Apple only needs to provide phones at the upper mid market and lower end of the top market to favor those "lets now try Apple" people. Apple knows that's once these people are in, there is a more than 50% chance that those switchers won't leave, that's all it takes to built the use base and steal Androids best clients.
Getting the best clients at the high end, and slowly but surely at the higher end of the mid-range (with the likes of the SE) means everybody else is starving in a down market and in house R&D takes a hit forcing everyone to sell essentially small variants of the same phone with no hopes of competing except on price.
This is exactly what myself and @avon b7 are arguing with @tmay for quite some time, i.e. Apple should look for expanding its user base in upper mid-range ($300 to $600, Avon calls this segment as affordable premium) segment instead of just focusing on "Flagship" segment (>$600) alone.
I've had a long running battle with one of AI's non-iphone using members,over a focus on maintaining ASP vs targeting unit growth. Neil's post enlightened me on the value of ASP; if you are in a declining market, generate a lot of revenue and pump it into the next great thing. Don't put too much effort in gaining new users that won't use a lot of services, or buy much in the ecosystem. Do more for your user base.
Make it two, including me, apart from @Avon b7. The problem with the argument "generate a lot of revenue and pump it into the next great thing" is - There is no great thing to be seen for next few years. Until that happens, Apple should focus on expanding in the upper mid-range segment as well.
No great thing?
Maybe not the same scale as smartphones, or iPod's, but Apple is already dominating revenues for, notebooks, tablets, wearables, wireless earphones, and likely by next year, smart speakers, not to mention the growth in services. While Samsung and Huawei are fighting over marketshare, at less than a third of the ASP of Apple, Apple is scooping up the bulk of the revenues, and forcing Android OS device makers to fight over what is left. I don't know what the future holds for Apple, and neither do you and Avon b7, but it will likely be much better with massive revenues today, than not.
So, no, it doesn't make sense to "focus" on expanding the upper mid-range segment; it makes financial sense for Apple to focus on keeping its user base happy in the Apple ecosystem. If that strategy includes knocking $50 off the SE in the future, essentially a $299.00 SE, then all of us, Avon b7, and I should be quite happy with the strategy. But I don't expect much more than that, and wrt India, neither you nor I have a clue what Apple will do their specifically, but I'm certain that Apple won't be buying marketshare.
BTW, Avon b7 isn't ever going to buy an iPhone in the future, no matter the price and configuration; that's almost a certainty, so why would I or anyone else want to even consider his failed advice?
Ok. I will give some advice. If you want people to understand the idea you are putting forward, don't link to a DED article to support your stance. Here's why:
They are skewed at birth.
So, I'm guessing that you skipped that article because it violated your worldview?
Facts are biased.
No. I skipped it because I knew it would be skewed.
Facts are biased? Isn't it the people that use them that are biased? Doesn't bias in this context involve judgement and reasoning? How can a fact judge or reason anything?
I posted the source material, untainted by DED, and you still refuse to look at it.
That's your bias against the facts.
Sorry. I'm not seeing it. The only links I'm seeing are the DED one, save for a South China Morning Post article you linked to after I had already replied to you a few times. You threw it in with a 'BTW'. Was that the source of the DED article? He must be struggling, LOL.
I read the article, what am I supposed to be seeing with regards to anything I've posted.
Good for you
So I'm guessing that you would agree that the worldwide market for smartphones sales is diminishing, and Chinese manufacturers will be consolidating/going out of the business.
Hang on. Was that article the source of the DED piece or not?
As for a diminishing marketing for smartphones worldwide, I've always tried to simplify somewhat and said that the 'developed' markets had hit saturation point but that the big players (Apple included) were looking to the 'developing' markets for growth.
It is not unreasonable to see those markets following what has already happened in the developed markets: a progression from feature phones to smartphones. That transition obviously won't be as smooth as in the developed markets and obviously infrastructure and price are two key factors that need to be taken into account. There are others such as political stability etc.
Let's take Latin America as an example. Huawei is gearing up to give it some attention. Nothing really newsworthy as they have been very open about their plans and have been establishing themselves for a while now. Whether they will see marked growth there or not remains to be seen. Is there room for growth in the smartphone market worldwide? Definitely. Is there enough money to be had? Again, definitely. Will it happen tomorrow? How can I possibly know?
