Apple Quarter and Few Other Items in Smartphone Wars

So Apple gave its results for calendar quarter 3 ie July-September. They sold 46.7 million iPhones, which is up 14% vs previous quarter but this is the normal pattern with the strong swings in Apple annual sales cycle. Last year this time they were up 13% Quarter-on-Quarter so it's very similar performance on the quarter when first new iPhones are released. Year-on-Year is the more meaningful comparison in Apple Quarters and that business is up 3% which is also the rate that the industry is currently growing. Apple's market share currently (preliminary) is 12.9% and they are on pace for an annual market share of about 14.5% which would be flat vs last year. Flat market share would allow for that about 3% unit growth Year-on-Year. Apple made as per usual a huge ton of money. Some analysts were a bit disappointed that the average sales price wasn't quite as astronomical as they had hoped but they still make more money than god. Ho-hum. Nothing to see here. What else is going on?

Samsung said they had monster quarter but didn't give their numbers of units of smartphones sold. Sony once again lowered their annual sales target now to 14.5 million. LG made money elsewhere but not in mobile phones. Xiaomi had a great end to their quarter selling for the first time over 10 million units in one month and have climbed to second bestselling smartphone of India (behind Samsung). Pantech the third-largest South Korean phone manufacturer which recently went bust, was sold (again) as it is being split into parts. HMD's Nokia comeback looking strong, I have separate postings about that.

A few interesting handsets are around that work into a new direction for the stale race in form factors. Razer introduced a gaming-oriented super smartphone in top premium price range. Available in USA and Europe (at least) with some carrier support on both continents (runs on Android of course). Meanwhile ZTE introduced a folding-screen smartphone, the Axon. CAT has done a new release of its super-heavy-duty outdoor smartphone which includes the FLIR camera. And there is a Chinese phone maker, Koobee who are able to take 80 mp pictures (as software gimmicks on far more modest sensors).

Thats about the round-up for today. We'll see what info we get from the big analyst houses and if anyone mentions Nokia already in their surveys of the market. Then we'll wait also for the few other smartphone makers to give what little info they do give us, and I'll do the Q3 results of course.

Comments

[Tomi T Ahonen]

Hi everybody

IDC has already pushed their Q3 numbers out. They counted the total market at 373.1 million units (Top 5: Sammy, iPhone, Huawei, Oppo, Xiaomi). Their Samsung number was 83.3M and Huawei number 39.1M so its not a close race in any dimension currently..

Tomi Ahonen :-)

[Tomi T Ahonen]

PS PS

oh one more interesting note. Samsung will pass lifetime cumulative smartphones shipped number of 2.0 Billion units NOW in Q4. They MAY make a note of that massive number haha..

Tomi Ahonen :-)

[Phil W]

So 46.7 is greater than 83.3? What warped maths you use in your fantasy land LongAAPL.

[Jim Glue]

Nothing to see?

Well, we see that iPhone return to growth in China. We saw growth in the quarter even though the real "newest/best" iPhone wasn't released until today.

We see iPhone returned to growth for the whole year. We see that the rumors of the iPhone 7 outselling the 8/8+ was wrong.

We see the Apple Watch grew 50% over year ago comparison.

We see the iPad has returned to not just growth, but sustained growth.

We see that more of Apple's customers are buying apps and subscriptions (unit growth in those participating in services is greater than the unit growth in sales).

We see that Apple is maintaining that 95% customer loyalty.

And remember, we aren't supposed to be seeing ANY of this. Cheaper, good-enough commodity phones are supposed to be wiping Apple off the map. Apple isn't supposed to increase unit sales while raising prices.

We are supposed to see a beleaguered Apple because of intense competition (remember, only Apple is facing tough competition).

The iPhone 7 was boring, me too, 3yrd year in a row with the same form factor...it was not supposed to increase sales for a whole year.

