Global Implications of the iPhone Lineup on the Smartphone Market

With the new iPhone lineup, Apple has addressed every major screen size base for smartphones. What they have not addressed is every price point — unnecessary given Apple’s strategy. My read is the impact of Apple addressing premium (phones over $400) Android smartphones primary differentiating factor, larger screen sizes, this will in turn dramatically impact the sales of the premium Android smartphone market. The biggest impact could come from the US at first but other key markets for premium Android handsets will be impacted as well. If that does happen, it may also impact the Google ecosystem in significant ways.

Apple has taken just about every reason to buy a premium Android phone from Samsung, HTC, LG, etc., off the table. Most mainstream consumers don’t care about specs and features. They want functionality. Many found a larger screen to be more functional for them for whatever reason. My gut tells me the premium Android space, and Samsung in particular, will be severely impacted by the new Apple lineup of iPhones.

In the US, Apple’s iPhone made up 64% of the premium phones sold. Apple’s average of premium phone sales during the past six quarters was 60%. If I was a betting man, I’d wager that is all about to change. Apple will likely get a minimum of 70% (this was their number in Q4 2012) of premium smartphones sold during the holiday quarter in the US. Around the world, Apple’s premium share is dominant as well. In China they make up 78% of all premium phones sold, per the last data point I got from Umeng earlier in the year. In China, Apple has sold just over 12m iPhones since January and approximately 40% of all 4G phones sold since then in China were iPhones. Now that they will release a 5.5 inch device, the demand for iPhones in China amongst the social elite, and even upwardly mobile Chinese consumers, will be higher than ever. Apple’s share in Europe is also higher at just below 60% but the volume of premium phones there is much smaller compared to the US and China.

Globally, Apple has the dominant share of premium smartphones. My last estimate, which needs an update, was premium Android smartphones were just over a third of the total of the iPhone installed base. I sense Apple will convert a significant percent of the current crop of premium Android buyers over the next year or so and this will impact Samsung the most. But it may also impact Google.

If you have followed what myself and Benedict Evans have been saying about the Google Play ecosystem, Google is paying out half of what the iOS App Store is to developers but with just about double the active users. I’m also fond of saying Google has already secured the most profitable customers. Understanding this point, the following chart becomes interesting to dig into.


That chart is composed of the latest snapshot of app store revenue. Included is Google’s (really Samsung’s) share of the premium smartphone buyers. Prior to knowing anything about the iPhone 6 lineup I had concluded, based on a projection model, that Google would need nearly 4x the iOS user base to pay out the same number of revenue to developers. It was unlikely Google would get that amount but now it is inevitably going to be losing a good chunk of their premium buyers. I’d be willing to bet Google’s and Apple’s App store lines begin to deviate further. Apple’s is continuing to go up and Google’s is showing signs of slowing growth.

While ultimately Google’s overall revenue may still be fine, thanks to the ability for them to make money off iOS customers, the app store revenue could see an impact. Which raises some very interesting questions for developers on Android. Questions I don’t have answers to yet.

Broadly, Android is continuing to sell in volume to low end customers. In many areas of S.E. Asia, India, Brazil, and even others, we are seeing early evidence of manufacturers choosing other services instead of Google’s in order to try and make more money. Monetizing the low end is very hard and it will be hard for Google and anyone who uses Android — unless they create and develop their own services to monetize on top of Android.

China has its own Android ecosystem and it will continue to advance and flourish. Apple will likely never be the dominant vendor there as they are in the US but by further lowering the price of the 5s (which is likely) it could compete quite well against a $400 Xiaomi Mi4 for example. Undoubtedly, Apple will continue to gain share in China but the real question for Apple is India.

India will be the second largest smartphone market at some point in the future. India does not want cheap, crap smartphones. This is a market keen on “value for the money.” Right now, there is better value for the money in the Android camp than there is for iOS for Indian buyers. That may always be the case but as the smartphone ramp takes place in India, I’d be interested to see Apple do some things to appeal to the value for the money mentality in that market. Just under 70% of mobile phones in India are feature phones. I do not expect a first time buyer to get a iPhone. However, as India ramps, and the market matures, the timing will eventually be right for Apple to be creative in that market.

From the data and research I have on the global smartphone market, it is very hard to not be optimistic about Apple’s overall opportunity. Ultimately Samsung is the biggest loser here as is the premium Android smartphone category at large. Android’s most passionate fans will still buy premium smartphones but that is such a small number it will not factor.

The questions around Google’s app store will remain but as new data points come out we can check back in on it. I’ll be spending more time thinking about what Samsung and other premium vendors can do but they are all in for a few rough quarters at least.

