Why Apple’s worldwide smartphone market share slide is not bad news

Just imagine, for a moment, a world where your mobile phone company charged you $869 upfront to buy the latest iPhone.

You can’t get it subsidised on a 24-month plan – you must pay for it upfront. That’s before the monthly cost of your plan or your recharge vouchers.

Let’s make this scenario even more interesting: Let’s suppose you earned just $10 per week, so that iPhone works out to be nearly 87 weeks’ salary.

Realistically, no carrier in the world would ever subsidise an $869 phone to the point it’s affordable for someone on just $10 per week.

Next to the iPhone is another smartphone. It’s nowhere near as good, but it’s far cheaper – maybe $50 or $100. Which one would you buy?

It’s easy to assume, when examining the smartphone wars from Australia, the telecommunications industry works under the same assumptions globally as it does locally. The truth is it doesn’t.

The scenario I just sketched is the decision a growing number of consumers in emerging markets will face as they decide to buy their first smartphone over the coming years. And, as they do, they’re increasingly going to be the ones determining market share.

Worldwide, the mobile industry is at an interesting tipping point right now, with the price of low-end smartphones continuing to fall while 3G and 4G mobile networks continue to be rolled out.

Smartphones now account for around 225 million of the 418.6 million mobile phones shipped worldwide each financial quarter.

Just to put those figures into perspective, around 80.2 million PCs are shipped worldwide each quarter. With apologies to Bill Gates, the smartphone is proving to be the defining invention of the new millennium so far, not the PC.

Many of the hold-outs still opting for a featurephone are in emerging markets, but as smartphone prices fall, they’re increasingly being persuaded to opt for a smartphone. This has implications for Apple’s market share.

Long ago – perhaps as far back as when the two Steves were in a garage – Apple made the decision that it was selling premium tech products for the high-end of the consumer market.

Back in 2008, when smartphones were a premium product, this allowed them to simultaneously command a large share of the smartphone market while remaining a premium brand.

This might even remain the case in the US, Japan, Western Europe, Australia or other developed markets.

However, globally, smartphones are increasingly becoming commodity products, with a growing number of people in emerging markets opting for a cheap Android phone over a featurephone.

As the smartphone pie gets larger, the premium slice gets relatively smaller – as does Apple’s share of the overall pie.

The upshot of this for Apple fans is that even if the iPhone’s market share shrinks further, it’s not a sign of ill-health for Apple’s sales – or its bottom line. People who say otherwise entirely miss the point of the company’s premium brand strategy.

Increasingly, Apple is the Ferrari or the BMW of the smartphone world. And like a premium auto maker, it will continue to make products its users love – and large profits for its investors – even if it doesn’t have the same market share as Ford or General Motors.


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