An AWS band (1900 AND 2100) compatible iPhone would be great. It could run on T-Mo and all the new entrants here in Canada. It doesn't have to be CDMA for just Verizon.
Also, with the 700 MHz band soon to be opened up, the carriers carrying the iPhone in North America will soon be 700/1900/2100. Apple getting an iPhone on these bands could actually propel carriers to start using 3.5G (HSPA) on these bands (which would be a lot better for data).
The iPhone will plateau eventually, for the simple reason that their exclusivity deals with carriers simply limits their market potential. Not everybody wants to sign up with the Apple approved carrier because the iPhone usually comes with longer than average contracts and higher than averagre tariffs/rateplans.
The numbers are phenomenal now, because the iPhone is still a relatively new product and is still rolling out into new markets. And of course, with every new market they'll get new market share which makes their growth stats seem almost unbelievable. But sooner or later, they'll run out of new markets.
...
1. Apple need not stick with exclusivity deals. See UK, France, Italy, Australia, Canada, India, Brazil, Turkey, etc
2. In the US, the iPhone rate plans are really no different in cost or length than Verizon. In other countries, YMMV.
3. If it takes the iPhone 6 years to plateau (as it did the iPod), Apple would be happy. But the iPod addressable market was in the millions; the cell phone market is in the billions - there are 4.6 billion cellphone subscriptions worldwide (out of 6.8 billion people), people are conditioned to replace their cellphones in 2-3 years, so in time, a good percentage of them will be smartphones.
4. If, in the future, Apple really needed to sell to those who won't pay for a 3G/4Gdata plan, Apple could go back and make 2G iPhones that have very cheap data rates. But I think there's enough people who'll pay, that Apple won't ever go back. Just look at the adoption of home broadband in the US; even though people could pay $10 for dialup or do without, we see that over 60% of people are willing to pay $35-50 for 10-15-20Mbps speeds. I think the market penetration of smartphones with data plans is still less than 10% worldwide; there's still plenty of room for growth, even if full market penetration is only 30-40% (of 4.6 BILLION).
How is it you're never on point. Just admit that you don't understand what marketshare is.
Go away shareholder, no one is interested in your biased viewpoint.
Quote:
Originally Posted by solipsism
Yeah, they do, in an unintelligent way... not unlike every post you make. By your definition, pretty much every phone is a smartphone. WAP does not a smartphone make.
I am not talking about WAP, maybe you should take off your Apple blinkers and realise that all the Symbian based phones have browsers on them, not WAP browsers, but actual browsers.
And Apple's profit from the iPhone alone (Q3) was $1.6bn - I think Q4 was more. (My guess over 2.3$bn!)
Nokia are not losing money, but their profits are declining as their share of the top-end cellphone market is falling rapidly.
Back atcha!
.
Why do you care about the profit made by these companies unless you are a shareholder in one of them. If that is the case your viewpoint is worthless as your viewpoint is biased. As a consumer I do not decide to purchase an item based on who will get the most profit.
1. Apple need not stick with exclusivity deals. See UK, France, Italy, Australia, Canada, India, Brazil, Turkey, etc
Sure they can. But like I pointed out in my example for Canada, ending exclusivity doesn't always make the iPhone any more affordable. It hasn't happened in Canada. For most people it's not the $100-$200 to get an iphone that's bothersome. It's the $50-$80 + tax that puts the phone out of reach. And that's still not the most bothersome part. Overages are huge with the 3 telcos that offer the iPhone. Data is as much as $0.50 per MB with Rogers. Extra voice minutes can be $0.35/min. And long distance which happens a fair bit given the small local calling areas of the Big 3 Canadian carriers, is $0.35.
Or I can sign up for a new carrier called Wind for $75 per month with an HTC Maple, a Blackberry Bold 9700 or soon hopefully a Google Nexus One and unlimited voice any time of day, unlimited province wide long distance (and nationwide for only $5/mo more), cheap roaming/long distance, unlimited texting, and unlimited data (Wind throttles you after 5 GB but there's no overage fees). Now which would you pick?
So you see, it's not about ending exclusivity. It's about offering the phone with the right carriers. Or at least offering it unlocked so people can pick any carrier. And that's going to be tough for Apple since they really want the carriers to subsidize the phone and also because the carriers that do offer the best deals are rarely big national brands. They tend to be upstarts (like Wind) or regional carriers.
The reality with most of Apple's exclusive carriers has been that they've picked carriers that usually large legacy carriers that aren't really well liked. For these carriers, the iPhone is a lifeline. Problem is that, the iPhone in and of itself is rarely ever good enough to compel you to switch carriers if the iPhone carrier comes with terrible price plans, poor coverage or low speeds. Even in the US, just look at how Verizon has held up against AT&T.
Quote:
Originally Posted by mark2005
2. In the US, the iPhone rate plans are really no different in cost or length than Verizon. In other countries, YMMV.
The US maybe more an exception than the norm. Lots of places have iPhone only plans that you must get with the iPhone. For example, Rogers offers a 6 GB for $30/mo special everytime a new iPhone or other halo smartphone launches. You have to get the phone to get it and you have to sign a separate 3 year contract with a separate early cancellation fee for that.
Also, it's not that the plans are any different (you are right on this) but the fact that they tend be higher ARPU/price probably discourages users from getting an iPhone. The iPhone almost never pairs up with cheaper rateplans. There's good reasons for this (for example, carriers using it as a halo phone). But it can certainly be a deterrent to getting one.
Quote:
Originally Posted by mark2005
3. If it takes the iPhone 6 years to plateau (as it did the iPod), Apple would be happy. But the iPod addressable market was in the millions; the cell phone market is in the billions - there are 4.6 billion cellphone subscriptions worldwide (out of 6.8 billion people), people are conditioned to replace their cellphones in 2-3 years, so in time, a good percentage of them will be smartphones.
How many of those 4.6 billion cellphone subscriptions were smartphone customers? Undoubtedly Apple will capture a large share of the market but it's not going to be anything like the iPod. In Pakistan and Egypt, average revenue per user (ARPU) is US$ 6/month. How many smartphone clients do you think there are? More importantly, how many are willing to pony up for a premium device like the iPhone even if they are smartphone clients.
Apple's had phenomenal growth because they've been picking low hanging fruit till now, largely taking on the wealthiest customers in each country (and starting off mostly in developed countries) that can afford $600 phones (because contracts really aren't all that popular outside North America). They've largely stolen the customers who would pay hundreds of dollar to buy a Sony Ericsson or Nokia. But that strategy has a limit. And you'll see Apple hitting that wall in a few years....unless it's willing to chase other OEMs into the more middle prices territory. A $300 iPhone? Who knows!?
The whole Apple offers value not discounts gambit really only works in parts of the developed world. In countries where the GDP isn't as high, people are far more price sensitive than you can imagine. For most of these people the iPhone is a fashion accessory for the rich....again, that's until the price comes down. But we really don't know if Apple really intends to compete in a broader market. Maybe it's satisfied selling its stuff largely to North Americans and Western Europeans and a handful of upper class users in the developing world.
Quote:
Originally Posted by mark2005
4. If, in the future, Apple really needed to sell to those who won't pay for a 3G/4Gdata plan, Apple could go back and make 2G iPhones that have very cheap data rates.
Unlikely. 2G is very inefficient at data transmission. Carriers aren't likely to encourage customers to take on 2G handsets. They want everyone on 3G so they can shut their 2G nets down.