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Ben Bajarin

Ben Bajarin is a Principal Analyst and the head of primary research at Creative Strategies, Inc - An industry analysis, market intelligence and research firm located in Silicon Valley. His primary focus is consumer technology and market trend research and he is responsible for studying over 30 countries. Full Bio

44 thoughts on “Global Implications of the iPhone Lineup on the Smartphone Market”

  1. I think the implications are biggest in the USA, where Apple sells strongly. A big 5.5″ iPhone isn’t going to sell in emerging markets that are turning to big cheap phones, because this is a super-premium priced product.

    I have been saying it was only a matter of when, not if, Apple would get into big phones (long before this rumour cycle). And the sooner the better.

    I was repeatedly told that 4″ and one-handed use was what it was all about.

    Now here we are and it looks like Apple might even abandon 4″ phones, once the old phones age out. So much for that one true size.

    I was expecting 326 ppi across the board. It seems like it would be great for developers having the same PPI for graphics assets across phone sizes (and iPad mini).

    So I am a little surprised at the departure to 401 ppi for the iP6+. Maybe 1080p was just too hard to resist for marketing purposes (That seems like another Cook difference).

    Back when I was making a case for big phones. I said, why give competitors a free ride in this space. The free ride is over now.

    So I bet Samsung HQ is full of frowns today. These go head to head with Samsungs flagship phones, and IMO Apple builds a better product. I expect steeper fall in US market share for Samsung once the iPhone 6 models start shipping.

    This will hurt Samsung more than any lawsuit and it uses Apple strength (product development) instead of the almost random legal system.

    As much as I was one of the strongest proponents of Apple building big phones, it will still be puzzling to me if Apple abandons 4″ phones. I definitely think there is a significant market for smaller than 4.7″ phones.

    1. I’m with you in not understanding why the exact same phones are not offered in at least 3 sizes, especially because thickness doesn’t matter that much, so that you can’t spread out, you stack over. Even in the Android camp, there’s an outcry for a small flagship (Sony Z3 compact these days… 4.6″…).

      I’m not sure why Mr. Bajarin assumes the iPhone will take the world by storm, it seems to me by far the less inspired and buzz-generating launch in years. The new models don’t enable much more, and the competition both the high end (quad HD screens…) and the low-end ($180 for a “good enough” phone that didn’t exist 2 yrs ago) is getting fiercer. We’ll see how it pans out; most iCustomers around me at balking at prices, especially with Android having matured so much so quickly on the HW and SW fronts.

      1. To be clear, I’m talking about the premium segment only and largely in subsidy markets. We have so much data on the average smartphone user, even ones who have switched to Android because of bigger screens, and the data seems to suggest that many of them were not wedded to Android and were looking to go back. There is much more data we are sitting on on why we believe the iPhone is poised to continue to dominate and gain share in premium.

        1. My contention is that
          1) the luxury segment is getting smaller as a percentage, because where once upon a time a premium phone was required for satisfactory functionality, that’s no longer the case; the “premium” segment has morphed into a “luxury” one.
          2) the subsidized segment is getting smaller too (also as a percentage). Even in the US customers may start to realize that $300+24x$110=2,940 is a lot more money than $700+24x$60=2,040; or, combining with 1), than $200+24x$60=1,540. (prices for 3GB data, ATT vs T-Mob)
          3) These iPhones are not that compelling. They’re getting screen size and resolution right at last, but the design is meh, the specs are lagging as always, and there’s quite a bit of ill-will accumulated over the last few generations’ weak batteries. My iBrother just bought his first Android, reaction was “hey, that Moto G isn’t bad”

          1. On the luxury point, we don’t see it shrinking so much as it is saturated. That being said we anticipate growth of Apple in US and by early next year we believe iOS will have majority share in the US.

            In China, though, it really is hard to underestimate the luxury market there, how big it is and how profitable it is. Interestingly, also in China, the smartphone market is rapidly maturing and consumers who started with cheaper smartphones are going upwardly mobile. This is why the Mi 4 is more expensive than other Xiaomi phones and also has better build quality. China can’t be underestimated here.

            With subsidies, you are right but they are moving to installment plans. Which makes it very to sell the goodies people want. I’ve talked with all four US carriers about this holiday and every one of them is in agreement on the demand there will be for Apple’s phones.

          2. the mistake many analysis make when study the market, is to think that Apple is competing only with Samsung, HTC or Motorola, when in fact Apple is not only competing with these OEM but they are also competing at the same time with Google superior integration in android with best in class service that is unmatched by any one, a strong loyal base with a Brand that is as powerful and aspirational as apple itself.

