Stop panicking! Here's why Apple and the iPhone are far from doomed
Last week, my ZDNet colleague Jason Perlow penned a piece examining how Apple is going to face increased challenges over the coming decade as the iPhone market share is eroded by the competition. It's an excellent piece, and I encourage you to read it. He makes some very good points.
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But the piece is also subtly flawed.
Let's start with Apple.
One of Apple's core strengths is that the company is not one of those one-trick pony tech firms. And let's be honest, the tech industry is crammed with one-trick ponies firms that find it difficult to reinvent themselves. After years of exploring new avenues, Google is still a search and ad company, Microsoft continues to cling on to Windows and Office for dear life, and companies like Intel, AMD, HP, Nvidia and the like are, on the whole, doing today what they were doing a decade ago, and a decade before that.
Apple is a company that knows how to change. Here's a company that shifted from being a computer maker into a music player maker and content distributer, before going on to send shockwaves through the cellphone industry. It then accomplished something that the combined might of Bill Gates and Microsoft had failed to do and make tablets a mainstream device. And, over the past year or so, Apple has become a world-leader in smartwatches too, and is hammering the competition pretty hard.
Apple is not a company that stands still for long. That makes it far better placed to deal with a changing ecosystem than many of its competitors.
Next, I want to address the common and oft-quoted misconception that Apple products are expensive, luxury goods.
They're not.
Macs and iPhones, and to a lesser extent, iPads and Apple Watches are everywhere. From lecture theaters to coffee shops to business meeting rooms the world over. The mere idea that Apple is in the same category as Prada or Rolex or Ferrari is laughable. Sure, Apple makes high-end products, and those products aren't cheap, but to call it a luxury brand is a disservice to companies that actually sell luxury goods.
Is there any luxury brand out there that can shift 75 million units of a single product line in three months? To put that figure into perspective, Rolex makes less than a million watches a year, while Ferarri makes about 7,000 cars a year.
When people call Apple products "luxury" items, I think what most of them are actually thinking is "quality." And yes, Apple makes a quality product. But the fact that quality is mistaken for luxury has little to do with Apple and is instead an indictment of the tech industry and its focus on "race to the bottom" pricing, which in turn, has meant an erosion of quality and customer service.
If anything, the war going on among Android device makers, with the constant pressure to shave dollars off the price tag in order to better compete against each other, is more likely to have a detrimental effect on Android itself. Device makers are already operating with razor-thin margins, and it's not long until profits shift to losses. We've already seen implosions within the Android ecosystem -- look at how the likes of Dell were chased out of the space -- and I expect more over the coming years.
But now I want to come to the point where I think that Perlow and I disagree the most, and that's on the subject of Apple's core market and why people buy -- and will continue to buy -- iPhones by the tens of millions every quarter.
It's down to the hugely buoyant ecosystem.
Now any ecosystem you choose to buy into -- Windows, OS X, iOS, Android, Linux -- is a prison of sorts. One you've voluntarily chosen for yourself and willingly walked into, but a prison nonetheless. Once you start buying software and accessories, it becomes harder and harder to leave that ecosystem behind. And the more you buy, the harder it is to walk away.
And this is exactly the sort of thing Apple has created. Don't just think about iPhone or iPad, but think beyond that to all the apps and digital content that people bought. Then think beyond that to devices such as the Apple TV and the Apple Watch, and the myriad of third-party accessories that are out there.
It's incredibly hard for people to walk away from the iPhone ecosystem because that device isn't just the tool they use to make calls on, keep up with email and social media and such, but it's also the tool they use to control their lights and thermostat, unlock their door, and keep track of their diabetes or blood pressure.
iPhone users are incredibly reliant on their device, far more so than their Android or Windows Phone counterparts, and the more Apple convinces them to use HomeKit and HealthKit and the like, the deeper into the Apple ecosystem they are, and the harder it is for them to choose not to buy a new iPhone down the line.
So, it's not like the automotive example that Perlow outlines, where Lexus or Mercedes owners are happy to jump ship to a Hyundai because it can male a luxury sedan for $20K less than the competition. Cars are pretty much self-contained devices, and beyond clearing the contents of their glovebox, jumping ship to a new brand is just a matter of showing up at the dealership and paying the money. The Apple ecosystem is more like the Harley Davidson ecosystem. Once you're in deep enough to get a Harley tattoo, you're in for life. And once you're deep enough into the Apple ecosystem to be using an iPhone to keep track of your health and perform functions in your home, you're in for life. At the very least, trying to shift to an alternative platform is going to be a lot of work.
And right there is why cheap smartphones are not a big threat to the iPhone. Unlike the Android ecosystem, where there's little to differentiate between high-end devices and something cheap on a fundamental level, a cheap Android smartphone can't be a substitute for an iPhone. Yes, you can make calls on it, browser the web, and interact with others on social media, but when it comes to iMessage or HealthKit or HomeKit, that's just not going to shift over. Same goes for at least some of the myriad of apps and accessories that people have.
I know this because I've given thought to the notion of making the shift myself, back when iOS 9 was a bag of bugs (now it feels like iOS 9.3 is a bag of entirely new bugs). Not only would the move have cost time, money, and functionality, it would have been a lot of effort. And at the end of the day, I know it's just not worth it, because no matter what my issues are with iOS or the Apple hardware ecosystem, it's not like the Android ecosystem is anything close to perfect.
The grass may seem greener on the other side of the fence, but it's usually nothing more than an illusion.
Bottom line, people are going to be buying iPhones for a long time to come. And if anything, given the fact that price is one of the few ways that Android handset makers can differentiate their product from the competition, the tougher it will be for the device makers to scratch out a profit margin.
Android is at much greater threat of extinction than Apple or the iPhone.
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