Explaining Apple in One Graph (That nobody else is showing) - Why no reason to panic, why it all makes sense, and why future also looks great

I am not an Apple analyst. This blog is not a Wall Street or stock market blog. This is not a smartphone blog. This is not even a broader overall mobile handset blog or IT tech blog like PC-related blogs from the West Coast. I am a mobile industry analyst, statistician, forecaster, author and consultant. This blog is a 'broad' cover for any tech, media and near future releated topics I'd like to cover, so the blog name Communities Dominate Brands comes from my 4th bestselling tech book from eleven years ago and it was the first business book on what we now call 'Social Media' (Facebook, Twitter, YouTube, Instagram etc). So as an example social media is part of the remit of this blog's wide areas covered. But as I predicted (when nobody else said it) that the sleepy but rapidly growing smartphone market of 2009 was about to go into 'bloodbath' from 2010 - as it also happened - the smartphone 'wars' had been a highly-read topic here on this blog (we've had over 6 million lifetime visits to this blog and still no ads, no registration and we won't be spamming you). Many of our regular readers are particularly interested in that part and I have been able to provide considerable insights including numerous world-first calls and forecasts such as calling Apple's iPhone peak, or Nokia's instant collapse, or that it was Samsung who would replace Nokia as world's largest smartphone maker (at a time when both Blackberry and iPhone were far bigger than Sammy) or that Xiaomi will not be a Top 3 threat any day soon but Huawei continues to be... I also called exactly the strategy Apple now is doing with the iPhone 5SE - except I wrote it out in 2010 and silly Apple wasted all that time, abandoned market share and uncollected profits by delaying that device until now in 2016. From before the birth of the iPhone, I have consistently been the most accurate iPhone forecaster (as I am the most accurate mobile industry forecaster overall, that is a relatively easy side-merit). But as I said, this is not an Apple blog.

So but now, as there is all this consternation about the doom around Apple and the iPhone, we need a collective major 'reality check'. I already wrote one quick blog to comment on Apple's latest quarterly results. But many of my readers wished for more analysis of exactly what is going on (this blog has one of the most active and smart readerships, over 50,000 comments left lifetime). So I decided to do that. I think this warrants it. So I have distilled all my insights and wisdom into one graphic. Yes, just one picture. This is the graphic nobody else is showing which best explains what has happened and shows what has ACTUALLY happened vs the silly hype and nonsense, as well as why the road into the future is still bright for Apple. And normally, I would write a long essay to get you to fully understand what I mean - the mobile industry is the most complex giant industry on the planet, totally different from the far-smaller tech industries like the PC industry or internet or even media like television. This time I decided to write a short-cut version for all you in a hurry. Just 'cut to the chase'. The best part. BUT I ALSO wrote the detailed article - with TONS more pictures (and massive insights into the REALITY of the smartphone wars not the bullshit coming out of Wall Street or Silicon Valley writers, pundits and analysts).

THE ONE GRAPHIC TO EXPLAIN iPHONE MARKET PERFORMANCE

Most numbers and graphical illustrations of iPhone and Apple performance are confusing and misleading due to factors partly due to Apple and partly outside its control. The industry is very easy to misunderstand because most tech industries are 'led by' the USA at least initially and thus understanding the US market is good for any analyst to the rest of the world. In mobile the industry was not born out of the iconic Motorola phone sold in Chicago in 1983. The industry was born four years PRIOR in .. Japan. Most of the industry's major inventions and developments came from Japan or else from the largest tech player in mobile of the previous decade - Nokia and its home market of Finland (Finland also launched cellular mobile telecoms two YEARS before the USA). So compare to cars, Daimler & Benz invented the motorcar in Germany but Henry Ford turned the automobile into a mass market. The computer was invented in Britain by Alan Turing but IBM was the first to sell commercial computers. Apple then created the first modern personal computer as the Apple 1, while Commodore also of the USA was the first mass market commercial success in PCs. The internet was born as the ARPAnet for military use in the USA. Wright Brothers flew the first airplane, in the USA. So for most tech if they weren't born in the USA, the first mass market commercial success would be there. Not in mobile. In mobile Japan and Finland were ahead and by essentially all metrics still today are ahead of the USA. The joke was that to see whats coming in the next iPhone just look at a 4 year old Nokia. And the reality is that almost all improvements to the iPhone were first launched in Japan from the App Store all the way to NFC mobile wallets - which were commercially launched in Japan a decade before iPhone finally brought this idea to Americans 18 months ago.

This is a global industry where the LEADERSHIP is not in the USA. EVERYTHING you see on an iPhone has been a SUCCESS for YEARS in the leading countries of mobile, especially Japan. But there are local phone brands and global brands. American giant corporations tend to be good at globalization. But their management sits back home in the USA (or Canada if you're Blackberry) and tend to get a myopic view thinking your home market is the 'reality' of mobile while its actually a backyard. Its like going to a cave man to try to learn about the future.. So lets get to my graphic. In year 2010 the four largest smartphone makers were Nokia, Blackberry, Apple and Samsung, in that order. They were the big 'global' brands with the highest average sales prices, not to be confused with emerging Asian brands of lower price levels like Huawei and ZTE (Lenovo the PC maker had not even gotten into smartphones yet and Xiaomi had not been founded). These four giant global brands were the big names but there were others who also sold premium smartphones like HTC, Palm and SonyEricsson. Their relative smartphone share was so slight, and they all withered away out of the Top 10, that we need not consider them. These four global brands controlled 78% of the total worldwide smartphone market as we enter year 2010.

