile phone market in 2014 than in 2013. At this point, the distinction between "smartphones" and "feature phones" is irrelevant. Chances are a $50 "smartphone" is being used in a similar manner as a $50 "feature phone" was, and is of similar quality relative to the rest of the market. The same reason that expensive cars still sell well even though cheap cars of today have features that expensive cars from 10 years ago didn't have is the same reason that $650 phones will continue to sell well even if $150 phones do the same things that $650 phones did 3 years ago.

Given the nature of technology, it was inevitable that all or virtually all phones would become "smartphones." All that's happening now is that the segments formerly served by Asha, S40, or anything else are being replaced by old versions of Android.


KPOM

According to Verizon, 25% of upgrades in the current quarter are unsubsidized, up from 12% in the previous quarter.

http://recode.net/2014/12/08/verizon-says-heavy-promotions-will-dent-otherwise-strong-fourth-quarter/

I believe the percentage is even higher on AT&T. According to a lot of people here, as soon as carriers moved away from subsidies, Apple would see sales drops. I guess we'll find out. My gut reaction is that as the US carriers move away from subsidies and toward lower monthly rates and installment plans, it will offset the effects of withdrawing subsidies.

Winter

@LeeBase
""Android" has the huge overwhelming 85% "market share" but that's spread out among hundreds of companies. "

But they all use the same basic hardware components and software.

AndThisWillBeToo

Here's interesting article about the Apple sapphire adventure:
http://www.wsj.com/articles/inside-apples-broken-sapphire-factory-1416436043

Winter

@LeeBase
"How to stand out then? How to build a competitive advantage, a bulwark against commoditization?"

This sounds like a perfect opportunity for you to learn some market economics. This is what free markets are about. A good start is still the famous book by Adam Smith, who did a great job in making this idea popular.

The book is freely available (another case of a price drop following vanishing marginal costs):

An Inquiry into the Nature and Causes of the Wealth of Nations by Adam Smith
http://www.gutenberg.org/ebooks/3300

Winter

@Boron95
"If you told Adam Smith that there was this product that the higher it was priced the more people wanted it, even in the face of ever cheaper competitive alternatives, his brain would explode."

It must have been a long time ago that you read Adam Smith. He discusses the folly of (rich) people in great detail. He also explains the damage such extravagance does.

RottenApple

@ExNokian:

"(growth QoQ which is surprising on iPhone launch quarter). "

Not really if you consider that they had an exceptionally bad second quarter (which makes all predictions based on 'current momentum' ridiculous. They didn't even regain what they lost...

RottenApple

No, it isn't. Basing a prediction on past events is completely different than declaring recovery from a sudden decline 'gaining momentum'.

Of course the Apple Mafia will do its best to deny it but we'll see in a few years when the smartphone market becomes just like the PC market - with little to no innovation, insignficant performance gains and all the other effects that increased the PC upgrade cycle from 2 to 5 years.

AndThisWillBeToo

Regarding Samsung: they plan to launch their own mobile money service:
http://recode.net/2014/12/16/samsung-in-talks-to-launch-apple-pay-competitor/
in Tomi doctrine it will beat Apple Pay as Samsung has higher market share.
I'm preparing popcorn for the discussion that starts when Tomi blogs about it.

KPOM

@Rotten, one difference with the phone market is that we already had a period of low innovation toward the end of the pre-smartphone era. The two-year upgrade cycle was quite common. Phones get dropped, screens get cracked, etc. After 2 years lots of people want new phones anyway. My guess is that it goes to an average cycle somewhere between 2.5-3 years. And we are still a few years out from stagnation. Curved screens, flexible screens, and 3D are still there to be exploited. Wearables may be where the market heads long term.

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