          3. Obarthelemy’s argument (one of them anyway) has long been that Apple has only succeeded because of subsidies, and as those decrease Apple will die. What he and others miss of course is your point about installment plans or financing. It’s so easy to spread the cost of an iPhone out in many ways. Subsidies is just one way. If they go away there will be other ways to do essentially the same thing.

            Something else I think many people miss is how big China really is. I see a lot of “Oh, people in China are too poor, they can’t buy iPhones” analysis. But China is huge, and a small segment of people who can afford iPhones in China is a really big absolute number.

          4. I just ordered a 128GB unlocked iPhone 6 for $849. I use it in the US on Cricket for $45/month unlimited everything (2.5 GB LTE data then throttled).

            Total cost for 2 years is $1,929. (I won’t actually have it for 2 years, I replace my iPhone every year but this is for comparison).

            Buying an unlocked Nexus 5 with 32 GB is $399. That would cost me $1,479 for 2 years with the same Cricket service. So for less than $20 per month ($450 over the life of a normal 2 year contract), I can get a much better phone with many more features and significantly more storage (and iOS if that is something valued).

            Many people will decide that it is worth $20 a month to go premium even if they are buying unsubsidized.

    2. Depends, with the new thinner design (and is the bezel different or the same?), maybe the 4.7 inch doesn’t feel that much different in your hand, ‘volumetrically’.

      I think many people knew larger screen iPhones were coming. I certainly did. My argument was always that Apple would do it when the time was right, as it is now. Apple hasn’t missed any opportunity, larger screen phones are only now becoming a large enough market to care about.

      1. Yes SG, I am familiar with your “anything Apple isn’t doing, isn’t worth doing yet” and it’s corollary “whenever Apple is doing something, it is the right time to do it”, lines of “reasoning”, but they strike me more like a case of fan-blindness than any kind of actual argument.

        Apple is late to the big phone party. It isn’t like Apple will be damaged by being late, but they left money on the table for years, and even worse, they left it there for Samsung.

        Competing directly with Samsung on Big Phones, will hurt Samsung more than any court case will. They should have been doing it sooner.

        1. “Apple is late to the big phone party.”

          Nonsense. We have *data* now and we had *data* back when we originally discussed this. I was right, large screen phone sales were *tiny* and they are only recently making more than the smallest dent, and that is mostly in Asia which is also only recently a market that is opening up for Apple.

          There’s no argument, it’s simply the truth. Unless you’ve got some data that I don’t showing phablet sales being HUGE over the past couple years? Please share.

          1. Samsung alone has sold > 140 Million phones with screens larger than 4.7″ before Apple gets to market.

            With an ASP of $500, that is 75 Billion in revenue, just for Samsung.

            Tiny sales indeed.

          2. Over what time period for those 140 million? Strange that you’d leave that out. Perhaps because once you add that it’s not as impressive, relative to the whole market? We have some recent info from Ben Bajarin’s article on phablets:

            “the vast majority of Android devices in use are not phablets”

            “14% of smartphone shipments this year will be phablets”

            “approximately 165m phablets in 2014”

            “Phablets are not the majority of form factor sales.”

            There’s no debate here, we know that phablets have been a tiny portion of sales until very recently. Ben tracks this from many angles, I trust his info.

            But we also know that market demand is growing, especially in Asia, again from Ben’s article:

            “the vast majority of phablets being sold in Asia”

            And we know that China is a very important market for Apple, so the timing is very good. I realize you think I have a pro-Apple bias. I do not. It is our current reality that has a pro-Apple bias.

          3. This isn’t just “Phablets” it is also flagship big phones 4.8″ and up. That is a significant part of the market.

            A 70 Billion Dollar free ride for Samsung so far. That is a Fact. A piece of that revenue could have been Apples, but instead it was all Samsungs, because Apple was sitting out the market.

            But I get it. Apple can do no wrong, 70Billion is chump change to Apple…

          4. I guess I’ll take your refusal to answer the question about the time period as confirmation that it is cumulative sales to date, which when compared to all sales in the market over the same time period, actually proves my point.

  2. “Many found a larger screen to be more functional for them for whatever reason.”
    My reasons are:
    much better for gaming, reading, surfing and video. slightly better for email and calendar.

  3. Great summary of the current status.

    As for Google Play data, growth is slowing down in many ways if you take a critical look at AppAnnie’s data. I suspect that Google will be very reluctant to show data anymore, especially after a couple of quarters. AppAnnie is also giving us less data than before following the acquisition of Distimo. It would be very interesting to see how things turn out, and my hope is that we will continue to see some objective stats on this.

