Market shares collapse with 'brutal speed' in cyclical smartphone industry

Posted:
in iPhone edited January 2014
A closer look at market shares in the highly competitive smartphone industry shows sales trends can be reversed in an instant, and companies that once dominated could quickly find themselves on the verge of collapse.

In the December quarter, Apple's iPhone captured 20.9 percent of the smartphone market, up from 13.9 percent in June. It was the launch of the iPhone 5 that caused Google's fast growing Android to reverse and actually lose market share at the end of 2012.

Needham


That led analyst Charlie Wolf of Needham & Company to ask on Monday why smartphone market shares can collapse with "such brutal speed." While Android has grown and dominated platform market share, only Apple has been able to hold its 20 percent share. Meanwhile, previously dominant platforms like BlackBerry, Nokia's Symbian and Microsoft's Windows Phone have become minor players.

The most important reason for these changes, Wolf believes, is the fact that carriers have "exceptional influence" on the phones customers buy. He said this strategy has worked particularly well for Android, because Google offers carriers and their retail staff incentives to push the brand.

"If the carrier decides to punish or simply ignore a brand, it can rapidly die, as we've seen in the case of BlackBerry and Nokia," Wolf wrote.

Another key factor in a sometimes chaotic market is the fact that many smartphone users replace their handset every year or two years. In comparison, PC owners typically keep their investment for four years, while TV sets last seven years or longer.

In addition to more opportunities for customers to switch brands, those brands are not "protected" when they are sold in carrier stores, where all products are essentially sold side by side. The only major vendor that has a means to prevent this is Apple, which sells iPhones through its own retail stores.
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Comments

  • Reply 1 of 66


    This is news!? Trotted off as insight?

  • Reply 2 of 66
    tallest skiltallest skil Posts: 43,399member


    I like this post because it reverses the trend as of late to post information about competitors that isn't disparaging.


     


    And it's actually pretty subtle about what it says, so that's nice.





    Originally Posted by AppleInsider View Post

    The most important reason for these changes, Wolf believes, is the fact that carriers have "exceptional influence" on the phones customers buy. He said this strategy has worked particularly well for Android, because Google offers carriers and their retail staff incentives to push the brand.


     


    And so, uh, there's… not gonna be any sort of, uh… inquiry into this, is there? image


     


    So who's lying? The telecom employees who said they don't get anything for pushing Android or this guy who says they do?

  • Reply 3 of 66
    emig647emig647 Posts: 2,396member


    I'd love to know more about this. Seems carrier employees do push Android on people that come in for iPhones quite a bit. I just figured they were fandroids, perhaps I assumed incorrectly ;p

  • Reply 4 of 66
    mstonemstone Posts: 11,510member


    That chart is scary looking. I think it is important to understand that a chart showing sales of iPhone verses Galaxy S(x) would look substantially different. Anyone who was considering an iPhone in comparison to an Android phone would perhaps consider the Galaxy S as the only other suitable choice.


     


    The chart above is out of balance with all low end crappy Android devices not just the other premium device that could compete with iPhone.

  • Reply 5 of 66
    haarhaar Posts: 563member
    ohhhh, beware apple shares could drop at any moment!!!..
    . apple is doomed! i say! doooooommmmmmmed.. /Facetiousness

    ....and yes this Isn't news with respect to Apple, because Apple shares stay the same , unless of course you are stockbroker shorting the stock, to suck out some more wealth by making sure that the stock is around 400 dollars...
  • Reply 6 of 66
    blastdoorblastdoor Posts: 1,884member
    I think it might be more accurate to say that the carriers can greatly magnify/accelerate the rise and fall of a smartphone (or any phone). That is, Blackberry and Nokia didn't crash and burn because the carriers woke up one day and decided they just didn't like those guys. They crashed and burned because their products were not keeping up with the competition. The carriers can accelerate a decline (or rise) because of their large volume purchases.

    One other thought -- it really does seem that there are two markets here. One is a market for mobile computers that happen to have a cellular radio. I think that's the market that iOS, Windows Phone, and *some* Android products compete in. Then there's the market for super feature phones, which is what Symbian was and some Android phones are.