Also, it hardly costs Apple anything to put 3G vs. 2G on a phone. The only reason for the price difference when the iPhone 3G came out was so that Apple could differentiate from the original iPhone.
Quote:
Originally Posted by mark2005
But I think there's enough people who'll pay, that Apple won't ever go back.
It's not an option. See above.
Quote:
Originally Posted by mark2005
Just look at the adoption of home broadband in the US; even though people could pay $10 for dialup or do without, we see that over 60% of people are willing to pay $35-50 for 10-15-20Mbps speeds.
Again with the Ameri-centric analysis. Going from $10 to $35 per month is insignificant with the incomes that most Americans have. But on this front it's actually the price of the phone that matters....Going from a $200-$300 Nokia or Samsung or Sony to a $600 iPhone for a middle class Indian or Chinese or Eastern European is a much larger chunk of their income. It's an order of magnitude difference for a lot of people around the world. In India $600 could house and feed a middle class family for one to several months depending on the city you're in. Also, these folks have the habit of changing phones every year (not 2-3 years like you thought above) and selling off their phones in the secondary market. Getting a $600 iPhone every year can be an expensive proposition even if you get a decent price for your old iPhone.
Also, you can't assume that all the features you get on an American iPhone are available everywhere. Even 3G isn't available everywhere. Let alone things like Visual Voicemail. Start taking away a lot of the marquis features of an iPhone and it starts to look like you're just overpaying for what a Nokia or Sony Ericsson handset can do.
Quote:
Originally Posted by mark2005
I think the market penetration of smartphones with data plans is still less than 10% worldwide; there's still plenty of room for growth, even if full market penetration is only 30-40% (of 4.6 BILLION).
Except, as I was trying to point out, not all smartphone users are equal. The ones who would spring for and use an iPhone are a much smaller proportion of that 10% and ditto when that market goes to 30-40%.
Overall, Apple's done incredibly well for themselves in the phone business and they deserve kudos for it. I certainly find their performance admirable. However, I think it's extremely optimistic (probably due to several posters here not having exposure to life outside the US) to assume that the phenomenal growth in market share will continue unabated given the current pricing and sales/distribution structure. Their sales curve has an asymptote. We'll be seeing it in 2-3 years. The interesting question is where that limit lies and what will Apple to do to move it.
I am not talking about WAP, maybe you should take off your Apple blinkers and realise that all the Symbian based phones have browsers on them, not WAP browsers, but actual browsers.
Not true. My Nokia 5800 is a Symbian device and it comes with WAP 2.0. Of course, people usually do install other browsers. But the phones themselves don't necessarily come with full feature browsers.
Why do you care about the profit made by these companies unless you are a shareholder in one of them. If that is the case your viewpoint is worthless as your viewpoint is biased. As a consumer I do not decide to purchase an item based on who will get the most profit.
He's an Apple fanboy cheering for Apple on an Apple fan website. So what?
If his assertions weren't based in reality then you'd be right to challenge them. But why dog him for cheering Apple on?
The iPhone will plateau eventually, for the simple reason that their exclusivity deals with carriers simply limits their market potential. Not everybody wants to sign up with the Apple approved carrier because the iPhone usually comes with longer than average contracts and higher than averagre tariffs/rateplans.
That's what you wrote and what I addressed but now you write.
Quote:
Sure they can. But like I pointed out in my example for Canada, ending exclusivity doesn't always make the iPhone any more affordable.
Okay, so affordability; we don't really care about exclusivity after all. So let's address affordability.
1. The price floor for an iPhone globally is free (including the subsidy); in other words, Apple has no problem with carriers marketing an iPhone for free (with contract). In the US, the floor is $99. By itself, the handset price can't get any more affordable than free, so we have to look at the cost of the data plan.
1a. The price of an iPhone is based on two things: Apple's desire for gross margin, and what the market (including carrier subsidy) is willing to pay. The phone will keep getting cheaper to make (if features don't change); it's up to Apple whether it wants to keep selling it. In the case of the 3g, they said yes. For the 2g, they said no.
2. So the plan. Looking around the world, plan costs vary greatly - in Hong Kong, it's dirt cheap. In Canada, it's pretty expensive. The cost of labor far outweighs the cost of equipment in building out the network, so going to 3G is not triple the cost of building out the network in the first place. And even Africa and Haiti has cell phone networks, so companies/governments will do it. Now, the carriers will charge what the market will bear - in most cases, carriers will be willing to recoup their capital "build-out-the-network" investments over time, since they can charge monthly for service forever. So where do we have similar examples to see what "carriers" will do and what the market (consumers) will do?
The most obvious and applicable recent examples are wired broadband service and cellphone service. (Going back further, one could look at cable TV, or landline telephones, or even electricity.) Let's note two things first: Different countries adopt these services at different rates. And not all countries have broadly adopted wired broadband, just like some haven't even adopted PCs - most of these have gone straight to cell phones.
So the example. For the countries that have adopted broadband, the pattern of adoption has been the same. Early adopters, followed by lots of naysayers saying it will never be broadly adopted, and then gradual broad adoption over a period. In the US, go back to 2001, and you'll find plenty of analysts/forecasts saying that no one will pay that much (then $50, now $40) just to get on the Internet, especially when dial-up rates were going down to $10 (or free with the purchase of a computer.) In Feb 2001, only 6% of adult Americans. But by 2009, it was 63% of adult Americans. Even among low-income Americans, it's risen to 35%. (See www.pewinternet.org for study details.) Why did all these people do so? Because the Internet increased in value over that time.
Now look at cellphones, not smartphones. Globally cellphones have been adopted as fast or faster than any other technology, faster than PCs, faster than Internet (dialup or broadband). (Read communities-dominate.blogs.com, the blog of Tomi Ahonen, a sometimes visitor here, if you need more info on mobile.) So 60%+ (4.6b out of 6.8b, some with multiple phones) of the world's population understand the value of 24/7 voice communications (and even SMS) and are willing to pay whatever the rate is in their country to get it. (The US was a laggard at cellphone adoption, and also of SMS adoption.)
Moving on. In the US, 19% accessed the Internet from their cellphone back in Dec 2007. Two years later, 32% did (altho a good chunk using WAP over their non-smartphone!). In Europe, the forecast is that 50% of cellphones sold this year will be smartphones. When will people start buying more smartphones? When the value gained by 24/7 access to the Internet or apps is worth more than the incremental cost of adding a data plan (whatever the cost is in the country you're in). And there are lots of people increasing that value everyday, just like there was from 2001 to today (thus causing people to invest in wired broadband).
Broadband has passed 60%, but even if the smartphone adoption rate ONLY gets to 35% worldwide, that's almost 2 billion people. For comparison, there are only 1.2 billion PCs in use worldwide. Last year, there were 1.13b cellphones sold, of which 175m were smartphones. There were only 270m PCs sold. Just about everyone expects smartphones sold to pass PCs sold in a couple of years.
Because of this scale, if Apple just managed to go from 14% of smartphones today to 25% two years from now, it would increase sales from 25m to 60m a year; that would top Apple's iPod record of 55.4m in 2008 (when it held 50-70% of most major "media player markets" worldwide), and still only be 25% of a smartphone market, that itself is, at that point, only 25% of the whole cellphone market where people buy new phones every 2-3 years.
So yes, there is a ceiling but it's a long ways away. I'm not being an Apple fanboy; Apple could blow it with slow innovation and high prices. Regardless, mobile is really the new gold rush; Apple knows it, Nokia knows it, Google knows it, (Microsoft doesn't act like it knows it.)