  4. First of All Samsung has been very successful at killing the smaller screen IPhone

    i am willing to bet with you Ben Bajarin that the new IPhone wont make a dent to the High End Android segment and that your analysis are base on the same False assumption as those who think that just better spec and cheaper price alone of Android phone will take user away from Apple.

    you’re Free to disagree.

      1. it you can prove to me next quarter that a lot of Android user has switched to IPhone 6 or 6+ i will subscribe for 2 years of exclusive insider if not you will give me 2 years for Free.
        what say you?

        1. You got it. 🙂 Let’s agree the focus in on premium Android users. I know Android is selling tons to the lower end and Apple isn’t positioned there quite as well.

          I, along with many other analyst firms, track this and will be easily able to tell if Android premium users convert to iPhone. The US operating mix itself will be telling. We predict the mix will shift to iOS as the majority share of active smartphones in the US and lots of firms calculate this. Also Samsung’s sales of quarterly smartphones Q4 and beyond will be very telling.

          1. Dea !

            First of all :
            we will have to track IPhone market share in the us for the entire years, Total sell wont tell the whole story due to a lot of current apple user that will switch to the new IPhone.

            Samsung total sell wont tell us all the story because the other android OEM will take a lot user away from Samsung primarily Motorola in the US.

            we need Data about the current install user base in the High segment versus next years to get an idea of how many of them has switched From android and vice versa

          2. I have all that of course. 🙂 I track by vendor in each country as well. And I have a premium smartphone data set globally.

          3. There are none so blind as those who will not see. Facts are irrelevant or lies depending on the level of insanity. While you might be refining your presentation dealing with these people, nothing you say will bring them closer to reality. Their mindset seems not dissimilar to serial killers. Terrifying really, their detachment from actuality.
            While some might be here for the full 30 minute argument because they can’t help themselves, never actually maturing, I find it increasingly tedious having to scroll further and further.

      2. this analysis is the same as the one you made when Apple introduce the IPad mini that was during the time when Apple where at his strongest and android at his weakest.

        you said that that the IPad Mini will take lot of user away from Android smaller tablet segment such the nexus 7 etc. during that same period you made a series about Google winning the battle with android while loosing the war and a lot of thing about or strong Apple is compare to Android.

        the things is you along with a many other annalist were all wrong, Android is more powerful more dominant in both market where they compete with Apple than ever

        1. That’s an disingenuous analysis of the tablet market. There is two tablet markets. The low end, with Android which is growing but these are not being used to do more than watch videos or play games. They are not computers, for example. Did you download my report BTW?

          And no, Apple did not lose consumers to Android. What they lost was the section of the market, the low-end which they had no intention of going after anyway. If we just look at premium tablets vs. low-end tablets we get the picture I outlined years ago. Apple as the largest share of premium tablets, and a bunch of white box sub $100 tablets make up the majority of the rest.

          Samsung is the only other player to sell tablets around Apple’s prices and they sell far less, and they are also being eaten by the white box in the bottom. That isn’t impacting Apple the same way it is Samsung.

          1. The tablet market has grown a lot since then, and the best argument can be made that, contrary to what you said, the Nexus 7 and many other $ 250 Android tablet has prevented a large number of people from going to the iPad Mini.

            The IPad market share has fallen significantly while the 250$ + Android segment of the market is growing

            how do you explain that?

          2. Do you happen to know what the sales of Nexus tablets have been? The argument you are using with products that you say compare to Apple’s move in very small volumes.

            The only segment of tablets that is growing is sub 100 dollar Android white box, and those are not really tablets the way an iPad is a tablet.

            yes the iPad market stalled because people aren’t upgrading since their current iPad is fine. Apple’s curse of making products that last a long time. Did you read Jan’s article on the iPad and its net add of users?

          3. The only segment of tablets that is growing is sub 100 dollar Android white box, and those are not really tablets the way an iPad is a tablet. Ben Bajarin.

            i totally disagree

            many Data show that the 250$ + Android Tablet market has gowned significantly in North america over the last two Year, and the iPad market has not stalled only because people aren’t upgrading, but also because Apple aren’t that successful at getting new user in a growing market for the last 2 years

          4. What data would that be? Do you have a link or charts that justify that position? Does not match up with global sales data by vendor I have. I talk to every branded tablet vendor regularly and get a inside picture of what they are seeing with sales, APS, and countries.