People are not supposed to be lining up around the globe, AGAIN, for the new iPhone with the OUTRAGEOUS price, and "about time you caught up" OLED screen and the "scary, will anyone trust it" face id.

The Mac isn't supposed to exist at all, 33 years into it's losing battle against Windows.

How is Apple even able to sell iPhones in light of the Nokia 8, Samsung Galaxy S 8, Samsung Galaxy Note 8, Google Pixel 2, and Essential Phone? Everyone got rid of bezels (well, except Nokia) and none of them had to resort to an ugly notch.

How is it that developers are wasting their time creating more than a thousand AR apps for the unimportant, niche, soon to be gone iPhone platform? Why didn't they build those on Android first?

Well, enough about Apple as it continues it's decline into complete irrelevance.

How about that BOTHIE camera on the Nokia 8! And TWO DAY batter in the $115 Nokia 2!

[Wayneborean]

Oh shit, Jim is coming Unglued again.

As to the numbers, 2b smartphones is one heck of a record. Good work Samsung!

[Tomi T Ahonen]

Hi Phil, Jim & Wayne

Phil - thanks. don't worry about the trolls

Jim - if this was an investor website about high tech then several of your points would have merit. I have acknowledged long ago and repeatedly that Apple is the most profitable company of all time and as it has the best loyalty, it has a very strong future also ahead of itself. That all is a 'given' and 'news' that support those points is 'ho-hum nothing new here, move along'. This blog is NOT about the current temporary market performance of random companies in the tech space. This blog IS about the future of mobile (and digital convergence and social media) as per the original book that this blog is based on, and all the writing on this blog over its 12 year history. So the big relevant issue about the iPhone is the role of iOS as an alternative platform vs the big rival/s like Symbian, Blackberry OS and Windows in the past, and Android today. Secondly we are interested in the iPhone as a major smartphone brand, in particular as the niche premium smartphone leader could be expected to bring innovations to the market (on this front Apple mostly disappoints). Thirdly we like Apple as a company exploring the digital convergence areas from music to PCs to smartphones to tablets and wearables.

As to any of the interests of this blog readers - and Jim you know well I was preaching to that choir, not to any random Apple investors who might stumble upon this weird blog - they will not find anything exciting or noteworthy in Apple's Quarterly results. The direction of iPhone's market share trajectory is - flat vs last year. Nothing dramatic going on, no big spikes coming in either direction.

Now I know Jim that you know, that I have never said Apple was about to head into terminal decline (which I have recently started to attribute to Microsoft, as I see signs their terminal decline may have started). So of course most of your tirade was directed at some readers who may have been more severe in their views of where Apple is headed... thats ok, it is the same old song we often see argued on this blog. Enjoy your moment.

Let me see if there is anything noteworthy in your laundry list of iStuff. Apple Watch? 50% of nothing is still nothing. Until Apple release the NUMBERS for Apple Watch, we know that Apple itself is ashamed of how low the numbers are. I was not going to turn that knife into the sides of iFans but you did bring this subject up..

Why isn't Apple supposed to increase unit sales while increasing iPhone prices? You are misquoting me very thoroughly on that. I made it VERY clear that Apple had room to grow its pricing far above the $600 price level towards the $1,000 price WITHOUT HURTING sales. We saw how much they grew unit sales WHILE increasing prices with the phablet series of iPhones. I TOLD THEM this is how they should do it. They, Apple being very conservative, did not do it properly as most of their marketing is bullshit half-assed nonsense without any real intention to achieve anything. So they have to correct and fix obvious errors and their moves take years to implement. But when I did my calculation of the price pyramid and why Apple HAD to increase prices - I made it very clear that this market CONDITION allowed for Apple to both increase prices AND increase unit sales - something that regular economic theory suggests should not happen. We HAD this discussion, Jim, so don't come claiming this was not supposed to happen. I was EXPLICITLY the world's FIRST EXPERT to calculate out that scenario and urge Apple to push prices above the arbitrary 600 dollar level.