Two of the four global brands were based in North America. They took a Western-market (Industrialized World) market focus for their distribution, and they only offered top-price premium smartphones. That was obviously Apple and Blackberry. The two other global brands, one out of Europe, Finland's Nokia, and the other out of Asia, South Korean Samsung, took a different strategy. They both decided to sell not just premium smartphones but also mid-price smartphones. They avoided the ultra-low cost smartphones sold by local brands like say Micromax of India or Tecno of Nigeria. But Nokia and Samsung had a global footprint and offered a wider range of prices than their two North American rivals. Then market share wars happened. Some customers buy a low cost product. Some customers are willing to pay a premium for a premium brand like buying an Audi or Jaguar or BMW as a car. And similarly in phones, some are willing to buy a premium smartphone. The total market for this SEGMENT grew by a factor of 2.6 times during the past 5 years. A great growth opportunity inside the larger smartphone market and the overall handset industry. A huge growth opportunity for these four brands. Now how did they do? This picture explains all you need to know about Apple iPhone:




Picture by TomiAhonen Consulting 4 May 2016
(Note above only has the Top 4 smartphone brands from 2010: smaller premium brands and all lower-cost brands excluded)
This picture may be freely shared


First, note that the above is not market share of all smartphones. All the low-cost manufacturers are excluded such as Huawei, Xiaomi, ZTE, Coolpad, Oppo etc. Also the other 'premium brands' are excluded too, as their slice is totally negligible. But to consider a sub-set of the total smartphone market, not just higher-price smartphones sold (many local brands also sell premium phones but the brand is not premium) but also premium BRAND in the market, that is these four. They didn't necessarily compete directly always, a Blackberry user in 2010 tended to be an enterprise corporate smartphone user while iPhones were with consumers - but within brand and price, these were the four. And two groups have the same strategy. Blackberry (larger) and Apple (smaller) in 2010 had the focus on the rich Industrialized countries with USA by far their largest market, doing most of the rest of their business in Europe, Australia, etc the rest of the rich world. Nokia and Samsung meanwhile did not focus only on the most expensive smartphones while both sold there as well, they also sold mid-priced smartphones. And both Nokia and Samsung had Asia as their main focus and sold globally while both also of course sold some smartphones in the USA.

Now the lesson. If there are four competitors and they form two pairings of rivals; then if your direct rival stumbles, its YOUR strategy (same as the stumbling rival) who will pick up most of the spoils. When Nokia collapsed, Apple and Blackberry could not take the spoils - they went to Samsung. And similarly when Blackberry fell, then while Nokia and Samsung did take some gains, the big spoils went to Apple. Now look at the COMBINED share of the premium brand phone market of year 2009. For the Blackberry and Apple strategy they had a combined 45% of the premium smartphone market segment. Today, Apple and Blackberry have.. 40% of that slice. Nokia and Samsung had 55% six years ago, now their combined share is 60%. So WITHIN their bracket, Apple went from 42% of the 'only premium price phones sold primarily in the West' to 98% - OF THAT SUBSEGMENT. Meanwhile Samsung in its subsegment in the premium brands, of 'both premium and mid-price phones sold globally' they went from 9% six years ago of that subsegment, to 92% today. Meanwhile, unluckily for Apple, the premium brand smartphone segment itself has shifted to more the international global footpring not just USA, Europe, Japan and Australia.. so Samsung was in that subsegment that grew at the expense of Apple's side.

So when considering their global rivals, both Apple and Samsung BENEFITTED in the past 5 years out of the total collapse of 2 of the 4 rivals. Apple did good, climbing in the global total smartphone market from 3rd ranking to 2nd place, but obviously Samsung did far better, jumping from 4th place among global smartphone brands in 2010 to number 1 today by a healthy margin. These two brands did not jump so far because they were 'excellent' while they did well yes. They climbed so far because two of their rivals decided to implode due to morons in management. The gains to both Samsung and Apple were WINDFALL GAINS. The growth they achieved was due to the INDUSTRY growing so fast that when you are a popular premium brand in a fast-growing lucrative business, yes of course you grow too (or you have to be a total idiot not to: see Sony Xperia).

HEADING FORWARD

The graphic above shows that Apple has clearly taken what could be taken. There IS NO growth at the top-end anymore, the weak rivals are already dead like Palm or bought by other brands like Motorola or are dying like HTC. That is why Apple HAS to follow where Nokia and Samsung went years ago (once again, Apple follows Nokia) and do its mid-price iPhone ie the 5 SE. As Apple has been pushing into China, now with the iPhone 5 SE it can go also fight for more of a presence in India (which just became the second largest smartphone market behind China and overtaking USA). Then Apple will clash more and more with Samsung as we can see from the above graphic. Then it seems like at least currently Samsung has figured out far better than Apple what it is that smartphone buyers outside of the USA want - like microSD card slots and waterproofing (both features that Samsung stupidly left out of its flagship last year but put back now). Many of Samsung's mid-priced Galaxies have removable batteries and of course most are Dual SIM slot phones that are also features prized in the rest of the world, as well as such specs as an in-built FM radio. As Apple still is myopic in its view, thinking that American iPhone buyers are representative of the world markets, the iPhone series still lags major features of great value in the rest of the world, especially in Emerging World markets. Hopefully more changes are coming to make the iPhone more acceptable in that way. But the truth is, there was no place for the iPhone to continue to grow with the old strategy. Now that the 5 SE has been released, Apple can gain some growth in the mid-price segment. And the focus has to be where most phones are now sold - in the Emerging World, not the USA. Apple fully knows this, they've been emphasizing their Chinese market performance for a while now.