BTW, I'm not touting anything new; the Internet is full of data and analysis and forecasts. Go read for yourself.
Okay, so affordability; we don't really care about exclusivity after all. So let's address affordability.
A whole of talk --- but everything was wrong.
Affordability has NOTHING to do with cost. Affordability is a function of supply/demand and the level of competition in the telecom industry in that country.
UK is a G7 country (high labour cost for putting up cell towers) AND the world's most insane auctioned prices for 3G licenses --- yet UK's iphone prices have been the most affordable in the G7.
The reason --- 5 national carriers in UK. The other iphone paradise is Hong Kong --- 6 wireless carriers.
All the idiotic iphone rates come from Norway (2 national carriers), Canada/France (3 national carriers).
Not true. My Nokia 5800 is a Symbian device and it comes with WAP 2.0. Of course, people usually do install other browsers. But the phones themselves don't necessarily come with full feature browsers.
It also has a full web browser, it is even in the Nokia specs, are you saying you Nokia 5800 doesn't come with the Nokia 5800 web browser?
He's an Apple fanboy cheering for Apple on an Apple fan website. So what?
If his assertions weren't based in reality then you'd be right to challenge them. But why dog him for cheering Apple on?
It is quite simple, as a consumer I value what I spend my money on, and I can't understand why someone would be happy to purchase an item based on who was going to make the most money off them, unless you get a finanical benefit from that purchase, it doesn't make any sense.
Why do you care about the profit made by these companies unless you are a shareholder in one of them. If that is the case your viewpoint is worthless as your viewpoint is biased. As a consumer I do not decide to purchase an item based on who will get the most profit.
These are business figures, which is why business indicators are worth mentioning.
The profitability of a business is what indicates whether a business is doing well or not. That is the single measure by which businesses determine success.
Unit sales are irrelevant if a company cannot translate those sales into profits.
The profits are a good indicator of how enthusiastic a product is received by its audience. But is that is not good enough, you might check out some alternative indicators...
How consumers use the device. (see online usage stats)
These are business figures, which is why business indicators are worth mentioning.
No, they are smartphone figures, that isn't restricted to businesses.
Quote:
Originally Posted by Carniphage
The profitability of a business is what indicates whether a business is doing well or not. That is the single measure by which businesses determine success.
No, it is a figure, not the single figure
Quote:
Originally Posted by Carniphage
Unit sales are irrelevant if a company cannot translate those sales into profits.
Again, both companies mentioned are making large profits off their mobile phones, one has 40% share, one has 2.2% share
Quote:
Originally Posted by Carniphage
The profits are a good indicator of how enthusiastic a product is received by its audience. But is that is not good enough, you might check out some alternative indicators...
No, far from, Apples profits combined with Apples market share indicates they are charging an excessive price for their devices and actually getting some people people to part with their money
Okay, so affordability; we don't really care about exclusivity after all. So let's address affordability.
1. The price floor for an iPhone globally is free (including the subsidy); in other words, Apple has no problem with carriers marketing an iPhone for free (with contract). In the US, the floor is $99. By itself, the handset price can't get any more affordable than free, so we have to look at the cost of the data plan.
But this is the point I have raised before. It's an entirely Ameri-centric view to think that people around the world like to sign long contracts to get a free phone. They don't. The North American way of buying phones is an exception to the global norm. There's places where carriers don't even sell handsets. You go to the electronic store and buy an unlocked phone and then go get a SIM from your carrier. So the price is not free. We have to talk about the full retail price. And that's US$600.
Quote:
Originally Posted by mark2005
1a. The price of an iPhone is based on two things: Apple's desire for gross margin, and what the market (including carrier subsidy) is willing to pay. The phone will keep getting cheaper to make (if features don't change); it's up to Apple whether it wants to keep selling it. In the case of the 3g, they said yes. For the 2g, they said no.
It's the subsidy that I am sceptical about. When the iPhone didn't have a real competitor, carriers were willing to pay the subsidy. But as competitors emerge that's going to be far less likely. Keep in mind that most iPhone users aren't Apple fanatics. They would willingly switch to a free Android or Symbian phone if the feature set was reasonably close but the price was a lot better. Apple has the app store as a differentiator. The problem however is that the app store is incredibly anglo centric (how many non-english apps are on the app store?) and even more ameri-centric (there's a lot of apps that don't even work in Canada). So the killer feature of an iPhone is really, really diminished in effectiveness outside the US. Symbian on the other hand has a history of app developers developing in local languages around the world. Apple can overcome the language barrier but it's going to take more time than most people realize.
Quote:
Originally Posted by mark2005
2. So the plan. Looking around the world, plan costs vary greatly - in Hong Kong, it's dirt cheap. In Canada, it's pretty expensive. The cost of labor far outweighs the cost of equipment in building out the network, so going to 3G is not triple the cost of building out the network in the first place. And even Africa and Haiti has cell phone networks, so companies/governments will do it. Now, the carriers will charge what the market will bear - in most cases, carriers will be willing to recoup their capital "build-out-the-network" investments over time, since they can charge monthly for service forever. So where do we have similar examples to see what "carriers" will do and what the market (consumers) will do?
Why are we debating this? Outside of the US, 3G is not that big a deal. Most of the world is moving there on its own, iphone or not. It's more efficient with data. That's why. You don't need to give carriers an incentive to go to 3G, they already have one.
Quote:
Originally Posted by mark2005
The most obvious and applicable recent examples are wired broadband service and cellphone service. (Going back further, one could look at cable TV, or landline telephones, or even electricity.) Let's note two things first: Different countries adopt these services at different rates. And not all countries have broadly adopted wired broadband, just like some haven't even adopted PCs - most of these have gone straight to cell phones.
So the example. For the countries that have adopted broadband, the pattern of adoption has been the same. Early adopters, followed by lots of naysayers saying it will never be broadly adopted, and then gradual broad adoption over a period. In the US, go back to 2001, and you'll find plenty of analysts/forecasts saying that no one will pay that much (then $50, now $40) just to get on the Internet, especially when dial-up rates were going down to $10 (or free with the purchase of a computer.) In Feb 2001, only 6% of adult Americans. But by 2009, it was 63% of adult Americans. Even among low-income Americans, it's risen to 35%. (See www.pewinternet.org for study details.) Why did all these people do so? Because the Internet increased in value over that time.
Now look at cellphones, not smartphones. Globally cellphones have been adopted as fast or faster than any other technology, faster than PCs, faster than Internet (dialup or broadband). (Read communities-dominate.blogs.com, the blog of Tomi Ahonen, a sometimes visitor here, if you need more info on mobile.) So 60%+ (4.6b out of 6.8b, some with multiple phones) of the world's population understand the value of 24/7 voice communications (and even SMS) and are willing to pay whatever the rate is in their country to get it. (The US was a laggard at cellphone adoption, and also of SMS adoption.)
Moving on. In the US, 19% accessed the Internet from their cellphone back in Dec 2007. Two years later, 32% did (altho a good chunk using WAP over their non-smartphone!). In Europe, the forecast is that 50% of cellphones sold this year will be smartphones. When will people start buying more smartphones? When the value gained by 24/7 access to the Internet or apps is worth more than the incremental cost of adding a data plan (whatever the cost is in the country you're in). And there are lots of people increasing that value everyday, just like there was from 2001 to today (thus causing people to invest in wired broadband).