Apple only needs to provide phones at the upper mid market and lower end of the top market to favor those "lets now try Apple" people. Apple knows that's once these people are in, there is a more than 50% chance that those switchers won't leave, that's all it takes to built the use base and steal Androids best clients.
Getting the best clients at the high end, and slowly but surely at the higher end of the mid-range (with the likes of the SE) means everybody else is starving in a down market and in house R&D takes a hit forcing everyone to sell essentially small variants of the same phone with no hopes of competing except on price.
This is exactly what myself and @avon b7 are arguing with @tmay for quite some time, i.e. Apple should look for expanding its user base in upper mid-range ($300 to $600, Avon calls this segment as affordable premium) segment instead of just focusing on "Flagship" segment (>$600) alone.
I've had a long running battle with one of AI's non-iphone using members,over a focus on maintaining ASP vs targeting unit growth. Neil's post enlightened me on the value of ASP; if you are in a declining market, generate a lot of revenue and pump it into the next great thing. Don't put too much effort in gaining new users that won't use a lot of services, or buy much in the ecosystem. Do more for your user base.
Make it two, including me, apart from @Avon b7. The problem with the argument "generate a lot of revenue and pump it into the next great thing" is - There is no great thing to be seen for next few years. Until that happens, Apple should focus on expanding in the upper mid-range segment as well.
No great thing?
Maybe not the same scale as smartphones, or iPod's, but Apple is already dominating revenues for, notebooks, tablets, wearables, wireless earphones, and likely by next year, smart speakers, not to mention the growth in services. While Samsung and Huawei are fighting over marketshare, at less than a third of the ASP of Apple, Apple is scooping up the bulk of the revenues, and forcing Android OS device makers to fight over what is left. I don't know what the future holds for Apple, and neither do you and Avon b7, but it will likely be much better with massive revenues today, than not.
So, no, it doesn't make sense to "focus" on expanding the upper mid-range segment; it makes financial sense for Apple to focus on keeping its user base happy in the Apple ecosystem. If that strategy includes knocking $50 off the SE in the future, essentially a $299.00 SE, then all of us, Avon b7, and I should be quite happy with the strategy. But I don't expect much more than that, and wrt India, neither you nor I have a clue what Apple will do their specifically, but I'm certain that Apple won't be buying marketshare.
BTW, Avon b7 isn't ever going to buy an iPhone in the future, no matter the price and configuration; that's almost a certainty, so why would I or anyone else want to even consider his failed advice?
Ok. I will give some advice. If you want people to understand the idea you are putting forward, don't link to a DED article to support your stance. Here's why:
They are skewed at birth.
So, I'm guessing that you skipped that article because it violated your worldview?
Facts are biased.
No. I skipped it because I knew it would be skewed.
Facts are biased? Isn't it the people that use them that are biased? Doesn't bias in this context involve judgement and reasoning? How can a fact judge or reason anything?
I posted the source material, untainted by DED, and you still refuse to look at it.
That's your bias against the facts.
Sorry. I'm not seeing it. The only links I'm seeing are the DED one, save for a South China Morning Post article you linked to after I had already replied to you a few times. You threw it in with a 'BTW'. Was that the source of the DED article? He must be struggling, LOL.
I read the article, what am I supposed to be seeing with regards to anything I've posted.
Good for you
So I'm guessing that you would agree that the worldwide market for smartphones sales is diminishing, and Chinese manufacturers will be consolidating/going out of the business.
Hang on. Was that article the source of the DED piece or not?
As for a diminishing marketing for smartphones worldwide, I've always tried to simplify somewhat and said that the 'developed' markets had hit saturation point but that the big players (Apple included) were looking to the 'developing' markets for growth.
It is not unreasonable to see those markets following what has already happened in the developed markets: a progression from feature phones to smartphones. That transition obviously won't be as smooth as in the developed markets and obviously infrastructure and price are two key factors that need to be taken into account. There are others such as political stability etc.
Let's take Latin America as an example. Huawei is gearing up to give it some attention. Nothing really newsworthy as they have been very open about their plans and have been establishing themselves for a while now. Whether they will see marked growth there or not remains to be seen. Is there room for growth in the smartphone market worldwide? Definitely. Is there enough money to be had? Again, definitely. Will it happen tomorrow? How can I possibly know?