          5. here is the thing
            Are you telling me that in the last two years, your Data tell you that the 250+ $ segment of the tablet market in North America has stalled or declining?

          6. do you have total Sell of this year versus last year of the year before for the 250+ $ segment which is the one that compete with the IPad MIni

          7. Ok, I’ll tell you what. I just realized I never really did a tablet market update for insiders. So I’ll start working on that. You tell me what data points you want to broken out and I’ll add them to my overall update of the tablet market / trends.

            There is so much more going on than 7-8 inch tablets. We are seeing growth in larger screen tablets more than we are smaller. Phablets are the cause of this.

            With Apple getting into large screen phones, it is inevitably going to have further impact on the tablet market, especially the mini, but possibly the Air also.

            So what screen size trends are growing as percent of sales etc., price points, all need to be included, in each region as well.

            So let me know what specific points you think it would be helpful to see and I’ll break them out as well.

          8. I am very interesting in updating data for the $ 250 + segment mainly in North America, since it is one that is in direct competition with Apple offerings

    1. “First of All Samsung has been very successful at killing the smaller screen IPhone”

      Ah, this is the new battle cry of the anti-Apple crowd. Look! Samsung killed the smaller screen iPhone! Yay! We won!

      1. Well it is true. Without Samsung and other Android phone manufacturers pushing larger phones, Apple likely would have stuck with 4″ and under screens.

        But I think Android fans might find out the meaning of a Pyrrhic victory shortly after crowing about this.

        1. Yes, this falls into the category of ‘be careful what you wish for’. The iPhone 6 Plus has already sold out and the two iPhone 6s (iPhones 6?) have set another sales record for Apple.

          “Without Samsung and other Android phone manufacturers pushing larger phones, Apple likely would have stuck with 4″ and under screens.”

          Well, you could also frame this as simple market demand. Once the demand was there Apple made larger screens available. I remember last year when phablets were being waaaay overhyped (even as sales were very low) and Apple was doomed if it didn’t release a larger screen iPhone immediately. Of course that was nonsense, larger screen phones are only just now becoming a market opportunity.

          As is often the case Apple has timed this very well. Analysts and pundits would do well to remember that Apple isn’t filled with a bunch of bumbling idiots who don’t know what they’re doing, it’s a pretty smart and capable group running Apple. And yet a lot of the analysis of Apple seems partly based on the assumption that it is a bunch of dummies running Apple.

          1. Well of course they would assume that, it’s what they’re familiar with and the circles they move in. Kind of like hillbillies with a bit more money.

  5. “Do you ever turn off the rabid attack fan mode?”

    Ah, you mean asking for sources and relevant details? No, I never turn that off. So, you still haven’t provided a source (or two credible sources which I prefer). And you’re still being vague on the time period, let’s use months please, or quarterly I suppose. It would also be nice to know what percentage of Samsung’s sales phablets were. And I’d like *sales* data not shipments as reported by Samsung.

    The price point of the phablets being sold also matters, since that speaks to your earlier assertion that Apple lost significant sales to Samsung re: phablets. For example, if most of those sales were at price points Apple doesn’t match, then that destroys much of your argument. I won’t apologize for taking you to task on the details. Make an argument, with data and details/sources. I think you’ll have a tough time because reality doesn’t align with the argument you’re trying to make.

    1. Vague?

      I listed the SIX SPECIFIC models in question. Their selling dates are not a secret. They all went on sale some time in 2012 or after. I am talking about the free ride in big phones Samsung has had since their flagship went big in 2012. Listing the exact month is pointless minutia. How would that change in any material fashion the argument I am making? You are just making pointless attacks instead of dealing with the actual argument.

      As far source linking. With your constant insinuations that I am presenting misleading data, why would I think you would trust my links.
      Start here. Repeat for the other 5 models.

      Tell me your number.

      These are all flagship phones. The prices are comparable to Apples so they could compete. Even if Apple charges more they can still compete, and their revenues would be even greater.

      This reminds me of year ago when I said it looked like iPad sales were leveling off, and you claimed there was no signs of that, now after 3 consecutive quarters of iPad sales declines you still can seem to admit ipad sales are down.

      Your posts make you look extremely biased (understatement), do you somehow think you aren’t?

      1. On the subject of iPads here’s exactly what I said: “We’ll have to wait and see how fiscal 2014 ends up. My guess is another YoY increase for iPad unit sales, just like every year since its launch.”

        We’ll know soon enough. It looks like iPad sales will be roughly even with 2013, neither up nor down, but it does depend on the back to school quarter. Then we’ll see what happens for fiscal 2015.

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