So. What did we learn? There was a reason Apple was able to find 'easy growth' its because two of the main rival global premium smartphone brands decided to commit market suicide. Apple was not as nimble as Samsung has been. Samsung was already focusing on Asia and Emerging World, and had mid-priced smartphones and pheblet-sized screens well before Apple did. So Samsung gained more. But Samsung's strong gains also ended when its direct rival Nokia was done, then Samsung experienced the weird whip-lash, of where did my rocket-ship growth vanish? And for two years now we've had silly stories about Samsung in eminent collapse - totally dumb reporting, Samsung has never been near losing its grip on the top slot of smartphones. Only that its strategy won't let it grow further. The weaklings were devoured and now if Sammy wants more, it has to go chase the Chinese brands into low-cost smartphones. Meanwhile, how about Apple. It didn't gain much out of Nokia's collapse (mostly as Nokia was not big in the USA to begin with) but as Blackberry died shortly after Nokia only more slowly, Apple was able to pick up that slack and now that is all done and dusted. Apple can no longer grow out of the mistakes of others, it has to now fight for any gains from hard-nosed Samsung who is well entrenched in the markets where Apple wants to go, and Sammy has a far larger product portfolio in those price segments. So Apple's growth path is far slower now but there is clearly more growth to be had. Apple has the most desirable smartphone brand and the best customer loyalty. As it expands its product portfolio down-stream in price - it is gaining share - as we heard from Tim Cook, the iPhone 5 SE demand is oustriipping their ability to produce the devices (duh. I suggested this exact strategy - already in 2010 - and said sooner or later Apple HAS to do it but had they done it sooner they'd be more ahead now)

That is the story (and the picture) nobody else seems to be telling. And its the core of what happened and why there was such hype about Samsung around 2012-2013 and then the disapointments of 2014-2015. Now we have the same reality check coming to Apple. As long as Apple doesn't make stupid mistakes now as it transitions to a new strategy (like Samsung in 2015 or like haha Sony Xperia) and a key is not to abandon any popular must-have specs or features (but it WOULD help for Apple to pick up some of the industry's STANDARD features like microSD card support and FM radio) and as long as the pricing strategies are sound, then we should see several healthy years of growth still for the iPhone. Will it keep pace with overall industry growth? Thats a DYNAMIC issue depending on the exact market reactions by rivals. In 2015 Samsung went silly with the Galaxy, Sony Xperia decided to play dumb with its naming and Nokia ie Microsoft decided not to issue a new Lumia flagship at all. So Apple's 6 series iPhones had an 'easy time'. This time Sammy is back with a vengeance with highly popular Galaxy S7 and Sony Xperia seems to be getting its act together while several of the lower-priced brands are pushing hard into premium phone territory. Its not getting any easier the lower Apple comes to the mid-field. But go there it must because at the top of the price pyramid there is no more unit sales growth.

So thats what I decided to add to the mostly silly noises about iPhone. Oh, and for those eager to find all the best stats about mobile, my brand new TomiAhonen Almanac 2016 edition will be out this week. If you order it today, I will send you the 2015 edition now, and you will get the 2016 edition in a few days, two for the price of one. How good is that? Here is the web page with details about the 200 page report with 100 graphics and tables of stats about mobile  It only costs 10 Euros.

For those who want to know the FULL story of the iPhone, I have TONS more including phablets - was there a spike, etc after the fold.

Welcome back


So Apple had some silly hype built into its expectations. As if Apple was not subject to normal laws of economics, haha. Well, there is a good antidote to that Reality Distortion Field and its called mathematics. We go strictly by the math and numbers here on the CDB blog. So lets dig deeper into WHY the mess and what is the reality vs the hype about Apple and its luvly iPhone.

THE QUARTERLY DATA DRIVES YOU BONKERS

Lets start off with the Apple numbers. Its not that Apple smudges or fiddles with the numbers, its that Apple's (now abandoned) bizarre launch pattern caused a ridiculous pattern. This is the unit sales of iPhones in the past 7 years: How can anyone make any sense out of this:





Apple Quarterly iPhone Sales, source Apple
This image may be freely shared

That is what you can call a 'saw tooth' graph. It has enormous sharp spikes when the new model(s) were released in September and then nearly as bad drops afterwards. So you think the Quarter-on-Quarter or Year-on-Year data is 'better'. No, its even worse. Check this out:







Apple Quarter-on-Quarter iPhone Sales, source Apple
This image may be freely shared

Data like that will drive any analyst bonkers. You have hysterical ecstasy one month then suicidal depression a few months later. Next cycle, repeat, then repeat, then repeat but never rinse. Oh, you wanted the YoY table its not any better. Here:







Apple Quarter-on-Quarter iPhone Sales, source Apple
This image may be freely shared
 

Thats ludicrous to examine those numbers to find any insights or information. That is just data noise. There IS a way to analyze Apple iPhone and my readers have known this from the start because thats how we do it on the blog, always. The ONLY way to measure Apple iPhone growth (up to now, as they used to only release phones once per year) was with something statisticians call a '12 month moving average'. You add the latest month, just-ended April, and replace last year's April, so every time you have a consecutive 12 month period. In the case of Apple published data, we can do it 4 times per year, at every quarter. So now the data looks like this:






Apple Quarterly iPhone Sales adjusted for 12 month moving average
Source TomiAhonen Consulting based on Apple official quarterly results data
This image may be freely shared


See? Now all the silly volatility is gone and the graphic doesn't look like a heart monitor graph when the patient has been fed cocaine intravenously haha.. This helps make Apple analysis easy and clear.  We can see there was nothing dramatic happening from 2009 to 2014 except Q3 of 2011 (that was the sudden delay in iPhone 4S when Apple had attempted to force the carrier/operator community to accept a virtual SIM card ie that the iPhone 4S would not have a SIM card slot but carriers said 'no way' and suddenly Apple had to rush to redesign its phone and thus it was pushed back from the then-normal June launch to the now-normal September launch).

Other than Q3 of 2011, there is nice healthy growth in iPhone sales through the whole period - up to now, when Q1 of 2016 has a decline. No reason to have heart-attacks every few months. This is the best picture to understand how iPhone sales have performed over time, while removing the wild volatility of its sales cycle within any one calendar year. Note there is a big spike happening from Q4 of 2014 (that was the launch of the phablet-screen sizes of iPhone 6 and 6+.

