How Apple is Cornering the Market in Mobile Devices

I have been speaking with various vendors of tablets lately and more than once, the topic of Apple “iPodding” them has come up. iPodding basically refers to the fact that although Apple has had the iPod on the market for over 10 years now, they still have over 70% of the MP3 portable digital music player market. This fact is giving many of the tablet vendors nightmares. Although they see this tablet market as a very large one and believe there is room for multiple tablet vendors given the potential market size and potential world wide demand, they know very well that Apple has done a great job in cornering the MP3 player market with iPods and are afraid that Apple could do the same with tablets.

And even though Apple has not cornered the market in smartphones, all are amazed that Apple had record iPhone sales last quarter and realize that Apple has just started selling iPhones in the Chinese market and could be expanding to other BRIC (Brazil, Russia, India, China) countries too. And many of the smartphone vendors are certain that Apple will bring out a lower cost iPhone at some point and get very aggressive in emerging markets within the next two years. An even harder fact for them to swallow is that when it comes to smartphone profits, Apple takes about 75% of all profits made in cell phones.

While all of them think that they can compete with Apple when it comes to hardware, and maybe even software, what they all pretty much know is that the secret to Apple success is that they have built their hardware and software around an integrated ecosystem based on a very powerful platform. And it is here where their confidence level lags and the “iPodding” fears raise its head. And to be honest, this should really concern them.

Apple is in a most unique position in which they own the hardware, software and services and have built all of these around their eco-system platform. That means that when Apple engineers start designing a product, the center of its design is the platform. For most of Apple competitors, it is the reverse; the center of their design is the device itself, and then they look for apps and services that work with their device in hopes that this combination will attract new customers. In the end, this is Apple major advantage over their competitors and they can ride this platform in all kinds of directions.

For example, when they were working on the iPad, they already had in place the iTunes content store and since all were based on the iOS platform, it was pretty straight forward for them to now build the iOS iPad Apps environment that easily sat on top of this already existing software platform. Of course, the iOS app platform already existed for the iPhone so all they had to do is to create an apps toolkit to take advantage of the new screen size they now had with the iPad.

We will see this same concept repeated when they eventually release anything for the TV. The current Apple TV product is a good first step and is also based on this iOS platform and eco system. But let’s say they design an actual TV; the platform is already in place for them to tap into it and indeed, the center of design for any future TV is the platform itself.

For a lot of vendors, they had hoped that Google’s Android would deliver to them a similar platform to build on, but to date that has not been the case. The various versions of Android only complicate things for the vendors and the software community and in essence they really don’t have a solid unified platform to build anything as powerful as Apple’s iOS architecture. As a result there is a lot of fragmentation in the Android marketplace. This is more than problematic and has been at the heart of Android failures in tablets thus far.

And I am not sure Microsoft’s new Windows 8 platform will deliver what they need either. The key reason is that Windows 8 is still based on a PC Centric OS and this is being extended downward to tablets. At the same time, they have a Windows OS for their smartphones that share no code and no app base. In the end, it delivers at best splintered apps and a non-unified ecosystem even if all the devices have the same Metro UI. I believe this OS has more of a chance to challenge Apple then Google’s Android will, especially in tablets. But the lack of a powerful unified platform that the vendors can really design around and support, along with vendors own quests to differentiate, could cause this approach to have a hard time competing with Apple too.

The bottom line is that when it comes to competing with Apple, it really is all about the platform. And at the moment, I don’t see anybody creating a unified and powerful enough platform that comes close to or is equal to what Apple already has in the market. That is why Apple is cornering the market in mobile devices today and why it could continue to grow its user base WW at the expense of their competitors. Based on marketing material on Apple’s own website, I would say they understand this as well.

Published by

Tim Bajarin

Tim Bajarin is the President of Creative Strategies, Inc. He is recognized as one of the leading industry consultants, analysts and futurists covering the field of personal computers and consumer technology. Mr. Bajarin has been with Creative Strategies since 1981 and has served as a consultant to most of the leading hardware and software vendors in the industry including IBM, Apple, Xerox, Compaq, Dell, AT&T, Microsoft, Polaroid, Lotus, Epson, Toshiba and numerous others.

