At the beginning of last year I wrote about mobile year 2013 that one thing to follow is Apple. Apple’s market share in smartphones fluctuates through the year as they release a new model annually and therefore it is very hard to say for sure if their market share is in decline or rising.
During the last year I came to realize that my whole point is plain wrong. We cannot really compare Apple to other smartphone vendors using smartphone market share. I try to explain why:
Let’s imagine that a car maker – e.g. Land Rover – would only make full AWD cars that are designed for heavy all-terrain use. Those cars would have no luxury equipments, you could drive the car to a river your neck deep as the engine has air tube reaching the roof of the car so it can get air even if submerged. Those cars would be noisy, uncomfortable, and EVERYTHING that makes them a very narrow market product not suitable for mass market. It is rather easy to follow how that maker is doing if we see how many percent of AWD cars are made by them.
Now in this assumption let’s assume that this setup existed at the point when SUVs became so popular. Our magnificent maker could be having steady or even increasing sales, but their market share would all of the sudden plummet as more and more people buy Toyota RAV4 or Dacia Duster in the exploding AWD market.
You don’t drive Toyota RAV4 into a river! Heck, you preferably even stay off the beach if you can. Our car maker would now need its own sub-category if we want to see their real success and compare it to other makers – or we need to go into TOTALLY different approach.
I say we compare their sales to sales of ALL CARS.
Why not? Car market grows, sure, but in the end it’s quite stable structure. Certain percentage of people need real AWD car that will get them to mountain top if needed, majority only drive on asphalt. The relative sizes of those groups do not change as fast as the preference of car types and in this comparison we would see our maker had something like 0.5% market share to begin with and in the end it would still have 0.5% – or even 0.6% market share (if some of the SUV buyers bought one). Their business indeed did not collapse since none of the competition had any possibility to steal their customers. Nor did they ever target those new customers. Case closed.
So how about we apply this to Apple? The smartphone market is exploding as feature phone users switch to smartphones. Apple is not offering a replacement for $100 feature phone, nor should they. And those who want the high-end experience are not buying $100 cheap Android – far from it. So Apple pretty much matches the scenario described above and we can check their performance here:
This is Apple’s market share of all mobile phones (feature phones and smartphones combined) for last 6 years. As we can see, Apple still grows its market share, so their market share decline in smartphones is not implying that the competition is eating their share of the total pie. However, the growth has indeed bent down last year. It very much follows iPhone annual unit sales chart which we also have coming:
Where have I seen that before? Oh, right. There was this rubber boot manufacturer from Finland that also made quite a good deal of world’s mobile phones:
Nokian taloudellisia tunnuslukuja = Nokia financial key metrics
Nokian markkinaosuus matkapuhelimissa ja matkapuhelinverkoissa = Nokia’s market share in mobile phones and mobile networks
Prosenttia = percent
verkot = networks
matkapuhelimet = mobile phones
Lähde = source
Nokian matkapuhelinten myynti = Nokia mobile phone sales
miljoonaa kpl = millions of units
Note that Nokia was always making mobile phones AND smartphones. Their share of total mobile phones should have at least been holding steady if they planned to keep growing at the speed of market. However, years 2006-2008 Nokia’s market share stalled and came down years 2009-2010. At the same time Nokia was keeping quite steady unit sales and even managed to increase its sales to in 2010 but as we know, eventually both crashed.
Apple however is increasing both unit sales and market share. That indicates they are not facing any immediate threat. It is hard to say if the dip we see is a sign of something coming from behind the corner, or just an indication that Apple is reaching full coverage of the high-end segment. Next year at this same time we know better.
Am I worried about Apple? Not yet.
Apple came to rule portable music player market with their iPod, which was more expensive than competition yet still the most sold music player.
Apple came to light-weight laptop market with Macbook Air, once again more expensive than competition yet taking more profits from the industry than next rivals combined.
In smartphones Apple has been capturing more profits than other players in the mobile phone industry – combined. For years now. That is very nice way to compensate decreasing iPod sales year after year.
And we cannot ignore iPad either. Apple managed to change the tablet market when they introduced the iPad. Not only the apps ecosystem, but the fact that every single Internet tablet from the past looked like a brick with an anchor compared to the slim looks of iPad. And Apple just keep improving it. Naturally iPad will eventually reach its maximum sales (following the path iPod took and the path iPhone seems to take). Nothing can grow indefinitely. Most likely tablets will still grow a moment after iPhone sales level out, thus compensating the loss of iPhone sales growth that is equally inevitable.
Unless Apple has lost the abilities it has had throughout its history, I’m not worried about them. I say they come up with next iEquipment within two years to once again grasp the majority of the profits of some area of the tech industry. They have literal billions of dollars in the bank and are profitable at a level where everyone else would like to be but no one else is.
I wrote recently that Apple has been winning for several years and Apple still is winning. There are several ways to measure that and market share is not one of them.
WHAT TO EXPECT?
What came out of mobile year 2013 is that Apple is not “losing” the game. If you loot more profits than the rest of the industry, you are dominating, no matter what your market share is.
Could we see something coming year 2014? If we look back to the past, we can. Let’s see a graph from Benedict Evans. It shows Apple’s quarterly sales of products mentioned above
The iPod has gone through almost full curve whereas iPhone is not going to hit its peak for a while yet and iPad is merely starting. Apple is not blind. They know iPhone will “peak” eventually and they need something new. Like they introduced iPhone and iPad to replace iPod profits that were going to go down.
For this year there is a chance they will amaze the world again with something new.