Now with 'Mac was not supposed to exist' you are being utterly silly. I've said long long long ago and as far as I can see, nobody EVER even in comments has suggested otherwise, that the Mac PC has a safe niche market of under 10% market share, that Apple can forever milk for its revenues and profits, because those Mac users are loyal and Apple's solutions cater to a few industries where those industries feel a Windows PC is not a viable option - like Advertising and various creative industries.

AR apps? Were developed for Android first. In fact 8 YEARS ago. You're being silly Jim.

On Bothie Camera, haha, well, I have not yet found it very compelling and this blog has never said a Bothie Camera will be the answer to solve all issues for a new brand. This blog DID insist that Apple's original iPhone, without the Selfie Camera (then called the 'inward-facing camera') was a mistake and that Apple HAD to introduce the second inward-facing camera - which Apple also did do. It is not that I would not 'care' about the camera side of the phones, which makes my lack of enthusiasm about Bothie cameras even more conspicuous. I don't recall anyone else being enthusiastic about Bothies either, in our comments, so that may be your frustrations Jim, because I don't see where that ending comment was even headed. But yeah. Ho-hum, nothing to see here. Apple results just like any other quarter. Their market share is flat, their profits are huge, their loyalty is enormous (and they still fear the poor sales level of Apple Watch so much that they won't tell us how low it is). Ho hum, nothing to see here; move along!

Wayneborean - haha yeah. Unglued haha. As to 2B it IS a monster number. Nokia made it to about 3B in total phones but under 1B in smartphones. Apple is the only other company that has sold more than 1B smartphones cumulatively lifetime, but it always second fiddle to Samsung. The next biggest is Huawei which is at about half a Billion now. The other classic brands like Motorola, LG, Sony/SonyEricsson, etc are nowhere near; and the newcomer brands haven't sold enough to get to those levels.

Tomi Ahonen :-)

[samsheep]

Well, a bit more significant this time

The iPhone now account for only 55% of sales, from levels that many people saw as too dependent and problematic and now, soon it will be below 50%. If split in 2 companies each will be 100 billion a year, each bigger than most companies out there trying to compete with Apple

Sales do not include the X .. that as we ( isheep ) knew very well will be brutal contrary to fandroids that were crying wolf that the iPhone was too expensive and no one would buy it .... well 10 years wrong and still don’t get it

It is no shame to admit that Samsung profits are a debt of gratitude to Apple as most of it has nothing to do with phones but silicon, it’s the silicon making money and their biggest by far client is Apple ... we all know it but some would rather ignore this fact for the sake of keeping face

[Richard Jansky]

Tomi
As usual great hearing from you about what is going on, talking numbers instead of hype. Please all the apple fans and haters, relax. I also liked the comment (things to come maybe?) about different form factors of a number of new phones. I look forward to a longer discussion of the impact of these phones, Razer, Axon, Cat, Hydrogen Red.

[Jim Glu]

Hi Tomi,

You are right in that my post points aren't all in reference to you. But some are.

I'm awaiting the convergence of your enthusiasm for AR with Apple's leadership in AR. Apple is bringing AR to the masses -- right now -- like no other company is or can. We can project that SOMEDAY, Android will...but right now, a tech that you have been cheering on is bring brought to market by Apple.

As to Apple Watch numbers -- I see no reason you can't use analyst estimates they way you do for phone sales. You report on numbers for many companies who never release their own unit sales...by using an average of the credible analysts. Why is this technique unavailable for the Apple Watch?

As for Apple investment....I own no Apple stock and my interest in Apple's financial performance has nothing to do with stock prices. These are the comments less tied to you as you've long ago moved from Apple making temporary profits to Apple is in no trouble and will continue on continuing on.

But yeah...this is a quarter for crowing about Apple's performance because it flies in the face of several common narratives. Not narratives from you, but from the usual crowd.