When you take the trend line for the previous 24 months prior to the phablet screen launch in Q4 of 2014, so look at the graph from Q4 of 2012 to Q4 of 2014 - that is essentially a straight line of growth. Now project that line to today (Q1 of 2016). We are STILL ABOVE that historical trend line, even after the 'disastrous' quarter Apple just reported.. Apple is AHEAD OF THE GAME (that is the result of the powerful spike driven by the phablet sales)

SHOW ME THE PHABLET SPIKE

So yeah. Some have 'seen' the obvious spike powered by the 6 series of iPhones from Q4 of 2014 - which means that the comparison to last year is to an exceptinally high starting point (ie unfair comparison) while others can't see it. Let me show you. Again. What is the ONLY tool we can use with Apple iPhone quarterly sales data? The 12 month moving average. If we take the iPhone unit sales growth - same quarter vs 12 months ago - BUT USING 12 MONTH MOVING AVERAGE we get sensible data. Now look at the growth of the latest quarter on a 12 month moving average, vs the previous quarter's 12 month moving average. And see how steady the growth was almost two years from the start of 2013 to Q3 of 2014 (the 5 Series including 5S and 5C were launched at that time with HUGE sales spikes that now are not confusing us). This is the REALITY of Apple's ACTUAL growth. And then compare to the Q4 quarter of 2014:








Apple Quarterly iPhone Sales adjusted for 12 month moving average
Source TomiAhonen Consulting based on Apple official quarterly results data
This image may be freely shared


Now the data makes perfect sense. Yes, there is a decline now - but Apple is still WAY ahead of the game because, yes indeed, there was an ENORMOUS spike powered by the phablet-screen sized iPhone 6 and 6+ models. That spike was a one-off, it will never come back. So there is a fair adjustment now coming and the overall total gains to Apple are far above what they would have been with linear growth without the phablet spike.

Readers, please. Go up to the 'sawtooth' graphic and you see. There is NO WAY to detect this huge spike from the raw Apple data as it was published and reported by all media. Only a few sensible MOBILE experts were talking of Apple 12 month moving average and they could CLEARLY see a spike. Duh.. Compare the two. They are from the IDENTICAL data set. One hides the spike into the normal Apple volatility and the other clearly exposes the hidden insight. I told you time and again, the ONLY way to study Apple iPhone quarterly sales was 12 month moving average (which will still be useful going forward but likely the dual-annual launch pattern makes it less 'necessary')

Ok, what else did I have for you... Oh, yeah, we have to talk about the smartphone market overall (not just luxury brand premium smartphones) AND the overall handset market.. So lets do smartphone market first

APPLE IN SMARTPHONE MARKET

This is the reality of Apple's iPhone growth annually. Not Apple fiscal years (again, I am NOT an Apple blog and won't live by their silly fiscal year. My year starts on January 1 and ends on December 31). These are the real calendar years from 2006 when Apple did not sell mobile phones to today. The sales include original 2007 iPhone which was not a smartphone, only a featurephone but total Apple mobile phone sales look like this:








Apple Quarter-on-Quarter iPhone Sales, source Apple
This image may be freely shared
 

Aren't those just glorious growth numbers. The absolute truth, that is how Apple has grown from nothing. And obviously such news has driven the Apple analysts and Wall Street pundits and tech writers batshit crazy thinking Apple is the new Tesla or something haha. Except not us here in mobile. We were NOT impressed. That would be phenomenal performance in a puny little tin-pot industry like the personal computer biz. This is MOBILE the fastest-growing giant industry on the planet. That is only 'par for the course' not anything amazing. Because the INDUSTRY ITSELF has grown - and FASTER THAN THAT. Apple took market share for a few years then has been BLEEDING market share for several years, now finally caught up a bit with the strong spike with the phablet 6 series. THIS is WHY we are not impressed. The above is the hype-generating story from Apple. This is the REALITY of the smartphone MARKET:







Apple iPhone Market Share out of Total Smartphone Market
Source TomiAhonen Consulting May 2016
This image may be freely shared


That is again the SAME data. But wow, that huge growth which so excites the tech writers in Silicon valley or the clueless idiots of Wall Street - suddenly looks not just tame but gosh after 2013 there was a clear decline in Apple's market share. So Apple was UNDERPERFORMING the market !!! Yes, thats what we've been saying on this blog and all my readers have known the REALITY of the smartphone bloodbath. Apple was not about to take over the world haha. But how many stories did you read last year about how Apple was chasing Samsung (ridiculously silly stories) or could soon become the world's biggest smartphone maker. How lost are those writers. The above picture tells the REAL story. Apple's amazing growth was clever timing by Steve Jobs and to be fair, if he had moved into mobile EARLIER he would have seen BIGGER gains and be further ahead... So lets not applaud Apple, they are consistently underperforming and are slow and leave tons on the table and don't want to act in their own best interest. But yeah. THAT is the REAL story. The only reason there was huge growth in iPhone sales was because Apple had the luck to join the fastest-growing digital gadget sector close to the right time - and then that two of the nearest rivals collapsed. Even then Apple couldn't snatch the larger share that went to Samsung.. But wait.. even this is painting a rose-colored picture. This is not the reality of the market Apple is in. We need to examine Apple in the mobile HANDSET market - as a featurephone often has a touch screen, web browser and camera. Similar to how the original iPhone was not a smartphone. This is the handset market and Apple's role in it, globally of course. Paints quite a different picture, doesn't it? .

 

 

Apple iPhone Market Share out of Total Handset Market (Including smartphones and 'dumbphones')
Source TomiAhonen Consulting May 2016
This image may be freely shared


Yeah.. that puts it all into perspective doesn't it? That is like what is Porsche's market share of all cars, not just of luxury or sports cars. Apple has yes seen growth of its market share but if you compare to say the first 9 years of the Apple Macintosh PC, it will be eerily similar. Almost identical (which is.. once again.. EXACTLY as I predicted it). Apple is not taking over the world, even as it is doing well in its home market. The world is buying dozens of other phone brands, now mostly smartphones but still hundreds of millions of dumbphones too. Phones that still have a web browser and can do Facebook, so for a random less affluent customer in the world, that is just about what they want. But if Apple showed us this picture, of how tiny its share is of all phones, nobody would believe the next fairy tale about the App Store somehow taking over the world or haha, Apple Pay. And wait... Wanna cry? This is the REALITY that we KNOW in the mobile industry, which is why everybody sings Android songs here.. See the same graphic of Apple iPhone (and iOS) market share of all phones, with Android added to the same picture:

Apple iPhone Market Share out of Total Handset Market (Including smartphones and 'dumbphones')
Source TomiAhonen Consulting May 2016
This image may be freely shared 


Yes. That is the sad picture Apple doesn't want you to see. If the industry sees this picture, then the illusion of the App Store is shattered. The Trumpian-wild fantasy of Apple Pay taking over the world is utterly demolished. This is the REALITY of the iPhone. We are not surprised here on this blog, which has called EVERY step of the iPhone saga first, and near-perfectly being by far the most accurate iPhone forecaster of the planet. Because we here on this blog, my regular readers and I - we KNOW this industry and how it works. Apple was never in any contention to take over the world. Its a PREMIUM luxury brand, with a high profit margin, that sells to affluent luxury and style-oriented customers, selling tech that is not the latest or greatest but wilh wonderful Apple marketing powering it. Apple is a luxury premium brand, it cannot ever win the war. Mass Market is not in the Apple DNA. When Apple once tried competing for the mass market in the PC wars in the 1990s, in a far less dynamic, far smaller and far less compeitive market - Apple almost went bankrupt. Its the first lesson Steve Jobs taught his company when he returned to save it - Apple must always be the premium brand not the mass market brand for everybody. We have known this from the start and this story has NO SURPRISES in it to my regular readers. All of the points I make in the pictures here have been discussed - ad infinitum - in the Smartphone Bloodbath series though the years. We NEVER fell for the iHype. The iBullshit. We knew what Apple is, and what the iPhone is. Yes, my blog created the term many use 'Jesusphone' for the iPhone and yes, exactly as I predicted back in 2007, the world now thinks smartphones started with the original iPhone - but that is PERCEPTION. Not reality.

Numbers tell the truth. We go by the numbers here on this blog. Always have, always will. Apple will never take over the world. They will always be a luxury premium smartphone but they will do their style thing, they will be ultra-desirable forever, and they will always have the best user experience. Hence they also will have the best loyalty and Apple is smart enough (vs say Sony Xperia) to use the high loyalty and style to always remain profitable. Ridiculously profitable. The iPhone will continue to have great sales success and a MODEST market share which will be near 10% when all new phones sold, will be smartphones around the end of year 2019. See the last picture I just drew for you. Android won the world. That is the one sad picture of great Apple success, that Apple does not want you to see. Because they still have plenly left in that Steve Jobs-created Apple Reality Distortion Zone where iSheep believe Apple is immune to realities of economics. We know what reality is. Reality bites... :-)

For those who need all the numbers for the mobile industry, not just the handset business but all of it, a 1.7 Trillion dollar industry (as big as total TV, plus total PC, plus total internet, plus total radio, plus total cinema, plus total videogaming - added together).- check out the latest edition of the TomiAhonen Almanac 2016. It has 200 pages, over 100 tables and charts, including a long chapter with 15 tables and charts just about mobile phones & smartphones. The ebook is an unrestricted pdf file that you can save on all your devices. It is formated for the smartphone screen size so you can have all the 100 best mobile industry stats in you pocket every day. And it only costs 10 Euros. Is that not a bargain or what? I am shipping it this week, order it now (as a bonus you'll also receive the 2015 edition now immediately). TomiAhonen Almanac 2016.

Comments

[obarthelemy]

"All the low-cost manufacturers are excluded such as Huawei,"

??? Huawei is a Samsung-like manufacturer, with low-, mid- and high-end lines. The P9 and Mates are legit flagships, with premium features, premium quality, and sold a premium price.

[E.Casais]

@obarthelemy

Tomi makes it clear that he looks at the premium brands: "many local brands also sell premium phones but the brand is not premium"

[Catriona]

Apple is never going to add MicroSD or FM Radio support. It wastes valuable space. I also don't see them adopting USB-C for their phones, though they may do so indirectly as shown by the 12.9" iPad's USB 3.0-compatible Lightning port (which should gradually make its way to the rest of the iOS line).

Apple will never break it out, but I'd be curious as to where the iPhone SE is selling. Apparently its success caught Apple off guard. Is it selling well in Apple's existing large markets or is it making inroads in emerging markets? It's got high end specs and a mid-range price. In some respects I'm surprised Apple abandoned the small-screen market in the first place, but they had the sense to move back in before anyone else did. In that respect they made the more agile move.

[obarthelemy]

@Catriona: Sony never left the small-phone market. their 4.6-incher is only 10% bigger than Apple's 4-incher, because bezels.

[E.Casais]

"Sony never left the small-phone market."

Such as Sony, which has been releasing "compact" versions (4.3-4.6") of its flagships for two years already.

[Catriona]

But Sony is such a small player. Samsung, Huawei, etc. haven't released full-powered smaller phones.

[Tomi T Ahonen]

Hi obarthelemy, uniquemonique, E, Catriona and disintegrator

obarthelemy - E.Casais already explained the first point (thanks E).

uniquemonique - lets move the Trump & US election stuff to a blog posting that talks about it, this article is about Apple & smartphones

E - thanks (both)

Catriona - haha you have no idea how much of a deja vu that is now on iPhone topics. Many Apple fans insisted nobody used the puny cameras on phones and the 2mp camera of the original iPhone would never be upgraded. Then that 3mp was enough, then that Apple would never need to go beyond the 5mp etc. Then there were all those singing Apple will never, about the larger than 3.5 inch screen. And again, that Apple won't ever chase Samsung into phablet that 4 inches was somehow a perfect screen size. Its the same song a hundred times. Apple doesn't need microSD or FM radio for the US market. If it intends to do well in the international market, especially Africa, poorer parts of Asia and Latin America - it HAS to give what consumers expect... but yeah, feel free to think that haha.

On 5 SE markets, me too. We'll start to find out as we get Kantar numbers so we can see where iPhone may be seeing upticks now in Q2. And when we know actual iPhone Q2 totals, we can also calculate out the rest of the world so we'll get a pretty good idea. Thats around .. end-of-July-ish.