That was one of the sources. It even places Huawei as one of the survivors, which you would like.
Unfortunately, there's that ASP downside, but you aren't interested in that so, you're all " yea Huawei"
Sadly for you, Apple is gong to end up gaining even more revenue. The problem for all others is that Android OS devices, for the most part, are devoid of any distinguishing features, due to diffusion. No matter how hard each competes with each other, it's all downsides in the end; it comes down to price, and lower is better.
On the subject of Chinese manufacturers going out of business I don't think I've ever touched on that issue as I can't see much relevance. All markets consolidate to some degree. What's the deal? What's clear is that if the company you bought the phone from, goes out of business, you won't shrug your shoulders and say 'that's it, I'm out of the market'. You will buy from someone else. Have you ever seen me touch on that issue? I don't remember having gone there.
On the subject of Chinese manufacturers going out of business I don't think I've ever touched on that issue as I can't see much relevance. All markets consolidate to some degree. What's the deal? What's clear is that if the company you bought the phone from, goes out of business, you won't shrug your shoulders and say 'that's it, I'm out of the market'. You will buy from someone else. Have you ever seen me touch on that issue? I don't remember having gone there.
Just because you haven't touched on the issue doesn't mean that it doesn't exist. In a declining market, one of the tools that companies have to increase sales is to decrease prices. Works great, except that when everybody is doing it, lots for revenue and profit are lost by everyone. Consumers love price wars!
But your company is a survivor. Now, your desire is to raise prices back up, but you still have competitors out there who are still willing to cut prices and offer other deals to increase unit sales.
You can't raise prices, you have to protect your user base, but you still have to push to acquire more users, more share. It's a downward spiral. Oh, and the price wars have now armed consumers with a whole lot of modern phones that won't need to be replaced for three or four years. More market decline. This is the situation that Samsung, Huawei and Xiaomi will find themselves in, and they ware the lucky survivors! So chase new markets, and hope the other guy isn't willing to compete there.
For Apple though, the user base is much more insulated from this, much more loyal, so, while price increases are at some point out of the question, Apple isn't going to have to react, much anyway, to the price war in the Android OS space. Apple's ability to maintain innovation in the iPhone, other hardware, and the ecosystem, all act as a huge moat that creates friction to leaving.
The truth is, the smartphone war is over. Apple continues to win most of the revenues and sell most of the premium devices, and Android OS fills out the rest. There's still a chance that Huawei can make it to the top and outsell both Apple and Samsung, at some point in time, but by then, revenues and profits will be quite a bit diminished.
On the subject of Chinese manufacturers going out of business I don't think I've ever touched on that issue as I can't see much relevance. All markets consolidate to some degree. What's the deal? What's clear is that if the company you bought the phone from, goes out of business, you won't shrug your shoulders and say 'that's it, I'm out of the market'. You will buy from someone else. Have you ever seen me touch on that issue? I don't remember having gone there.
Just because you haven't touched on the issue doesn't mean that it doesn't exist. In a declining market, one of the tools that companies have to increase sales is to decrease prices. Works great, except that when everybody is doing it, lots for revenue and profit are lost by everyone. Consumers love price wars!
But your company is a survivor. Now, your desire is to raise prices back up, but you still have competitors out there who are still willing to cut prices and offer other deals to increase unit sales.
You can't raise prices, you have to protect your user base, but you still have to push to acquire more users, more share. It's a downward spiral. Oh, and the price wars have now armed consumers with a whole lot of modern phones that won't need to be replaced for three or four years. More market decline. This is the situation that Samsung, Huawei and Xiaomi will find themselves in, and they ware the lucky survivors! So chase new markets, and hope the other guy isn't willing to compete there.
For Apple though, the user base is much more insulated from this, much more loyal, so, while price increases are at some point out of the question, Apple isn't going to have to react, much anyway, to the price war in the Android OS space. Apple's ability to maintain innovation in the iPhone, other hardware, and the ecosystem, all act as a huge moat that creates friction to leaving.