Broadband has passed 60%, but even if the smartphone adoption rate ONLY gets to 35% worldwide, that's almost 2 billion people. For comparison, there are only 1.2 billion PCs in use worldwide. Last year, there were 1.13b cellphones sold, of which 175m were smartphones. There were only 270m PCs sold. Just about everyone expects smartphones sold to pass PCs sold in a couple of years.
Again, you are attempting to translate an American experience on to the global marketplace while completely ignoring the context. Do you know why cellphones are so popular in the world? The reasons are entirely different than why they are popular in the US. In the rest of the world, it's damn hard to get a landline, that's why cellphones took off. Europeans move a lot, that's why they started ditching landlines. In places like India and Africa, governments thought it far more inexpensive to put up cellular networks than build landline telecom infrastructure, so they encouraged the mass adoption of mobile phones. All these different reasons, create vastly different usage patterns on a mobile device and vastly different motivations for owning a mobile phone.
A farmer in India will use his wap browser and be happy with its performance. He's not going to care about 3G because he really doesn't browse the internet that much to begin with. For him, simply having access to the internet is an amazing thing. For this individual, upgrading to an iPhone 3G to get faster internet access is a ridiculous proposition. He's not going to spend a month's wages for a fancier phone so he can get marginally faster internet access. He's not downloading videos or streaming music. He'll be ecstatic when his telco upgrades him to a cheap 3G handset with a decent WAP browser. And believe it or not, this individual is middle class over there. He's supposed to be in the target market for an iPhone.
Quote:
Originally Posted by mark2005
Because of this scale, if Apple just managed to go from 14% of smartphones today to 25% two years from now, it would increase sales from 25m to 60m a year; that would top Apple's iPod record of 55.4m in 2008 (when it held 50-70% of most major "media player markets" worldwide), and still only be 25% of a smartphone market, that itself is, at that point, only 25% of the whole cellphone market where people buy new phones every 2-3 years.
Pent-up demand. With every new market that Apple enters, people longing to get an iphone do so. That creates the phenomenal market share they are getting. But the question is, are they going to top out at 25% as competitors come on stream and everyone who wants an iPhone ends up getting one?
Quote:
Originally Posted by mark2005
So yes, there is a ceiling but it's a long ways away. I'm not being an Apple fanboy; Apple could blow it with slow innovation and high prices. Regardless, mobile is really the new gold rush; Apple knows it, Nokia knows it, Google knows it, (Microsoft doesn't act like it knows it.)
Agreed.
Quote:
Originally Posted by mark2005
BTW, I'm not touting anything new; the Internet is full of data and analysis and forecasts. Go read for yourself.
And I suggest you travel a bit. The US really is an anomaly when it comes to consumer behaviour. The American consumer has more money than sense (so to speak). That allows for some peculiar behaviour that is more the exception than the norm, globally speaking. Companies that do well globally, understand this. I am sceptical that Apple fully understands the rest of the world well. Right now they've benefited from a captive Western audience and the jet set crowd outside the West. Can the move beyond that? Will there be Punjabi farmers selling their crops using an iPhone app someday? We'll see.
By the way, I do know what's going on globally - anecdotally thru travel, and via other experts. It's just easier to find aggregated historical data on the US or Western Europe; so documented examples flow from those, rather than just hand-waving about Asia and South America. One other point: the App Store has huge numbers of foreign apps; visit an App tracker like apptism.com and you'll see it. It is not true of Android Marketplace or Blackberry AppWorld, so Apple has a huge headstart here. And it's why I think those that say 20,000-apps-is-enough really don't know what they're talking about.
Back to your issue, which is that Apple's growth from iPhone is limited because iPhones aren't affordable, with or without subsidy, to most of the world. I think I already answered this - I took into account the Indian farmer when I said Apple could take 25% (mostly high-end) of the smartphone market, which in itself is just 35% of the whole cellphone market. The Indian farmers and lots of others like them are in the other 65%. Putting these numbers together, Apple would only have 8.8% of the whole cellphone market (good for 4th place behind Nokia, Samsung, and LG.) And the smartphone buyer is most likely of all consumers to buy a new phone every 2-3 years. (By the way, the average global cellphone user replaces their phone every 18 months.)
But let me break it down one last time. The key question is how long will it take to saturate a market [of people willing to pay $400+ (w/no subsidy) or free (w/subsidy and plan)] with smartphones? So breaking that question down, we have:
1. How big is the market for $400+ phones in countries where phones are not subsidized? (current unsubsidized price of 3G iPhone is $450, so assume Apple is willing to offer a phone at $400 in the next two years but nothing lower)
2. How big is the market for free phones in countries where phones are routinely subsidized (and the data plan is required)?
3. How often will these people replace their phones?
4. How quickly will this portion of the smartphone market grow (add new people minus existing people leaving)?
5. Will this saturation occur before Apple adds (or altogether moves on to) another profit driver?
The overall cellphone market is 4.6 billion subscriptions (maybe rising to 5 billion over the next 2-3 years). Today, smartphones are over 10% (which includes Nokia smartphones that sell for $200 unsubsidized) of the total cellphones in use. Note that smartphone sales increased 9% even in a recession year, when overall cell phone sales decreased.
I believe wireless 3G/4G data broadband (with access to the Internet and mobile apps) will become more and more valuable so that there will be 1.75 billion subscriptions (35% of 5 billion) for smartphones and service sometime in the last half of this decade. And my estimate is conservative compared to others more expert in mobile! I say this because already today there are 3.6 billion people globally who sent 4.6 trillion SMS messages, generating $113B in revenue last year; this might even include those farmers in India.
If Apple is willing to sell a $200 unsubsidized smartphone, then all 1.75 billion is in Apple's market every 2-3 years; if only a $400 unsubsidized smartphone, then just 40-50% of the 1.75 billion is in its market. 175m smartphones were sold last last, and Apple sold 25m iPhones. It's got a long way to go before it has to worry that the smartphone market is saturated. And Apple has already started on its next big thing.
In Australia phones on contract have been the norm ever since mobile phones were introduced.
It costs less now to get an iPhone on a contract than it did to get a dumb phone on a contract ten years ago.
Of course you'll always get low users who do not see the value in contracts.
I think Canada has the worst phone deals in the world, two year contracts are barely tolerable I couldn't imagine signing up for three.
Here an 8GB 3G is free on a $A49 plan, 16GB 3GS free on a $A69 plan and 32GB 3GS free on a $A129 plan.
(Conversions $42.41, $59.72 and $111.65 US).
Quoting an outright price for a handset, then saying it costs less than a phone on a contract is not a valid indicator as it assumes no usage, prepaid or pay as you go costs more here, than plan rates particularly in regard to data.
btw India has more billionaires than any other country.
1. How big is the market for $400+ phones in countries where phones are not subsidized? (current unsubsidized price of 3G iPhone is $450, so assume Apple is willing to offer a phone at $400 in the next two years but nothing lower)
You've got a good discussion going with good points on both sides and I don't want to interrupt, but just wanted to point out that the cheapes unsubsidised price here in Finland (Europe) for an iPhone 3G 8GB is 560? (760 USD) and 3GS 32 GB is 830? (1120 USD). That makes the other smartphones look quite cheap in comparison and the 400 USD seems more like N. Am price.
You've got a good discussion going with good points on both sides and I don't want to interrupt, but just wanted to point out that the cheapes unsubsidised price here in Finland (Europe) for an iPhone 3G 8GB is 560? (760 USD) and 3GS 32 GB is 830? (1120 USD). That makes the other smartphones look quite cheap in comparison and the 400 USD seems more like N. Am price.
