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).
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.