160 thoughts on “How Apple is Cornering the Market in Mobile Devices”

  1. The term “iPodding” could be taken by some people, to have negative connotations.

    Those who don’t understand why the iPod, the iPhone, and now the iPad have gone from zero to basically owning the markets they are sold into, may have paranoid feelings that Apple used some sort of “dirty tricks” to accomplish this.

    Those who are fearful of Apple imagine everything from Apple having used Microsoft-style monopoly tactics (Microsoft was found guilty of forcing third party companies to use and sell it’s products, and not use Microsoft’s competitors’ products), to absurd claims that it is Apple’s marketing/mind-control that causes people to buy their products.

    These claims are of course ridiculous.

    Apple doesn’t even use “clean tricks” like selling its products at prices that under-cut the competition. In most cases, Apple’s mobile products are actually more expensive than their competitors’ products.

    The truth is that “iPodding” just means that Apple’s success is derived from selling products that consumers really want to buy and use. It is the total user experience (not just hardware) that draws consumers to buy Apple’s mobile products.

    Tim Cook said it best:

    “What we’re focusing on is the same thing we’ve always focused on: making the world’s best products…. Price is rarely the most important thing. A cheap product might sell some units. Somebody gets it home and they feel great when they pay the money, but then they get it home and use it and the joy is gone. The joy is gone every day that they use it until they aren’t using it anymore. You don’t keep remembering “I got a good deal!” because you hate it! …. What I see is that there is a lot of commonality in what people around the world want. Everyone in every country wants the best product as it turns out. They’re not looking for a cheap version of the best product — they’re looking for the best product.”

  2. Excellent analysis. Apple’s masterful control over vertical integration trumps all when it comes to user experience.

  3. I have to agree with the article and the comments. Anti-Apple fans like Apple competitors tend to focus on the wrong thing. Its about the product. Make it great, make it work well.

    You will always have the anti apple side, say about 30-35% of the market. But not only does Apple end up with market share, they get it cause its a good product. Not to mention they make tons of money on what they do.

    Just a thought,
    en

  4. strongly agree with the viewpoint of this post. but … it should have also detailed how, in addition to MS, several of the major OEM’s are trying hard to invent their own separate ecosystems in response to Apple’s. Sony’s is the most ambitious, finally after all these years, with its consolidated Sony Entertainment Network and other integrated services linking all its hardware, from HDTV’s to PS3 to Xperia smartphones to its new tablets to the new Vita. Samsung and LG are both setting up their own as well, centered on exclusive apps pre-loaded on their popular HDTV’s, likely to be extended to smartphone/tablets soon. and then of course there is Amazon … and once Google takes over Motorola for real, will it also try?

    but of course the weakness of all these competing would-be ecosystems is immediately obvious: there are so many of them fragmenting the not-Apple market segments that no single one can achieve critical mass as an alternative ecosystem to Apple. and who wants to buy only Sony hardware (outside of Japan), or only Samsung hardware (outside of Korea)? once upon a time maybe, but over the last 20 years Windows and then Android have taught most consumers to mix-and-match their hardware brands, relying on commodity software to link their gadgets to a limited extent. only Apple held fast to a hardware-based “walled garden” strategy. that was a weakness for years, but now is Apple’s great strength.

  5. Another thing: Some critics of Apple accuse the company of floating hype about their stuff. The truth is that Apple NEVER comments about unreleased products and therefore CAN’T, by that very fact, create any hype before a product is released. Fact is its the press and a portion of Apple’s userbase that do all of this, all on their own. It’s very typical for Apple to never mention a new product until it’s ready to go, at which point the item is “available now” or within a week or two. Now, once its released, do they have good marketing and buy up lots of ad space? Of course! What corporation wouldn’t (or would love to if they had the resources)??