Apple's return to growth in China...verses China being the canary in the coal mine for the long awaited collapse in demand in favor of cheap phones.

iPhone 7 returning "whole year growth" giving much support for the iPhone 6 year being the outlier....not the iPhone 6s down year from being the trend.

The snark about rising sales along with increased prices is about how forever people are saying that Apple can't succeed in a premium niche....that cheaper, good enough Android is assured to bring down Apple sales just like they have with Samsung. You have indeed put forth that Apple could go higher end as well as lower.

Everything about Apple's strategy is supposed to be wrong. And in the 6s era there was the first real decline and down year. So now we've finished the year after....and it was growth, not further decline. And in that year Apple did nothing to follow the plan by those who think Apple's pes are the main problem.

All of this BEFORE we have the huge blockbuster iPhone X Christmas quarter. The next TWO quarters are going to be huge for Apple. This quarter was huge too, but having nothing to do with Apple's latest 3 new phones. This was the final quarter of the iPhone 7 pair. A year where Apple put out the same design for three years in a row. It was supposed to be a disastrous year following the "bad" year that was the 6s.

Christmas season followed by Chinese New Year with a new model that has all of the "exciting new design" cache you could want. You can go ahead and write off the entire 2018 year as "one more year when none of our predictions for Apple are coming true". Not "Tomi Predictions"...of course.

Developers will be coming out with AR apps like never has been witnessed before. They will be on the Apple platform exclusively. They will be available to a market of hundreds of millions of users. Apple's platform is now the largest AR platform in the world and will be for a couple years.

[Abdul Muis]

Samsung NEW idea on recycling the smartphone.... UPCYCLING

https://www.youtube.com/watch?v=Z9ujIbdi33g

[James Glu]

Hi Abdul...how about those great results for iPhone in China? You know...even BEFORE the iPhone X

[Per "wertigon" Ekström]

If IDCs numbers hold up, Apple moving average market share for Q3 is at 14.32 %, up .5% since previous quarter. 14.5% is definitely plausible. Now, I do believe my forecasting method will need some revising to account for the coming surge.

Most of the sales this coming year will be iSheep and other loyal customers buying the 6 or 6S, back again for their iFix. Since there were such a large surge with the 6, it's quite possible we will see a similar but smaller surge this year. Evidence does look towards this surge.

This surge means that yes, the market share will see a slight rebound, up to 15%, but rest assured, then the two years of decline will come in again, then the surge... The pattern will repeat, but the tops will be lower and so will the valleys.

It is clear Apple will most probably tangent, if not surpass their units record next year. This year, not so much, I doubt they can sell 93M units this christmas quarter. Next year they might get 235M-240M units, depending on what they do with the iPhone XS.

So yes, peak units for Apple will happen; this is inevitable. But no, it will not happen yet, Apple still has far too many loyal customers.

As for Apple selling points, Apple will have to come up with ever more desirable ones - and unfortunately, they are pretty much running out of them. Thing is, you need to offer something 10x better than the status quo to lure users over from Android. Apple offers a 2x-3x better experience - on their key strengths.

Apple will not be able to grow their market share, and Android - the bigger, far more powerful ecosystem - will eventually crush Apple. It's only a matter of time now.

[James Glu]

Hi Per,

Lure folks from Android? Apple does that all the time. More people switch TO iPhome than from iPhone. What Android manufacturers have failed to do is come up with a compelling option to conver iPhone customers...and they have been trying for years.

You do realize that Apple’s falling market share has nothing to do,with losing Apple customers, right? It’s totally and solely about the growth in the cheapest end of the market where Apple has no offerings.

Have you also modeled the end of the growth in Android? Peak smartphone is every bit as inevitable as peak iPhone. Peak “iPhone class” Android happened years ago and has been in significant decline ever since.

All these years and there is still ONLY Samsung that can field a successful challenger to the iPhone. Nobody else’s “iPhone killers” have amounted to a hill of beans.