Comments
An AWS band (1900 AND 2100) compatible iPhone would be great. It could run on T-Mo and all the new entrants here in Canada. It doesn't have to be CDMA for just Verizon.
Also, with the 700 MHz band soon to be opened up, the carriers carrying the iPhone in North America will soon be 700/1900/2100. Apple getting an iPhone on these bands could actually propel carriers to start using 3.5G (HSPA) on these bands (which would be a lot better for data).
The iPhone will plateau eventually, for the simple reason that their exclusivity deals with carriers simply limits their market potential. Not everybody wants to sign up with the Apple approved carrier because the iPhone usually comes with longer than average contracts and higher than averagre tariffs/rateplans.
The numbers are phenomenal now, because the iPhone is still a relatively new product and is still rolling out into new markets. And of course, with every new market they'll get new market share which makes their growth stats seem almost unbelievable. But sooner or later, they'll run out of new markets.
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1. Apple need not stick with exclusivity deals. See UK, France, Italy, Australia, Canada, India, Brazil, Turkey, etc
2. In the US, the iPhone rate plans are really no different in cost or length than Verizon. In other countries, YMMV.
3. If it takes the iPhone 6 years to plateau (as it did the iPod), Apple would be happy. But the iPod addressable market was in the millions; the cell phone market is in the billions - there are 4.6 billion cellphone subscriptions worldwide (out of 6.8 billion people), people are conditioned to replace their cellphones in 2-3 years, so in time, a good percentage of them will be smartphones.
4. If, in the future, Apple really needed to sell to those who won't pay for a 3G/4Gdata plan, Apple could go back and make 2G iPhones that have very cheap data rates. But I think there's enough people who'll pay, that Apple won't ever go back. Just look at the adoption of home broadband in the US; even though people could pay $10 for dialup or do without, we see that over 60% of people are willing to pay $35-50 for 10-15-20Mbps speeds. I think the market penetration of smartphones with data plans is still less than 10% worldwide; there's still plenty of room for growth, even if full market penetration is only 30-40% (of 4.6 BILLION).
How is it you're never on point. Just admit that you don't understand what marketshare is.
Go away shareholder, no one is interested in your biased viewpoint.
Yeah, they do, in an unintelligent way... not unlike every post you make. By your definition, pretty much every phone is a smartphone. WAP does not a smartphone make.
I am not talking about WAP, maybe you should take off your Apple blinkers and realise that all the Symbian based phones have browsers on them, not WAP browsers, but actual browsers.
And Apple's profit from the iPhone alone (Q3) was $1.6bn - I think Q4 was more. (My guess over 2.3$bn!)
Nokia are not losing money, but their profits are declining as their share of the top-end cellphone market is falling rapidly.
Back atcha!
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Why do you care about the profit made by these companies unless you are a shareholder in one of them. If that is the case your viewpoint is worthless as your viewpoint is biased. As a consumer I do not decide to purchase an item based on who will get the most profit.
1. Apple need not stick with exclusivity deals. See UK, France, Italy, Australia, Canada, India, Brazil, Turkey, etc
Sure they can. But like I pointed out in my example for Canada, ending exclusivity doesn't always make the iPhone any more affordable. It hasn't happened in Canada. For most people it's not the $100-$200 to get an iphone that's bothersome. It's the $50-$80 + tax that puts the phone out of reach. And that's still not the most bothersome part. Overages are huge with the 3 telcos that offer the iPhone. Data is as much as $0.50 per MB with Rogers. Extra voice minutes can be $0.35/min. And long distance which happens a fair bit given the small local calling areas of the Big 3 Canadian carriers, is $0.35.
Or I can sign up for a new carrier called Wind for $75 per month with an HTC Maple, a Blackberry Bold 9700 or soon hopefully a Google Nexus One and unlimited voice any time of day, unlimited province wide long distance (and nationwide for only $5/mo more), cheap roaming/long distance, unlimited texting, and unlimited data (Wind throttles you after 5 GB but there's no overage fees). Now which would you pick?
So you see, it's not about ending exclusivity. It's about offering the phone with the right carriers. Or at least offering it unlocked so people can pick any carrier. And that's going to be tough for Apple since they really want the carriers to subsidize the phone and also because the carriers that do offer the best deals are rarely big national brands. They tend to be upstarts (like Wind) or regional carriers.
The reality with most of Apple's exclusive carriers has been that they've picked carriers that usually large legacy carriers that aren't really well liked. For these carriers, the iPhone is a lifeline. Problem is that, the iPhone in and of itself is rarely ever good enough to compel you to switch carriers if the iPhone carrier comes with terrible price plans, poor coverage or low speeds. Even in the US, just look at how Verizon has held up against AT&T.
2. In the US, the iPhone rate plans are really no different in cost or length than Verizon. In other countries, YMMV.
The US maybe more an exception than the norm. Lots of places have iPhone only plans that you must get with the iPhone. For example, Rogers offers a 6 GB for $30/mo special everytime a new iPhone or other halo smartphone launches. You have to get the phone to get it and you have to sign a separate 3 year contract with a separate early cancellation fee for that.
Also, it's not that the plans are any different (you are right on this) but the fact that they tend be higher ARPU/price probably discourages users from getting an iPhone. The iPhone almost never pairs up with cheaper rateplans. There's good reasons for this (for example, carriers using it as a halo phone). But it can certainly be a deterrent to getting one.
3. If it takes the iPhone 6 years to plateau (as it did the iPod), Apple would be happy. But the iPod addressable market was in the millions; the cell phone market is in the billions - there are 4.6 billion cellphone subscriptions worldwide (out of 6.8 billion people), people are conditioned to replace their cellphones in 2-3 years, so in time, a good percentage of them will be smartphones.
How many of those 4.6 billion cellphone subscriptions were smartphone customers? Undoubtedly Apple will capture a large share of the market but it's not going to be anything like the iPod. In Pakistan and Egypt, average revenue per user (ARPU) is US$ 6/month. How many smartphone clients do you think there are? More importantly, how many are willing to pony up for a premium device like the iPhone even if they are smartphone clients.
Apple's had phenomenal growth because they've been picking low hanging fruit till now, largely taking on the wealthiest customers in each country (and starting off mostly in developed countries) that can afford $600 phones (because contracts really aren't all that popular outside North America). They've largely stolen the customers who would pay hundreds of dollar to buy a Sony Ericsson or Nokia. But that strategy has a limit. And you'll see Apple hitting that wall in a few years....unless it's willing to chase other OEMs into the more middle prices territory. A $300 iPhone? Who knows!?
The whole Apple offers value not discounts gambit really only works in parts of the developed world. In countries where the GDP isn't as high, people are far more price sensitive than you can imagine. For most of these people the iPhone is a fashion accessory for the rich....again, that's until the price comes down. But we really don't know if Apple really intends to compete in a broader market. Maybe it's satisfied selling its stuff largely to North Americans and Western Europeans and a handful of upper class users in the developing world.
4. If, in the future, Apple really needed to sell to those who won't pay for a 3G/4Gdata plan, Apple could go back and make 2G iPhones that have very cheap data rates.
Unlikely. 2G is very inefficient at data transmission. Carriers aren't likely to encourage customers to take on 2G handsets. They want everyone on 3G so they can shut their 2G nets down.
Also, it hardly costs Apple anything to put 3G vs. 2G on a phone. The only reason for the price difference when the iPhone 3G came out was so that Apple could differentiate from the original iPhone.
But I think there's enough people who'll pay, that Apple won't ever go back.
It's not an option. See above.