Then smaller-screen premium phones by Samsung and Huawei. Sorry, Catriona you are totally wrong on that, but its because they don't bring those to the USA. Here in Asia go to any handset store and its form factors galore. Galaxies in every shape and size and price. Yes, totally an Xperia Mini clone from Galaxy (and from Huwaei) of course. They are not dumb and they play for the mass market - of COURSE there is variety in their product line.

disintegrator - lets bring the political discussion to the blog article where I talked about it, not here in an Apple and smartphones related blog.

Thanks for the comments, keep the discussion going

Tomi Ahonen :-)

[Paul]

Catriona: I disagree about USB-C. I predict the next iPhone will have a single USB-C port and not even an audio jack.

[Tochi]

Tomi Ahonen, hardest working analyst on the web. Glad to see you back now that USA primaries election is pretty much completed.

[Per "wertigon" Ekström]

Tomi, what are your thoughts on the recent setbacks in China and India?

For those wondering, China recently banned iTunes Movies and iBooks, and India does not allow Apple to sell iPhone refurbished phones.

I do not see this affecting Apple China that much but it will make the iPhone a tougher sell in India.

[Robert]

@Catriona:
"Apple will never break it out, but I'd be curious as to where the iPhone SE is selling. Apparently its success caught Apple off guard. Is it selling well in Apple's existing large markets or is it making inroads in emerging markets? It's got high end specs and a mid-range price. In some respects I'm surprised Apple abandoned the small-screen market in the first place, but they had the sense to move back in before anyone else did. In that respect they made the more agile move."

Suspect it is cutting swathes through the second hand Apple market. Really want to see how well other models have retained their value now that they have a similarly priced new model option with warranty included to compete against

Previously Apple had some of the highest retained values have seen in consumer products relative to their competitors. Have pet theory this was because they offered no mass market model, it created an upwards pressure on used models. Should be able to see this once can find some second hand sales data perhaps in a quarter or two when people trade in their older iPhones for the new 7 models

[Tomi T Ahonen]

Hi Lullz

No, look at the graph again. Its deceiving when the BOTTOM item is growing (Android). The number is the year (end) so to see Nokia how it did in 2010, you need to see 2010 vs 2009. And then when you look at the middle of the graph (vs purple of Blackberry), you see that that blue line also goes up but not as fast as the red (Android) line on the bottom. As we know happened, Nokia lost some market share from 2009 to 2010 overall in the industry, of course also here. The COLLAPSE started AFTER 2010, from 2010 to 2011 (and 2012, 2013)

Actual numbers total market: Nokia 2009 67.8M smartphones sold, 39% market share. Year 2010 103.6M (the final revised number) is 35% market share. Year 2011 77.3M 16% and year 2012 35M and 5%...

There was a significant decline in market share while Nokia set the world record for largest growth of smartphone sales in any single year up to that point, from 2009 to 2010. The share in all phones dropped from 39% to 35% due mostly because of rapid expansion of the field of competitors rushing into smartphones at the time.

(I think you made the mistake of timing in the graph - looking from 2010 to 2011, thinking that part of the graph was year 2010 sales, no the point in the graph is the END of the year, not the start of the year, so all the space from 2010 to 2011 is January-December of 2011, not 2010 haha. Don't worry, a common mistake haha)

Tomi Ahonen :-)

[Wayne Borean]

@Tomi,

Fascinating article, but you've got a couple of points wrong. I've just woken up, and am still in bed. For thus I need to haul my carcass out to the living room and use my laptop.

[Tomi T Ahonen]

To all my fans who crave all the numbers..

Its out! TomiAhonen Almanac 2016 ed just fresh out of the pdf-file-converter... shipping the first pre-order Almanacs out now. Its again bigger than last year, now 213 pages, it has even more charts (again) now 109. And for you fans of phones, the handset chapter grew the most, now includes GPS installed base, dual SIM installed base, phablet screen annual sales... tons and tons of again new info plus all the goodies you've loved in past Almanacs. Its formatted to fit your smartphone so you can carry all the mobile stats in your pocket every day. And best of all - the price has not changed in 8 years.. still 10 Euros. Here is the direct link to the ordering page. Get yours today...

http://www.tomiahonen.com/ebook/almanac.html

PS also all of you know someone who 'should have this data' haha, tell them about the Almanac - the BEST data package of mobile anywhere at a ridiculously low price at that, by the stats guy of this incredibly complex and volatile industry.

Tomi Ahonen :-)

[Wayne Borean]

- I am not an Apple analyst.

Well I am. Microsoft too.

- EVERYTHING you see on an iPhone has been a SUCCESS for YEARS in the leading countries of mobile, especially Japan.

Agreed. Apple has always been a follower. But...

Apple hasn't developed and sold phones with the features you mention (microSD card slot, removal battery, dual sim slot, FM radio, etc.) for the simple reason that those features have no importance in the Industrialized world. Certain individual users will find them necessary, 95% of Apple's target market will have no use for them.

As Apple moves outside of the Industrialized world, Apple may add those features. It is going to depend on a lot of factors which we don't know, such as whether or not Apple wants to compete in the $100 mobile price range. A lot of folks are going to laugh at this, but I could see Apple doing that in the long term (five to ten years). But first they'd introduce a mid-range price mobile. Oh wait, they've already done that. Well, upper mid-range price, but far less expensive than any other new phone they've released. This should actually reduce costs for Apple, because while the components are more powerful, they are also more common, a lot of them being shared with the top line phone, unlike Apple's earlier reduced price phones which were the previous model which used different components and probably cost marginally more to produce because of the reduced volumes.

- They climbed so far because two of their rivals decided to implode due to morons in management.

What some people are going to miss from that is even if the rivals hadn't been run incompetently and had maintained their general market share, Apple and Samsung would still have seen healthy sales growth as the market expanded. From a consumer viewpoint this would have been a better solution, as Apple and Samsung would have had stronger competition.