That Apple loyal fan base is 95% of 650 Million people...and growing.

The wave you are describing is just the living reality of iPhone customers buying their next iPhone. It is built in...practically guaranteed. Look how hard Xiaomi and Huawei and the like have to work to scratch out sales....even though they have ludicrously low margins. Meanwhile, Apple sells much more every year at high margins. No Android manufacturer has all that much loyalty from its customers....and they are fighting against each other far more than against Apple.

Look at HMD/Foxconn. They are barely competing against Apple with their Bothie camera...but have many models aimed at the mid to low end where they don’t have to compete against Apple.

Remember when Xiaomi was so smart and innovative to sell smartphones with no profit in order to buy marketshare and then make money with services? Apple sells a couple hundred million smartphones a year at high margins....and STILL makes a ton more on services.

Hearing that there is no more innovation left for Apple was said all the way back to the iPhone 4.

Apple should not be able to grow marketshare with ASP’s around $700 selling against Android phones with ASP’s below $200. That Apple will is amazing, astounding.

[Tester]

@PWE:

"As for Apple selling points, Apple will have to come up with ever more desirable ones - and unfortunately, they are pretty much running out of them. "

That's indeed the problem I am seeing there, too. So far it has always been the most superficial improvements to the iPhone that drove sales:

- retina displays with the iPhone 4.
- 16:9 screens with the iPhone 5.
- large displays with the iPhone 6.
- bezel-less design with the iPhone X.

Now that the entire front side consists of display area, what next? I think the past has proven time and again that actual technological advancements never actually mattered to drive sales - neither for Apple, nor for any Android manufacturer. For most users these are just too abstract.

@Jim Glu:

"Hearing that there is no more innovation left for Apple was said all the way back to the iPhone 4."

And that accusation still stands. Apple has been a laggard ever since. Not a single truly innovative feature was actually pioneered by them - they only followed suit once it was proven to be viable.

On the technological side, Apple has really just one thing going for them and that is that they actually update their firmware regularly. I know people who stay off Android just for this one reason. So once Google solves this quagmire and manages to produce an OS that can be updated without requiring adjustments to the software on every single step towards the customer things will become really interesting as this is a very strong selling point.

[Per "wertigon" Ekström]

@Jim:

Not a single phone can challenge the iPhones might, no. Just as not a single country could challenge Napoleons might at the peak of his empire. That is ok however. It wasn't a single country that ended Napoleon, but a multitude of countries working in tandem. While the brits dealt the finishing blow to his empire, they could not have done so without their allies.

Again. Apple must justify why I should pay over a grand for a phone, when a Lenovo P2 can cover my needs adequately for a third of the cost. And this equation becomes harder and harder to justify.

Apple shares the same problem as Napoleon - the infrastructure simply does not exist for sustained success.

[Jim Glu]

Outside of Samsung, all of the "iPhone class" Android phones put together....don't mount up to a hill of beans.

And how can you say there is no innovations in iPhones? FaceId is a leap ahead...just as TouchId was in it's day. You think Apple would have put up with the concept of a notch if the technology that needs that space wasn't compelling?

30,000 dots creating an accurate depth map of your face. Instantaneously....with or without room light. Machine Learning backed facial biometric that really works...and does so instantly. The fun animoji's are just the beginning of what developers will be able to come up with.

Meanwhile Google is working on software algorithms trying to compete with a "portrait mode" and Apple is plunging ahead with AR which really benefits from the front and back depth maps.

Apple waited on going to OLED...but it's a far better version. Accurate colors, individually color calibrated, wide color gamut (which others are now catching up to as well), and it's High Dynamic Range as well.

Everything Apple does is copied...even the things people on here dismissed. High Res screens, Virtual Assistant, 64bit chips, Touch Id, Removing Headphone jack, dual cameras (one with longer lens). It's just that nobody else has to introduce these features at scale from the get go.