Just look at the adoption of home broadband in the US; even though people could pay $10 for dialup or do without, we see that over 60% of people are willing to pay $35-50 for 10-15-20Mbps speeds.
Again with the Ameri-centric analysis. Going from $10 to $35 per month is insignificant with the incomes that most Americans have. But on this front it's actually the price of the phone that matters....Going from a $200-$300 Nokia or Samsung or Sony to a $600 iPhone for a middle class Indian or Chinese or Eastern European is a much larger chunk of their income. It's an order of magnitude difference for a lot of people around the world. In India $600 could house and feed a middle class family for one to several months depending on the city you're in. Also, these folks have the habit of changing phones every year (not 2-3 years like you thought above) and selling off their phones in the secondary market. Getting a $600 iPhone every year can be an expensive proposition even if you get a decent price for your old iPhone.
Also, you can't assume that all the features you get on an American iPhone are available everywhere. Even 3G isn't available everywhere. Let alone things like Visual Voicemail. Start taking away a lot of the marquis features of an iPhone and it starts to look like you're just overpaying for what a Nokia or Sony Ericsson handset can do.
I think the market penetration of smartphones with data plans is still less than 10% worldwide; there's still plenty of room for growth, even if full market penetration is only 30-40% (of 4.6 BILLION).
Except, as I was trying to point out, not all smartphone users are equal. The ones who would spring for and use an iPhone are a much smaller proportion of that 10% and ditto when that market goes to 30-40%.
Overall, Apple's done incredibly well for themselves in the phone business and they deserve kudos for it. I certainly find their performance admirable. However, I think it's extremely optimistic (probably due to several posters here not having exposure to life outside the US) to assume that the phenomenal growth in market share will continue unabated given the current pricing and sales/distribution structure. Their sales curve has an asymptote. We'll be seeing it in 2-3 years. The interesting question is where that limit lies and what will Apple to do to move it.
I am not talking about WAP, maybe you should take off your Apple blinkers and realise that all the Symbian based phones have browsers on them, not WAP browsers, but actual browsers.
Not true. My Nokia 5800 is a Symbian device and it comes with WAP 2.0. Of course, people usually do install other browsers. But the phones themselves don't necessarily come with full feature browsers.
Why do you care about the profit made by these companies unless you are a shareholder in one of them. If that is the case your viewpoint is worthless as your viewpoint is biased. As a consumer I do not decide to purchase an item based on who will get the most profit.
He's an Apple fanboy cheering for Apple on an Apple fan website. So what?
If his assertions weren't based in reality then you'd be right to challenge them. But why dog him for cheering Apple on?
The iPhone will plateau eventually, for the simple reason that their exclusivity deals with carriers simply limits their market potential. Not everybody wants to sign up with the Apple approved carrier because the iPhone usually comes with longer than average contracts and higher than averagre tariffs/rateplans.
That's what you wrote and what I addressed but now you write.
Sure they can. But like I pointed out in my example for Canada, ending exclusivity doesn't always make the iPhone any more affordable.
Okay, so affordability; we don't really care about exclusivity after all. So let's address affordability.
1. The price floor for an iPhone globally is free (including the subsidy); in other words, Apple has no problem with carriers marketing an iPhone for free (with contract). In the US, the floor is $99. By itself, the handset price can't get any more affordable than free, so we have to look at the cost of the data plan.
1a. The price of an iPhone is based on two things: Apple's desire for gross margin, and what the market (including carrier subsidy) is willing to pay. The phone will keep getting cheaper to make (if features don't change); it's up to Apple whether it wants to keep selling it. In the case of the 3g, they said yes. For the 2g, they said no.
2. So the plan. Looking around the world, plan costs vary greatly - in Hong Kong, it's dirt cheap. In Canada, it's pretty expensive. The cost of labor far outweighs the cost of equipment in building out the network, so going to 3G is not triple the cost of building out the network in the first place. And even Africa and Haiti has cell phone networks, so companies/governments will do it. Now, the carriers will charge what the market will bear - in most cases, carriers will be willing to recoup their capital "build-out-the-network" investments over time, since they can charge monthly for service forever. So where do we have similar examples to see what "carriers" will do and what the market (consumers) will do?
The most obvious and applicable recent examples are wired broadband service and cellphone service. (Going back further, one could look at cable TV, or landline telephones, or even electricity.) Let's note two things first: Different countries adopt these services at different rates. And not all countries have broadly adopted wired broadband, just like some haven't even adopted PCs - most of these have gone straight to cell phones.
So the example. For the countries that have adopted broadband, the pattern of adoption has been the same. Early adopters, followed by lots of naysayers saying it will never be broadly adopted, and then gradual broad adoption over a period. In the US, go back to 2001, and you'll find plenty of analysts/forecasts saying that no one will pay that much (then $50, now $40) just to get on the Internet, especially when dial-up rates were going down to $10 (or free with the purchase of a computer.) In Feb 2001, only 6% of adult Americans. But by 2009, it was 63% of adult Americans. Even among low-income Americans, it's risen to 35%. (See www.pewinternet.org for study details.) Why did all these people do so? Because the Internet increased in value over that time.
Now look at cellphones, not smartphones. Globally cellphones have been adopted as fast or faster than any other technology, faster than PCs, faster than Internet (dialup or broadband). (Read communities-dominate.blogs.com, the blog of Tomi Ahonen, a sometimes visitor here, if you need more info on mobile.) So 60%+ (4.6b out of 6.8b, some with multiple phones) of the world's population understand the value of 24/7 voice communications (and even SMS) and are willing to pay whatever the rate is in their country to get it. (The US was a laggard at cellphone adoption, and also of SMS adoption.)
Moving on. In the US, 19% accessed the Internet from their cellphone back in Dec 2007. Two years later, 32% did (altho a good chunk using WAP over their non-smartphone!). In Europe, the forecast is that 50% of cellphones sold this year will be smartphones. When will people start buying more smartphones? When the value gained by 24/7 access to the Internet or apps is worth more than the incremental cost of adding a data plan (whatever the cost is in the country you're in). And there are lots of people increasing that value everyday, just like there was from 2001 to today (thus causing people to invest in wired broadband).
Broadband has passed 60%, but even if the smartphone adoption rate ONLY gets to 35% worldwide, that's almost 2 billion people. For comparison, there are only 1.2 billion PCs in use worldwide. Last year, there were 1.13b cellphones sold, of which 175m were smartphones. There were only 270m PCs sold. Just about everyone expects smartphones sold to pass PCs sold in a couple of years.
Because of this scale, if Apple just managed to go from 14% of smartphones today to 25% two years from now, it would increase sales from 25m to 60m a year; that would top Apple's iPod record of 55.4m in 2008 (when it held 50-70% of most major "media player markets" worldwide), and still only be 25% of a smartphone market, that itself is, at that point, only 25% of the whole cellphone market where people buy new phones every 2-3 years.
So yes, there is a ceiling but it's a long ways away. I'm not being an Apple fanboy; Apple could blow it with slow innovation and high prices. Regardless, mobile is really the new gold rush; Apple knows it, Nokia knows it, Google knows it, (Microsoft doesn't act like it knows it.)
BTW, I'm not touting anything new; the Internet is full of data and analysis and forecasts. Go read for yourself.
Okay, so affordability; we don't really care about exclusivity after all. So let's address affordability.
A whole of talk --- but everything was wrong.
Affordability has NOTHING to do with cost. Affordability is a function of supply/demand and the level of competition in the telecom industry in that country.