The truth is, the smartphone war is over. Apple continues to win most of the revenues and sell most of the premium devices, and Android OS fills out the rest. There's still a chance that Huawei can make it to the top and outsell both Apple and Samsung, at some point in time, but by then, revenues and profits will be quite a bit diminished.
Oh, but you didn't want to go there. Sorry!
I'm not saying the issue doesn't exist. I'm saying it's completelynormal. That's why I never mentioned it. Can you name one industry that hasn't suffered the effects of consolidation?
You imply that Huawei can't increase prices because the competition will undercut them but fail to see that Huawei already increased prices across the board (it's been about two years now) and still managed YoY unit growth.
You speak of a downward spiral but while Apple has been flat for the last two years, Huawei has been on an upward spiral.
You speak of the smartphone war being over but if it is, then it was over for Apple twoyears ago and you only just realised. I take a different view. Apple has over 80% of the market to conquer. The market may be saturated but that's no reason for them to think nothing more can be done with share.
In fact, one of the big reasons for the strategic change last September was just that. It definitely wasn't to increase ASP. There's more. One of the major causes of flat growth for Apple is what I've been saying all along: the 'good enough' factor. If saturation wasn't already a factor, phones being 'good enough' at far cheaper prices has kept millions of users happy, for longer and for less! We will see what effect this change has in the next earnings call.
And as I said recently. One of the ways to describe Apple's year is that people were statistically simply paying more for the same amount of phones! Are you sure that's good for users? Are many of those users getting their money's worth? That's for them to decide but how will they see their 1,000 dollar purchase when, just months later, the same features are widely available on much cheaper phones? They can cling onto the 'iOS' line but that other world will be there, possibly tempting some users to give it a chance.
Innovation is everywhere, not only the iPhone. That some people here band the knock-off label around doesn't make it true. It isn't.
People insist that iOS is better than Android but when challenged on the subject, have a hard time giving examples of exactly where.
You seem to be finally coming round to accepting that Apple has hit a ceiling of sorts and even resigned yourself to seeing them getting aggressive on pricing even if it has an impact on ASP. You have taken your thinking out of the Q417 snapshot which is simply one distorted point in the Apple year. You even seem to be accepting the notion that Huawei might just knock Apple out of No 2 spot on unit sales.
Calling them lucky survivors is plain wrong. Huawei doesn't need the handset business. Apple absolutely does. It's a relatively new entry to the field and that makes its success so far nothing short of astounding. It even has the US government resorting to protectionist measures to keep them at bay in one of the world's biggest premium handset markets. When I said Apple users were effectively paying more, on average, for their phones, I wonder how many realise that with Huawei competing in the US via carriers that Apple would have very likely had to adjust its pricing.
When Apple repositioned the ship I said they had options but having a wider spread of models (mixing old and new) was only one of them. Another was pricing and another was to simply release more models each year (obviously a last resort). Let's wait and see how things play out before resigning ourselves to remaining below that ceiling.
One last, and somewhat out on a limb, thought. I think the supercycle will happen but what if it actuallyhappened in the last quarter but there simply weren't enough new users coming on board to push numbers higher? How would that leave things for this year's phones? Just a thought.
On the subject of Chinese manufacturers going out of business I don't think I've ever touched on that issue as I can't see much relevance. All markets consolidate to some degree. What's the deal? What's clear is that if the company you bought the phone from, goes out of business, you won't shrug your shoulders and say 'that's it, I'm out of the market'. You will buy from someone else. Have you ever seen me touch on that issue? I don't remember having gone there.
Just because you haven't touched on the issue doesn't mean that it doesn't exist. In a declining market, one of the tools that companies have to increase sales is to decrease prices. Works great, except that when everybody is doing it, lots for revenue and profit are lost by everyone. Consumers love price wars!
But your company is a survivor. Now, your desire is to raise prices back up, but you still have competitors out there who are still willing to cut prices and offer other deals to increase unit sales.
You can't raise prices, you have to protect your user base, but you still have to push to acquire more users, more share. It's a downward spiral. Oh, and the price wars have now armed consumers with a whole lot of modern phones that won't need to be replaced for three or four years. More market decline. This is the situation that Samsung, Huawei and Xiaomi will find themselves in, and they ware the lucky survivors! So chase new markets, and hope the other guy isn't willing to compete there.