Andy Rubin said that he couldn't have made the Essential Phone with titanium if he sold them in iPhone quantities.

What infrastructure is Apple missing? Their iPhones are made in China just like everyone else's. Samsung makes 25% or so of the iPhone, TSMC, Foxconn, Sony....etc.

And we are 10 years into Apple's phenomenal success. Long term success has already happened.

The ONLY metric you can point to to say "Apple is losing" is by including markets/price points where Apple doesn't even TRY.

[Per "wertigon" Ekström]

@Jim:

You are severely underestimating the rest of the pack.

Apple may lead in the premium segment, right now. Sony produce only mid-premium these days, 14.5M units vs Apples 220 - that's a mere 5% of the same phone market. But produce them, they do.

If you add up the millions of Pixels, Sony, and flagship phones of the top ten, I'd say they amount to a substantial amount - possibly 40-50% of Apple, if not more. It just takes one breakaway success here to knock Apple a peg or two down. Or one turd from Apple. Meanwhile their infrastructure is slowly eroded away.

As for FaceID, what Apple did was install a Kinect in the camera. The technology has been around for ages, the idea of using your face for unlocking as well, and Samsung offers the alternative of iris scanning if you want biometric security.

And is FaceID a good selling point? Not really, no. I see no "must have" features of this phone either, but a lot of "nice to have". The 8 days battery life of my current phone was the primary reason I bought it. Beat that, Apple, and then we might talk.

[Tester]

FaceID is a typical bullet point cited by the hardcore fans. In real life I'd guess it will prove a lot more of a hassle. A fingerprint sensor is far more practical because you can just operate it no matter how you hold your device.

If you want to ask why I am skeptical about Apple's continued and uninterrupted success:

Apple is running a classic money squeezing strategy: No real innovation, selling mature inventions that have already seen some use as the next greatest thing and overall trying to release as little advancement as possible each year without falling too much behind. This works as long as the industry still has places left to go but it's really slowly running out. Screen space has been maximized, internet connection speed is out of the device manufacturers' control, CPU performance cannot be increased indefinitely and is also close to the peak already (not to mention that for most users this is purely academic and of no use anyway and only helps draining the battery faster.) Increased GPU performance is important for gamers mostly which also constitutes only a small fraction of users.

Such a strategy can be run for a couple of years, but let's not forget something very important here: Fashion centered items will quickly go out of fashion if they remain the same old - which will inevitably happen as the means to VISIBLY differentiate quickly are used up.

[James Glu]

faceId is “just connect” like a smartphone camera is “just a dslr” - and the laptop class A11 Bionic is just a cpu, and on and on.

And Sony, HTC, Lenovo, Motorola are doing a terrible job competing against Apple. The only one giving Apple a good run for their money is Samsung. The rest fight it out for where Apple doesn’t participate

[E Petersen]

In the tech industry, things can change fast. Nokia died once within a few years, Sony has now record profits after a decade of turmoil and huge loses. Both were tech market leaders.

Apple was a few weeks from bankruptcy in 1997 and also made a comeback. It's actually quite fascinating how Apple manage to keep the boat afloat despite their lack of innovation in the past handful of years. Brand reputation (from past glories) and defining products in each category: the ultimate laptop design, the ultimate all-in-one desktop design, the original smartphone, still the best working tablet. Both brand reputation, tech and fashion are volatile aspects however. I would say Apple is one of the most vulnerable brands in tech concerning branding and fashion. The starting point, the core of the business, is the tech part. Poor tech, no strong branding in the long run.

I am very curious, from a business/marketing perspective, what will happen. One thing is for sure, there will be disruption at some point. i can recommend professor Clayton Christensen's writings on this subject. How Apple is going to respond to such a 'new situation' is very interesting. It will also be very interesting to see how they will respond the day that sales start to drop and the company is put to the test. Will they panic or re-invent themselves? The same questions could of course be asked for Samsung, the current market leader.