UK is a G7 country (high labour cost for putting up cell towers) AND the world's most insane auctioned prices for 3G licenses --- yet UK's iphone prices have been the most affordable in the G7.
The reason --- 5 national carriers in UK. The other iphone paradise is Hong Kong --- 6 wireless carriers.
All the idiotic iphone rates come from Norway (2 national carriers), Canada/France (3 national carriers).
Not true. My Nokia 5800 is a Symbian device and it comes with WAP 2.0. Of course, people usually do install other browsers. But the phones themselves don't necessarily come with full feature browsers.
It also has a full web browser, it is even in the Nokia specs, are you saying you Nokia 5800 doesn't come with the Nokia 5800 web browser?
He's an Apple fanboy cheering for Apple on an Apple fan website. So what?
If his assertions weren't based in reality then you'd be right to challenge them. But why dog him for cheering Apple on?
It is quite simple, as a consumer I value what I spend my money on, and I can't understand why someone would be happy to purchase an item based on who was going to make the most money off them, unless you get a finanical benefit from that purchase, it doesn't make any sense.
Why do you care about the profit made by these companies unless you are a shareholder in one of them. If that is the case your viewpoint is worthless as your viewpoint is biased. As a consumer I do not decide to purchase an item based on who will get the most profit.
These are business figures, which is why business indicators are worth mentioning.
The profitability of a business is what indicates whether a business is doing well or not. That is the single measure by which businesses determine success.
Unit sales are irrelevant if a company cannot translate those sales into profits.
The profits are a good indicator of how enthusiastic a product is received by its audience. But is that is not good enough, you might check out some alternative indicators...
How consumers use the device. (see online usage stats)
http://www.iphonestalk.com/google-wo...et-usage-rate/
How consumers report their satisfaction. (see customer satisfaction figures)
http://www.macworld.com/article/1432...er_iphone.html
C.
These are business figures, which is why business indicators are worth mentioning.
No, they are smartphone figures, that isn't restricted to businesses.
The profitability of a business is what indicates whether a business is doing well or not. That is the single measure by which businesses determine success.
No, it is a figure, not the single figure
Unit sales are irrelevant if a company cannot translate those sales into profits.
Again, both companies mentioned are making large profits off their mobile phones, one has 40% share, one has 2.2% share
The profits are a good indicator of how enthusiastic a product is received by its audience. But is that is not good enough, you might check out some alternative indicators...
No, far from, Apples profits combined with Apples market share indicates they are charging an excessive price for their devices and actually getting some people people to part with their money
Okay, so affordability; we don't really care about exclusivity after all. So let's address affordability.
1. The price floor for an iPhone globally is free (including the subsidy); in other words, Apple has no problem with carriers marketing an iPhone for free (with contract). In the US, the floor is $99. By itself, the handset price can't get any more affordable than free, so we have to look at the cost of the data plan.
But this is the point I have raised before. It's an entirely Ameri-centric view to think that people around the world like to sign long contracts to get a free phone. They don't. The North American way of buying phones is an exception to the global norm. There's places where carriers don't even sell handsets. You go to the electronic store and buy an unlocked phone and then go get a SIM from your carrier. So the price is not free. We have to talk about the full retail price. And that's US$600.
1a. The price of an iPhone is based on two things: Apple's desire for gross margin, and what the market (including carrier subsidy) is willing to pay. The phone will keep getting cheaper to make (if features don't change); it's up to Apple whether it wants to keep selling it. In the case of the 3g, they said yes. For the 2g, they said no.
It's the subsidy that I am sceptical about. When the iPhone didn't have a real competitor, carriers were willing to pay the subsidy. But as competitors emerge that's going to be far less likely. Keep in mind that most iPhone users aren't Apple fanatics. They would willingly switch to a free Android or Symbian phone if the feature set was reasonably close but the price was a lot better. Apple has the app store as a differentiator. The problem however is that the app store is incredibly anglo centric (how many non-english apps are on the app store?) and even more ameri-centric (there's a lot of apps that don't even work in Canada). So the killer feature of an iPhone is really, really diminished in effectiveness outside the US. Symbian on the other hand has a history of app developers developing in local languages around the world. Apple can overcome the language barrier but it's going to take more time than most people realize.
2. So the plan. Looking around the world, plan costs vary greatly - in Hong Kong, it's dirt cheap. In Canada, it's pretty expensive. The cost of labor far outweighs the cost of equipment in building out the network, so going to 3G is not triple the cost of building out the network in the first place. And even Africa and Haiti has cell phone networks, so companies/governments will do it. Now, the carriers will charge what the market will bear - in most cases, carriers will be willing to recoup their capital "build-out-the-network" investments over time, since they can charge monthly for service forever. So where do we have similar examples to see what "carriers" will do and what the market (consumers) will do?
Why are we debating this? Outside of the US, 3G is not that big a deal. Most of the world is moving there on its own, iphone or not. It's more efficient with data. That's why. You don't need to give carriers an incentive to go to 3G, they already have one.
The most obvious and applicable recent examples are wired broadband service and cellphone service. (Going back further, one could look at cable TV, or landline telephones, or even electricity.) Let's note two things first: Different countries adopt these services at different rates. And not all countries have broadly adopted wired broadband, just like some haven't even adopted PCs - most of these have gone straight to cell phones.
So the example. For the countries that have adopted broadband, the pattern of adoption has been the same. Early adopters, followed by lots of naysayers saying it will never be broadly adopted, and then gradual broad adoption over a period. In the US, go back to 2001, and you'll find plenty of analysts/forecasts saying that no one will pay that much (then $50, now $40) just to get on the Internet, especially when dial-up rates were going down to $10 (or free with the purchase of a computer.) In Feb 2001, only 6% of adult Americans. But by 2009, it was 63% of adult Americans. Even among low-income Americans, it's risen to 35%. (See www.pewinternet.org for study details.) Why did all these people do so? Because the Internet increased in value over that time.
Now look at cellphones, not smartphones. Globally cellphones have been adopted as fast or faster than any other technology, faster than PCs, faster than Internet (dialup or broadband). (Read communities-dominate.blogs.com, the blog of Tomi Ahonen, a sometimes visitor here, if you need more info on mobile.) So 60%+ (4.6b out of 6.8b, some with multiple phones) of the world's population understand the value of 24/7 voice communications (and even SMS) and are willing to pay whatever the rate is in their country to get it. (The US was a laggard at cellphone adoption, and also of SMS adoption.)
Moving on. In the US, 19% accessed the Internet from their cellphone back in Dec 2007. Two years later, 32% did (altho a good chunk using WAP over their non-smartphone!). In Europe, the forecast is that 50% of cellphones sold this year will be smartphones. When will people start buying more smartphones? When the value gained by 24/7 access to the Internet or apps is worth more than the incremental cost of adding a data plan (whatever the cost is in the country you're in). And there are lots of people increasing that value everyday, just like there was from 2001 to today (thus causing people to invest in wired broadband).
Broadband has passed 60%, but even if the smartphone adoption rate ONLY gets to 35% worldwide, that's almost 2 billion people. For comparison, there are only 1.2 billion PCs in use worldwide. Last year, there were 1.13b cellphones sold, of which 175m were smartphones. There were only 270m PCs sold. Just about everyone expects smartphones sold to pass PCs sold in a couple of years.
