It’s Tough Competing With the iPhone

on October 8, 2013

Understanding what is happening in smartphones is all a matter of perspective. It is easy to get caught up in the OS market share statistics and lose sight of the big picture.

comScore has recently updated their MobiLens and Mobile Metrix, data for US smartphone subscribers in August 2013. Many in the media picked up the point that iOS gained on Android during the month. While this is true, it has actually been going on for almost a year now. In November, 2012, Android peaked in the US at just over 53% share. Since then it has slowly declined. During that same time iOS has been slowly growing.

Screen Shot 2013-10-08 at 12.18.03 PM

That is, of course, all very interesting and important to know as we try to get a picture of what is happening with smartphones in the US. When we look at browser share between iOS and Android in the US we see a very different picture.

Screen Shot 2013-10-08 at 12.21.10 PM

–US Mobile browser share by type from NetMarketShare

In this picture, the iPhone leads all other platforms in web usage. Android is steadily gaining and that is an important takeaway. But as much as we like to generally compare iOS to Android, the uninformed mistakingly compare apples to oranges in doing so. The iPhone, at this point of time, is not competing against the entirety of the Android offerings in the US. The iPhone does not compete with the low-end, extremely low-cost, Android devices offered free by carriers or on pre-pay plans from retailers, which is why comparing the iPhone to the entirety of Android is a mistake. Rather, to get a holistic picture of what is happening, we must compare the iPhone to similarly priced products. More specifically we must compare the iPhone’s market share to that of other vendors’ products at the same price points. When we do that, we get a clearer picture.

Below is the iPhone’s share against other devices costing greater than $400 wholesale (or offered at $99-$199 subsidized). This chart is based on sell through estimates that I am extremely confident about.

Screen Shot 2013-10-08 at 12.29.16 PM

As you can see, the iPhone dominates the premium segment of the market. These estimates are prior to the launch of the iPhone 5c and iPhone 5s. For that reason, I specifically included devices as low as $400, even though the wholesale cost of the iPhone 5c is an estimated $549. I added that price point because I’m convinced that the iPhone 5c will continue to take share from devices — even those devices in the $400 wholesale range — which are generally priced at free by the carriers. I’m also convinced that this will happen in regions beyond the US, as well.

If I were to include only devices which cost more than $500 wholesale or priced at $99 to $199 on contract, the iPhone’s share would jump to well over 70%. As you can see, the iPhone outsells Samsung’s devices at nearly a 3-1 ratio and other devices at a ratio of 5-1 or higher.

Based on all the data I am seeing from demand and sales trends, it is hard not to conclude that iOS will overtake Android in the US in the near future – possibly as soon as the end of the calendar year. But perhaps the most important thing about the iPhone’s share in the premium devices sector is that other competitors have only been able to made weak inroads against it. Samsung, for example, has been spending hundreds of millions of dollars in US-based marketing, yet their share of the premium market has peaked and been trending downward on weaker-than-expected sales in 2013.

All of this is specific to the US. The US market is key for many reasons, not least of which because its one of the most profitable. I am, however, keeping a keen eye on Europe and Asia as well.

The key question in my mind for the US, or other regions for that matter, is whether anyone can legitimately compete with Apple in premium. I think we will observe that Apple can legitimately compete with others in the middle of the market. But whether anyone can challenge Apple’s dominance in the high end is yet to be seen.