For Apple though, the user base is much more insulated from this, much more loyal, so, while price increases are at some point out of the question, Apple isn't going to have to react, much anyway, to the price war in the Android OS space. Apple's ability to maintain innovation in the iPhone, other hardware, and the ecosystem, all act as a huge moat that creates friction to leaving.
The truth is, the smartphone war is over. Apple continues to win most of the revenues and sell most of the premium devices, and Android OS fills out the rest. There's still a chance that Huawei can make it to the top and outsell both Apple and Samsung, at some point in time, but by then, revenues and profits will be quite a bit diminished.
Oh, but you didn't want to go there. Sorry!
I'm not saying the issue doesn't exist. I'm saying it's completelynormal. That's why I never mentioned it. Can you name one industry that hasn't suffered the effects of consolidation?
You imply that Huawei can't increase prices because the competition will undercut them but fail to see that Huawei already increased prices across the board (it's been about two years now) and still managed YoY unit growth.
You speak of a downward spiral but while Apple has been flat for the last two years, Huawei has been on an upward spiral.
You speak of the smartphone war being over but if it is, then it was over for Apple twoyears ago and you only just realised. I take a different view. Apple has over 80% of the market to conquer. The market may be saturated but that's no reason for them to think nothing more can be done with share.
In fact, one of the big reasons for the strategic change last September was just that. It definitely wasn't to increase ASP. There's more. One of the major causes of flat growth for Apple is what I've been saying all along: the 'good enough' factor. If saturation wasn't already a factor, phones being 'good enough' at far cheaper prices has kept millions of users happy, for longer and for less! We will see what effect this change has in the next earnings call.
And as I said recently. One of the ways to describe Apple's year is that people were statistically simply paying more for the same amount of phones! Are you sure that's good for users? Are many of those users getting their money's worth? That's for them to decide but how will they see their 1,000 dollar purchase when, just months later, the same features are widely available on much cheaper phones? They can cling onto the 'iOS' line but that other world will be there, possibly tempting some users to give it a chance.
Innovation is everywhere, not only the iPhone. That some people here band the knock-off label around doesn't make it true. It isn't.
People insist that iOS is better than Android but when challenged on the subject, have a hard time giving examples of exactly where.
You seem to be finally coming round to accepting that Apple has hit a ceiling of sorts and even resigned yourself to seeing them getting aggressive on pricing even if it has an impact on ASP. You have taken your thinking out of the Q417 snapshot which is simply one distorted point in the Apple year. You even seem to be accepting the notion that Huawei might just knock Apple out of No 2 spot on unit sales.
Calling them lucky survivors is plain wrong. Huawei doesn't need the handset business. Apple absolutely does. It's a relatively new entry to the field and that makes its success so far nothing short of astounding. It even has the US government resorting to protectionist measures to keep them at bay in one of the world's biggest premium handset markets. When I said Apple users were effectively paying more, on average, for their phones, I wonder how many realise that with Huawei competing in the US via carriers that Apple would have very likely had to adjust its pricing.
When Apple repositioned the ship I said they had options but having a wider spread of models (mixing old and new) was only one of them. Another was pricing and another was to simply release more models each year (obviously a last resort). Let's wait and see how things play out before resigning ourselves to remaining below that ceiling.
One last, and somewhat out on a limb, thought. I think the supercycle will happen but what if it actuallyhappened in the last quarter but there simply weren't enough new users coming on board to push numbers higher? How would that leave things for this year's phones? Just a thought.
You seem confident in your analysis, so I'll leave you with that.
Comments
As for a diminishing marketing for smartphones worldwide, I've always tried to simplify somewhat and said that the 'developed' markets had hit saturation point but that the big players (Apple included) were looking to the 'developing' markets for growth.
It is not unreasonable to see those markets following what has already happened in the developed markets: a progression from feature phones to smartphones. That transition obviously won't be as smooth as in the developed markets and obviously infrastructure and price are two key factors that need to be taken into account. There are others such as political stability etc.
Let's take Latin America as an example. Huawei is gearing up to give it some attention. Nothing really newsworthy as they have been very open about their plans and have been establishing themselves for a while now. Whether they will see marked growth there or not remains to be seen. Is there room for growth in the smartphone market worldwide? Definitely. Is there enough money to be had? Again, definitely. Will it happen tomorrow? How can I possibly know?