Again, you are attempting to translate an American experience on to the global marketplace while completely ignoring the context. Do you know why cellphones are so popular in the world? The reasons are entirely different than why they are popular in the US. In the rest of the world, it's damn hard to get a landline, that's why cellphones took off. Europeans move a lot, that's why they started ditching landlines. In places like India and Africa, governments thought it far more inexpensive to put up cellular networks than build landline telecom infrastructure, so they encouraged the mass adoption of mobile phones. All these different reasons, create vastly different usage patterns on a mobile device and vastly different motivations for owning a mobile phone.
A farmer in India will use his wap browser and be happy with its performance. He's not going to care about 3G because he really doesn't browse the internet that much to begin with. For him, simply having access to the internet is an amazing thing. For this individual, upgrading to an iPhone 3G to get faster internet access is a ridiculous proposition. He's not going to spend a month's wages for a fancier phone so he can get marginally faster internet access. He's not downloading videos or streaming music. He'll be ecstatic when his telco upgrades him to a cheap 3G handset with a decent WAP browser. And believe it or not, this individual is middle class over there. He's supposed to be in the target market for an iPhone.
Because of this scale, if Apple just managed to go from 14% of smartphones today to 25% two years from now, it would increase sales from 25m to 60m a year; that would top Apple's iPod record of 55.4m in 2008 (when it held 50-70% of most major "media player markets" worldwide), and still only be 25% of a smartphone market, that itself is, at that point, only 25% of the whole cellphone market where people buy new phones every 2-3 years.
Pent-up demand. With every new market that Apple enters, people longing to get an iphone do so. That creates the phenomenal market share they are getting. But the question is, are they going to top out at 25% as competitors come on stream and everyone who wants an iPhone ends up getting one?
So yes, there is a ceiling but it's a long ways away. I'm not being an Apple fanboy; Apple could blow it with slow innovation and high prices. Regardless, mobile is really the new gold rush; Apple knows it, Nokia knows it, Google knows it, (Microsoft doesn't act like it knows it.)
Agreed.
BTW, I'm not touting anything new; the Internet is full of data and analysis and forecasts. Go read for yourself.
And I suggest you travel a bit. The US really is an anomaly when it comes to consumer behaviour. The American consumer has more money than sense (so to speak). That allows for some peculiar behaviour that is more the exception than the norm, globally speaking. Companies that do well globally, understand this. I am sceptical that Apple fully understands the rest of the world well. Right now they've benefited from a captive Western audience and the jet set crowd outside the West. Can the move beyond that? Will there be Punjabi farmers selling their crops using an iPhone app someday? We'll see.
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By the way, I do know what's going on globally - anecdotally thru travel, and via other experts. It's just easier to find aggregated historical data on the US or Western Europe; so documented examples flow from those, rather than just hand-waving about Asia and South America. One other point: the App Store has huge numbers of foreign apps; visit an App tracker like apptism.com and you'll see it. It is not true of Android Marketplace or Blackberry AppWorld, so Apple has a huge headstart here. And it's why I think those that say 20,000-apps-is-enough really don't know what they're talking about.
Back to your issue, which is that Apple's growth from iPhone is limited because iPhones aren't affordable, with or without subsidy, to most of the world. I think I already answered this - I took into account the Indian farmer when I said Apple could take 25% (mostly high-end) of the smartphone market, which in itself is just 35% of the whole cellphone market. The Indian farmers and lots of others like them are in the other 65%. Putting these numbers together, Apple would only have 8.8% of the whole cellphone market (good for 4th place behind Nokia, Samsung, and LG.) And the smartphone buyer is most likely of all consumers to buy a new phone every 2-3 years. (By the way, the average global cellphone user replaces their phone every 18 months.)
But let me break it down one last time. The key question is how long will it take to saturate a market [of people willing to pay $400+ (w/no subsidy) or free (w/subsidy and plan)] with smartphones? So breaking that question down, we have:
1. How big is the market for $400+ phones in countries where phones are not subsidized? (current unsubsidized price of 3G iPhone is $450, so assume Apple is willing to offer a phone at $400 in the next two years but nothing lower)
2. How big is the market for free phones in countries where phones are routinely subsidized (and the data plan is required)?
3. How often will these people replace their phones?
4. How quickly will this portion of the smartphone market grow (add new people minus existing people leaving)?
5. Will this saturation occur before Apple adds (or altogether moves on to) another profit driver?
The overall cellphone market is 4.6 billion subscriptions (maybe rising to 5 billion over the next 2-3 years). Today, smartphones are over 10% (which includes Nokia smartphones that sell for $200 unsubsidized) of the total cellphones in use. Note that smartphone sales increased 9% even in a recession year, when overall cell phone sales decreased.
I believe wireless 3G/4G data broadband (with access to the Internet and mobile apps) will become more and more valuable so that there will be 1.75 billion subscriptions (35% of 5 billion) for smartphones and service sometime in the last half of this decade. And my estimate is conservative compared to others more expert in mobile! I say this because already today there are 3.6 billion people globally who sent 4.6 trillion SMS messages, generating $113B in revenue last year; this might even include those farmers in India.
If Apple is willing to sell a $200 unsubsidized smartphone, then all 1.75 billion is in Apple's market every 2-3 years; if only a $400 unsubsidized smartphone, then just 40-50% of the 1.75 billion is in its market. 175m smartphones were sold last last, and Apple sold 25m iPhones. It's got a long way to go before it has to worry that the smartphone market is saturated. And Apple has already started on its next big thing.
It costs less now to get an iPhone on a contract than it did to get a dumb phone on a contract ten years ago.
Of course you'll always get low users who do not see the value in contracts.
I think Canada has the worst phone deals in the world, two year contracts are barely tolerable I couldn't imagine signing up for three.
Here an 8GB 3G is free on a $A49 plan, 16GB 3GS free on a $A69 plan and 32GB 3GS free on a $A129 plan.
(Conversions $42.41, $59.72 and $111.65 US).
Quoting an outright price for a handset, then saying it costs less than a phone on a contract is not a valid indicator as it assumes no usage, prepaid or pay as you go costs more here, than plan rates particularly in regard to data.
btw India has more billionaires than any other country.
Or, perhaps more correctly, the kind of technology that a minority of people (14% or so) enjoy using...
14% and growing...
and don't forget the legions of existing iPod Touch users.
1. How big is the market for $400+ phones in countries where phones are not subsidized? (current unsubsidized price of 3G iPhone is $450, so assume Apple is willing to offer a phone at $400 in the next two years but nothing lower)
You've got a good discussion going with good points on both sides and I don't want to interrupt, but just wanted to point out that the cheapes unsubsidised price here in Finland (Europe) for an iPhone 3G 8GB is 560? (760 USD) and 3GS 32 GB is 830? (1120 USD). That makes the other smartphones look quite cheap in comparison and the 400 USD seems more like N. Am price.
Regs, Jarkko
A SonyEricsson Satio is $A899.
These are RRP you can shop around for lower prices.
They are exactly the same price (free) on exactly the same plans.
Wouldn't the 16GB 3GS be about the same price on a plan as the Nokia X6, N97 Mini or N97?
Hey, where's the N900?
You've got a good discussion going with good points on both sides and I don't want to interrupt, but just wanted to point out that the cheapes unsubsidised price here in Finland (Europe) for an iPhone 3G 8GB is 560? (760 USD) and 3GS 32 GB is 830? (1120 USD). That makes the other smartphones look quite cheap in comparison and the 400 USD seems more like N. Am price.
Regs, Jarkko
Again, both companies mentioned are making large profits off their mobile phones, one has 40% share, one has 2.2% share
So why is Nokia making less profits that Apple?
I don't suppose that has anything to do with the desirability of their products?
C.