  6. Some claim that Apple’s eco system, or iTunes, is bloated. It appears to be so but it is its advantage. In the hands of others, an iTunes wannabe would be an unwieldily mess that crashes and burns. With Apple, it is a full fledged and flexible environment that can be tamed if one bothers with preferences. I’m always surprised that Windows and Android fans don’t seem to get this fact, but maybe they just don’t want to admit it. I am very willing to stand corrected on this point.

    What I also find curious about Apple is its patience, possibly the secret door to its structural triad. Apple rarely seems to be in a hurry or a mad run. If there is to be an Apple TV, it will be on Apple’s terms; and similar to the iPhone now, and more than ever the iPad, it will be perfect in its first iteration and very willing to take updates. The sauce that makes Apple special will confound the TV makers of this universe. Maybe Apple’s next steps need to be in the direction of cutting out the naughty partners by owning its own factories. The need of TV parts may be insurmountable, otherwise.

    On an aside, what is going on with the ATv, presently in its third iteration? It sits there in full view and the competition thinks they understand it. But it is like a Japanese puzzle box that hasn’t made its move yet. But when it does, it will look so obvious that at first the critics, except the analysts of this forum of course, will find it wanting.

    1. I like the puzzle box statement. I believe Apple TV will be one of the ultimate examples of a trojan horse. Key to this strategy is patience….

  7. Exactly right–the days when the other OEMs could just compete against an Apple “device” are long gone, pretty much since the dawn of the iTunes Music Store. Remember, back then Steve Jobs said something like, “This looks easy, but it’s not.”

    Now it’s all about the ecosystem, nee cosmos. Everything from their mammoth app store, to the gargantuan 3rd party peripheral market, to the incredible supply chain, to the “world’s-most-profitable” retail chain to their “world’s largest digital media store” and last but hardly least, the rabid internet hype machine which is mostly self-perpetuating at this point.

    Apple is beyond creating it’s own weather at this point, it is creating entire solar systems.

  8. Tablets seem like the fad of the moment. I’m finding that they’re useless to me. I have a Android Dell Streak 7 and my girlfriend has an iPad, and I’ve tried out other tablets, too.

    I have the, big screen but still fits-in-my-pocket, fast, 4G LTE Verizon Galaxy Nexus. I love it, and it’s always within arms reach. When I’m at home, I’m on my bigger screen Windows XP desktop; it’s just more capable than the tablets. Next to our TV is the XBox. Away from home, with a bag, in goes my really useful XP laptop. Of all the gadgets around me- the tablets: Streak and iPad, gets used the least.

    I’ve always found Apple products to be overpriced compared to other comparable products, so I’ve never owned anything Apple. When it comes time for me to get a new desktop and laptop, I’ll definitely go Windows, again.

    I think, one of big reasons, Android is the most widely used smartphone OS is that, like Windows, there’s alot of choices on hardware. My son just built his gaming rig, while a friend got a second netbook. With Android, there’s a wide choice of phone forms, carriers, and prices. Most folks I know that’s moving from featurephones to smartphones are going Android. Also, they have a laptop, maybe a desktop, and a phone, and that’s it.

  9. I do believe and admire Apple’s product oriented morale at this moment, but the power they are gaining is real and unheard of and it’s bound to corrupt them some time in the future.

    The good thing is that they seem to realize even that.
    The bad thing is that this could make Apple dogmatic and the opposite of innovative in a few years.

    But then, the good thing is that they seem to realize even that.

    It must be pretty stressful to be Tim Cook.
    Or Zen-like.

  10. Small nit to pick. I agree with most of this, but I would say that the challenge facing Microsoft is not any deficiency in their platform, but rather (1) their extreme lateness to market and (2) economies of scale (related to #1). This was essentially the same problem they faced with the Zune. I’m sure Microsoft will fight much harder for this market than they fought for the Zune because now they see that they are fighting for their life. But it is still going to be very tough to play catchup with Apple, particularly when their hardware vendors must confront Apple’s near monopsonisitc mastery of the supply chain.

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