Currently neither has strong competition. The smaller companies fight for the scraps, while Apple and Samsung hog the best sales.

- If the industry sees this picture, then the illusion of the App Store is shattered.

It wouldn't scare anyone who does corporate planning. I was asked why I went for one specific customer instead of another. The one I went for looked like Apple, premium product, lower sales. I went after that one because I could charge $50.00 more per unit, and the extra units sold with the other customer would have actually meant lower gross sales (and we made better margins on the higher priced units).

The Apple App Store doesn't reach as many people. But there's an amazing amount available there, and the sales possibilities appear higher (I was unable to find numbers for OSX and Windows desktop app sales that I trusted - if anyone does have a good source please tell me).

So I disagree with this argument. Sure, it might upset untrained pundits, but it won't upset anyone who knows that the best bet is to follow the money.

- So Apple was UNDERPERFORMING the market !!!

This is incorrect. If your chart only included Premium mobile sales, it would show Apple market share climbing. In other words Apple was outperforming the market, in the segment that they wanted to compete in.

If we were to make a similar comparison with Tesla, including numbers for the Tata Nano and the Honda Jazz would be ridiculous.

- Mass Market is not in the Apple DNA.

Tell that to Microsoft, who Apple trounced (along with everyone else) in the MP3 player market, where Apple held 74% of the market, Sandisk 7%, Microsoft 1%, and 'Others' 18%.

http://trak.in/wp-content/uploads/2010/05/image.png

Apple is quite capable of competing in the mass market. For that matter the Apple ][ was a mass market product, and was at one point the most popular personal computer.

************

Note for those who don't get where I'm coming from - I am not arguing with Tomi's numbers. Hell, I just bought the Almanac. Ask him.

I am arguing with his interpretation of those numbers. We had similar discussions in politics where Tomi and I had different interpretations of events. I was right about Trump being serious, and I was right about Trump having a decent chance of becoming the Republican nominee.

In the case of mobile I think that Tomi is reading the numbers wrong. The numbers are right, the issue is the meaning, and how certain players will act.

Let's take Nokia. Who would have thought that they'd go from a solid contender to an also ran in a two year period? Tomi did because he knew the players and the market.

In this case I think I know Apple better than Tomi. I also know a fair bit about product design and sales, possibly a bit more than Tomi, since I was the chap on the leading edge of the spear in knocking on the doors of Fortune 500 companies. I was pretty good at it.

It all comes down to money. When you hear people yelling that Apple IOS is dead because Android is soooo much bigger, they are wrong. Apple had a viable app ecosystem three years ago. The number of potential customers for Apple app developers has risen since then, and Apple users do tend to spend money.

Android users don't spend as much money per device. The numbers I've seen (which may not be accurate) seem to show that with 1/5 of the active devices Apple app sales (including in app purchases) are marginally higher than Android sales. Even if Apple was to drop below 10% market share, as long as the total number of devices stays static, the Apple ecosystem would still be a viable route for developers.

But Apple has moved down market with the iPhone SE.

Let's look at a scenario!

Apple sells the iPhone SE (and its replacement) at $399.00 for the next two years. It gains Apple increased sales, and possibly some market share. Then Apple introduces the iPhone XE for $299.00. The XE might possibly be the older SE. Apple might also add an iPhone SE+ in a phablet form factor priced at $450.00 to $475.00.

After two years of selling the iPhone XE (we are talking 2020 now) Apple introduces the iPhone YE for a price of $199.00.

All iPhones run the exact same OS, can run the exact same apps, and Apple now has mobiles which can compete against a large percentage of the smartphones on the market in the Industrialized world, and in places like the BRICS nations, where the population might not be as affluent as the Industrialized nations, but are close, and want the same things that their richer neighbours have.

In other words it would be a granulized move into the mass market, which is how Apple handled the MP3 Player market.

I have no idea if this is Apple's plan. This is just a logical extension of moves I've seen Apple make in the past. Apple has the money to do this. According to the company's most recent 10Q, they have $200 Billion in the kitty. You can do a lot of R&D and design engineering with that sort of money.

http://www.sec.gov/Archives/edgar/data/320193/000119312516559625/d165350d10q.htm

Compare that to Microsoft, who has $112 Billion.

http://www.sec.gov/Archives/edgar/data/789019/000119312516550254/d256147d10q.htm

Or Google who has $64 Billion.

http://www.sec.gov/Archives/edgar/data/1288776/000128877615000046/goog10-qq32015.htm#sA9E010FC4EDB28DCF20A3E13802E303E

Note that I didn't go after Samsung as it isn't an American company, and I'm working on three hours sleep. That would require thought, and I'm not sure I've got any left!

So the charts which show Apple in a slightly less than stellar manner are correct, but misleading. What is more important is this:

Net Sales by Product, quarter ending March 26, 2016

iPhone $ 32,857
iPad $ 4,413
Mac $ 5,107
Services $ 5,991
Other Products $ 2,189
Total net sales $ 50,557

That clearly shows that the iPhone is Apple's main source of revenue. Apple will fight to keep that source of revenue growing. The good news is that there is a lot of room for growth, if Apple can convince Android customers that IOS and the iPhone are a better choice. The iPhone SE is Apple's first move in that direction, and if the rumours we've heard are correct, it is a good one. I'm looking forward to seeing real numbers rather than rumours, so I'll be here every day checking to see if Tomi has put them up yet!

Hopefully this makes sense. I'm taking the dogs outside, then going back to bed. The reason I only got three hours sleep is Rosie, our seven year old Beagle cross is suffering from age related bladder issues, and the beautiful mutt wakes me up so I can take her outside, and then I can't get back to sleep. I love you Rose, but some days...

[Barney]

@Wayne Borean:

"as long as the total number of devices stays static, the Apple ecosystem would still be a viable route for developers."