    I think a mistake that some investor types make is to presume that Apple is competing in the highly fickle phone market rather than competing in the much more stable computer platform market. That would explain the low P/E that Apple has traded around since the iPhone became the driver of earnings -- investors are imagining that these profits could disappear tomorrow. They imagine that customers could change mobile computing platform as easily as they change toothpaste brand. (I think those folks are wrong).
  • Reply 7 of 66
    tzeshantzeshan Posts: 1,801member
    Yes, there are huge differences in sales model between Apple and the carriers. Inside a carrier store the customer is presented with a huge array of phones. But most of the phones can not be played. Some will display promotional video on them. So essentially the customer has no idea of which phone to choose. The customer has to rely on the sales representative in the store. What is the most effective sales pitch for the sales rep.? Price!

    Apple is completely different. Apple is completely honest. The customer can play with the products. The customer can ask all kinds of questions and they will be answered by professional staffs.

    Note, this looks like a sales pitch. However, I do not work for Apple. I am just a long time Apple products user.
  • Reply 8 of 66
    umrk_labumrk_lab Posts: 550member


    Illustration of this for the Windows Phones is still to be documented ....

  • Reply 9 of 66
    solipsismxsolipsismx Posts: 19,566member
    1) It's funny how some jack off troll in a previous thread yesterday was saying how Apple was losing marketshare to a few select Android vendors. I'm sure he'll be back once the iPhone 5 reaches EOL.

    2) These things only ever gauge "first sale," to use that term lightly, but I see iPhones have a long life after they stop being used by their initial owner. It would be interesting to see how many are actually being used as opposed to just sales of new devices. This might account for the excessively high iPhone activations on Verizon and AT&T.
  • Reply 10 of 66
    jragostajragosta Posts: 10,473member
    A closer look at market shares in the highly competitive smartphone industry shows sales trends can be reversed in an instant, and companies that once dominated could quickly find themselves on the verge of collapse.

    In the December quarter, Apple's iPhone captured 20.9 percent of the smartphone market, up from 13.9 percent in June. It was the launch of the iPhone 5 that caused Google's fast growing Android to reverse and actually lose market share at the end of 2012.

    <div align="center"><img src="http://photos.appleinsidercdn.com/needham-130318.jpg" border="0" width="600" height="395" alt="Needham" /></div>

    That led analyst Charlie Wolf of Needham & Company to ask on Monday why smartphone market shares can collapse with "such brutal speed." While Android has grown and dominated platform market share, only Apple has been able to hold its 20 percent share. Meanwhile, previously dominant platforms like BlackBerry, Nokia's Symbian and Microsoft's Windows Phone have become minor players.
    .

    Classic misinterpretation of the data.

    First, look at every line except Apple and Android. The changes are smooth and consistent. The market itself doesn't change that quickly.

    There are only 2 data points where Apple changed quickly - the release of the iPhone 4S and the iPhone 5. In both cases, their share dropped a bit in the quarter before the release and then jumped after the product release. If you smooth those two points, you see that there are no drastic changes.

    Android, of course, does just the opposite of what Apple does. In the months when Apple's customers are holding off their purchases, Android's share looks higher. When Apple gets a surge of orders from their new product, Android's share drops.

    In the end, there's nothing in this market that's unusual - except that the dominant player only has a single (major) product and updates the product relatively infrequently. So the conclusion should be "Apple sales drop before new product launch and jump after new product launch." Hardly news to anyone.

    Other than that, everything is a smooth, obvious trend.
  • Reply 11 of 66
    Imagine what this would look like if Apple did not have Google on the board and Google have such a head start on the OS?

    Would Google still be where it is today, or playing catchup?

  • Reply 12 of 66
    tallest skiltallest skil Posts: 43,399member


    Originally Posted by jragosta View Post

    Classic misinterpretation of the data.



    First, look at every line except Apple and Android. The changes are smooth and consistent. The market itself doesn't change that quickly.


     


    I think one of the problems here is that the chart starts in 2009. It ought to start pre-iPhone.