Unfortunately, there's that ASP downside, but you aren't interested in that so, you're all " yea Huawei"
Sadly for you, Apple is gong to end up gaining even more revenue. The problem for all others is that Android OS devices, for the most part, are devoid of any distinguishing features, due to diffusion. No matter how hard each competes with each other, it's all downsides in the end; it comes down to price, and lower is better.
But your company is a survivor. Now, your desire is to raise prices back up, but you still have competitors out there who are still willing to cut prices and offer other deals to increase unit sales.
You can't raise prices, you have to protect your user base, but you still have to push to acquire more users, more share. It's a downward spiral. Oh, and the price wars have now armed consumers with a whole lot of modern phones that won't need to be replaced for three or four years. More market decline. This is the situation that Samsung, Huawei and Xiaomi will find themselves in, and they ware the lucky survivors! So chase new markets, and hope the other guy isn't willing to compete there.
For Apple though, the user base is much more insulated from this, much more loyal, so, while price increases are at some point out of the question, Apple isn't going to have to react, much anyway, to the price war in the Android OS space. Apple's ability to maintain innovation in the iPhone, other hardware, and the ecosystem, all act as a huge moat that creates friction to leaving.
The truth is, the smartphone war is over. Apple continues to win most of the revenues and sell most of the premium devices, and Android OS fills out the rest. There's still a chance that Huawei can make it to the top and outsell both Apple and Samsung, at some point in time, but by then, revenues and profits will be quite a bit diminished.
Oh, but you didn't want to go there. Sorry!
You imply that Huawei can't increase prices because the competition will undercut them but fail to see that Huawei already increased prices across the board (it's been about two years now) and still managed YoY unit growth.
You speak of a downward spiral but while Apple has been flat for the last two years, Huawei has been on an upward spiral.
You speak of the smartphone war being over but if it is, then it was over for Apple two years ago and you only just realised. I take a different view. Apple has over 80% of the market to conquer. The market may be saturated but that's no reason for them to think nothing more can be done with share.
In fact, one of the big reasons for the strategic change last September was just that. It definitely wasn't to increase ASP. There's more. One of the major causes of flat growth for Apple is what I've been saying all along: the 'good enough' factor. If saturation wasn't already a factor, phones being 'good enough' at far cheaper prices has kept millions of users happy, for longer and for less! We will see what effect this change has in the next earnings call.
And as I said recently. One of the ways to describe Apple's year is that people were statistically simply paying more for the same amount of phones! Are you sure that's good for users? Are many of those users getting their money's worth? That's for them to decide but how will they see their 1,000 dollar purchase when, just months later, the same features are widely available on much cheaper phones? They can cling onto the 'iOS' line but that other world will be there, possibly tempting some users to give it a chance.
Innovation is everywhere, not only the iPhone. That some people here band the knock-off label around doesn't make it true. It isn't.
People insist that iOS is better than Android but when challenged on the subject, have a hard time giving examples of exactly where.
You seem to be finally coming round to accepting that Apple has hit a ceiling of sorts and even resigned yourself to seeing them getting aggressive on pricing even if it has an impact on ASP. You have taken your thinking out of the Q417 snapshot which is simply one distorted point in the Apple year. You even seem to be accepting the notion that Huawei might just knock Apple out of No 2 spot on unit sales.
Calling them lucky survivors is plain wrong. Huawei doesn't need the handset business. Apple absolutely does. It's a relatively new entry to the field and that makes its success so far nothing short of astounding. It even has the US government resorting to protectionist measures to keep them at bay in one of the world's biggest premium handset markets. When I said Apple users were effectively paying more, on average, for their phones, I wonder how many realise that with Huawei competing in the US via carriers that Apple would have very likely had to adjust its pricing.
When Apple repositioned the ship I said they had options but having a wider spread of models (mixing old and new) was only one of them. Another was pricing and another was to simply release more models each year (obviously a last resort). Let's wait and see how things play out before resigning ourselves to remaining below that ceiling.
One last, and somewhat out on a limb, thought. I think the supercycle will happen but what if it actually happened in the last quarter but there simply weren't enough new users coming on board to push numbers higher? How would that leave things for this year's phones? Just a thought.