Yadda, yadda, yadda. I think it has been proven that the only way to make money with apps is to develop them on contract for someone else - and in that market platform isn't chosen by who spends more but who reaches more of the intended target audience. Even though you CAN make more money on Apple's app store, that's still measly peanuts in relation to the development costs. The entire 'app economy is a joke - everybody ogling at the revenue but nobody ever asking what the COSTS are! Note: Developing apps is not cheap! Developing apps for Apple costs a lot more than developing apps for Android, because Apple constantly changes the rules which results in a lot of wasted work.

"The good news is that there is a lot of room for growth, if Apple can convince Android customers that IOS and the iPhone are a better choice. "

That's going to be hard. Because Apple is not the better choice for anyone who values flexibility or freedom of choice.
If Apple wants to convince these customers they have to drop their high-handed 'we know perfectly what the customer wants, and those who don't agree just do not know better' attitude.

Sorry, but I only see yet another person who drunk too much iKoolAid.

[Wayne Borean]

@Barney,

So from your viewpoint Apple should not be able to pickup many new customers or much market share with the iPhone SE. We'll see when the numbers come in.

@Wayne Brady,

You are incorrect. Apple has a lot to gain from going 'down market' in a controlled fashion. Let me toss some numbers out.

Assume that Apple manages to increase the number of IOS devices by 5%. The addressable market for apps rises by 5%, which makes app programming more lucrative (yes, I know, the app market is not a gold mine, or even a copper mine, but follow me through this). This also puts limits on the addressable app market for Android, which means fewer Android exclusive apps, which means that Apple won't get damaged the way they did when Windows killed Mac volume.

So then comes the iPhone XE, which again increases the addressable market for apps by 5%, with the same impact. Note that during this time total smartphone market is still growing, high means that Android is increasing the total number of in use units, and so is not feeling any pinch.

Then we hit 2020 when the smartphone market can no longer grow from cannibalization of the dumbphone market.

Now we get into weirdness. The World population is close to stabilization point anyway. Add in the increasing effects of Climate Change/Global Warming (heat waves in Thailand and India, droughts, extreme weather events driven by extra energy in the weather systems). At this point we should see several things happen:

1) Increased population die offs due to heat
2) Migration from areas where heat is becoming unliveable
3) Migration will often be to places like Canada or Finland where contraception will be readily available and inexpensive

So population may start to decline, reducing total world market for smartphones, at the same time that the population that can move is moving to places where they will be more economically advantaged (able to afford Apple products).

So the market which buys Android because it is the only choice will drop in total population. The drop will be minimal, but at the same time the population that can afford will Apple will grow minimally. However the small growth of the population that can afford Apple will have a greater impact on Apple than it will on Android. We are already starting to see this.

Apple 15% Market Share
Android 84% Market Share
Other 1% Market Share

The above is from memory of 2016 numbers and is not accurate, but horseshoes and hand grenades...

In 2020 this changes to

Apple 20% Market Share
Android 79% Market Share
Other 1% Market Share

Impact on Android? Minimal. Maybe as Apple eats part of the lower upper end of the market Sony might drop out. Maybe not.

Impact on Apple? Huge. Apple has just increased iPhone sales by 25% over a four year period, which is an excellent sales trajectory in anyone's books.

The iPhone SE has to be taken in context with Global population shifts. As does Android, Windows, and everything else. Analysts worldwide are ignoring these problems, though if you look at the planning the United States military has been doing, you'll see they are well aware of the possible problems (like a case where Mexico is inundated with refugees from further south, and being unable to handle them gives them guns and points them at the Rio Grande...)

FYI, I live 300 metres above sea level in an area where there was still ice on the lakes Monday. I'm fine when the oceans rise, and the temperatures go nuts.

At this point I'm going to strongly suggest reading this 1993 memo written by a Microsoft Executive titled Road Kill on the Information Highway, and meditate on both its accuracy, and what this means for Google, Microsoft, Samsung, and Apple. And then think about what it says, along with all of the other issues which are hitting the planet (ozone hole for example) and think about where things could go.

http://www.microsoft.com/about/companyinformation/timeline/timeline/docs/bp_roadkill.rtf

[Barney]

@Wayne Borean:

"So from your viewpoint Apple should not be able to pickup many new customers or much market share with the iPhone SE. We'll see when the numbers come in."

The iPhone 5SE will certainly produce an upgrade spike from all those who are still using an old 4'' iPhone and need to replace it. Aside from that, what kind of people would trade a large screen Android for a small screen Apple? Sorry, but no, I do not see much potential to increase customer base here, for the simple reason that screen size is the most important feature of all.

I'd say these days the lines have already been drawn. Those with enough money and an Android phone normally use that because they do not like Apple for how they operate their business. After all that was the main reason why I ditched their products 2 years ago.

[Wayne Borean]

Besides, Barney is assuming that the iPhone SE will only be sold in the 4" size.

Take a long had look at how Apple's laptops have 'evolved' starting with the first of the new series introduced after Jobs came back to the company. Apple has consistently introduced High-End systems, and then lowered the prices over a period of time while upgrading the specs.

The MacBook Air (13") was $1799.00 when introduced.

http://www.macworld.com/article/1131583/macbookair.html

The MacBook Air (13") now sells for $999.00.

http://www.apple.com/macbook-air/

So why wouldn't Apple take the wide screen, move it to the SE for $499.00? Dump the iPhone 6, or maybe make it a top end phone like the Vertu Ti, or make it modifiable like the Apple Watch, with the addons (gold case, etc.) being extra cost, with the aluminium case remaining standard.

This handles two things - the market for 'Premium' phones (and blows Samsung out of the water) and the market for midrange phones using the same basic hardware.

The Apple Watch could have been a test, to see if people would pay extra for gold bands (cases) and other toys, on top of the functional base unit.

This is just blue sky thinking, but it is based on Apple's historical actions.

[Per "wertigon" Ekström]

@Wayne:

I do not think that Apple wish to up the screen size of the SE, for one simple reason; that would cannibalize their sales of the high-end too much, leading to a massive loss of their beloved profits.

If Apple keeps on moving downstream they will find increasing resistance, and their "Premium" brand will start to erode. And the only thing keeping Apple afloat at the moment is that premium brand.