  • Reply 13 of 66
    jungmarkjungmark Posts: 6,573member
    Notice Apple never was #1. All those stories that Android has knocked off iOS from the top is pure bunk.
  • Reply 14 of 66

    Quote:

    Originally Posted by jragosta View Post





    Classic misinterpretation of the data.



    First, look at every line except Apple and Android. The changes are smooth and consistent. The market itself doesn't change that quickly.



    There are only 2 data points where Apple changed quickly - the release of the iPhone 4S and the iPhone 5. In both cases, their share dropped a bit in the quarter before the release and then jumped after the product release. If you smooth those two points, you see that there are no drastic changes.



    Android, of course, does just the opposite of what Apple does. In the months when Apple's customers are holding off their purchases, Android's share looks higher. When Apple gets a surge of orders from their new product, Android's share drops.



    In the end, there's nothing in this market that's unusual - except that the dominant player only has a single (major) product and updates the product relatively infrequently. So the conclusion should be "Apple sales drop before new product launch and jump after new product launch." Hardly news to anyone.



    Other than that, everything is a smooth, obvious trend.


     


     


    I disagree on the issue with a smooth downtrend, and you can't include March. 


     


    Android is more consistent as it has more phones that launch a new OS at different times. I also think Apple buyers are more aware to upgrades if not directly, the know a fanboy that is telling them to hold off. 

  • Reply 15 of 66
    philboogiephilboogie Posts: 7,430member
    Why is the year 2014 in that MarketShare graph?

    The graph itself is already blurry, rMBP users care to comment on what they see, if anything? Possibly the same as these analysts; blur.
  • Reply 16 of 66
    mstonemstone Posts: 11,510member

    Quote:

    Originally Posted by Tallest Skil View Post


    I think one of the problems here is that the chart starts in 2009. It ought to start pre-iPhone.



    That would be a different chart indeed but this chart is about Android's rapid adoption which is why it starts when Android was introduced.

  • Reply 17 of 66
    I read awhile back that Google gives the carriers a tiny kickback from the ad revenue earned on Android phones. While the amount was pretty small at the time, under $10 million, its more than enough to cover Verizon/AT&T CEOs and VPs bonus checks.

    Mobiles Phone stores' salemen are like used car salesmen, except they are teenagers, with even lower ethical standards.

    I say that as some who's good friend managed a Verizon store for 5 years, from the stories he told me.
  • Reply 18 of 66
    tallest skiltallest skil Posts: 43,399member


    Originally Posted by mstone View Post

    That would be a different chart indeed but this chart is about Android's rapid adoption which is why it starts when Android was introduced.




    Still, it would be nice to put the declines of other companies into perspective in that regard. Who was hurt most by Apple and Android and how sharply were they hurt.

  • Reply 19 of 66
    mstonemstone Posts: 11,510member

    Quote:

    Originally Posted by PhilBoogie View Post



    Why is the year 2014 in that MarketShare graph?



    The graph itself is already blurry, rMBP users care to comment on what they see, if anything? Possibly the same as these analysts; blur.


    2012/4 means 4th quarter of 2012. You are right it is blurry.

  • Reply 20 of 66
    matrix07matrix07 Posts: 1,993member


    The chart above supports Gruber's argument against Reuter article. Here is what Reuter wrote (as fact):


    "The marketing chief’s rare attack on a rival, on the eve of the Galaxy S4’s global premier in New York, underscores the extent of the pressure piled upon a company that once stood the undisputed leader of the smartphone arena, but ceded its crown to Samsung in 2012."


     


    For which Gruber argued, intelligently:


    "..developed three bad assumptions:


    1. Apple’s lack of serious competition would, or at least might, result in an overwhelming market share advantage for the iPhone...


     


    ...Assumption #1 is bad because the iPhone never had a market share lead, or even close to one, whether you count only “smartphones” (where the iPhone sits around 20 percent worldwide) or all phone handsets (where the iPhone, as a premium product being compared to $20 candybar dumb phones, has never had more than single-digit market share)."


     



     


    In essence, Reuter never do their homework while Gruber did.

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