Android vs. Apple and the state of smartphone industry: 4 takeaways

Android vs. Apple and the state of smartphone industry: 4 takeaways

Summary: Nielsen data indicates that Android is the top smartphone platform and Apple is the top manufacturer. In between those data points is a lot of nuance.

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Nielsen data indicates that Android is the top smartphone platform and Apple is the top manufacturer. In between those data points is a lot of nuance.

First, here's Nielsen's money graphic.

That graphic says a lot about the state of the smartphone market today. Here are my top four takeaways:

  1. There's a toss-up between integrated and partner-based platforms. The smartphone industry is often compared to PCs in the early days. Once upon a time, Apple controlled hardware and software. Microsoft partnered with OEMs. Microsoft won that market share game. So far in the smartphone industry, we have a draw for the most part. Consider that Research in Motion and Apple both control their software and hardware and integrate the two. Combined RIM and Apple have 48 percent of the market. Considering that RIM hasn't had product on the market for a year that integrated share is impressive. Toss in HP, which controls the WebOS and you have half the market with an integrated system approach. On the partner side of the equation, Android has 39 percent share and Microsoft chips in another 9 percent.
  2. RIM isn't dead yet. Imagine a company that has management issues and a product void that has lasted forever in smartphone terms and still had 20 percent of the OS market. That's RIM. If RIM's BlackBerry OS 7 devices can do anything in the market, the company has a shot at being a major player.
  3. Microsoft needs more hardware partners. Look at the sliver that is Microsoft's platform share. Then look at the partners. Microsoft has two friends on the smartphone block---HTC and Samsung. The software giant will need more OEMs if it's going to compete. Given Nokia is a no-show in the U.S. there are no guarantees that Microsoft's partnership with Finland's leading tech company will matter much.
  4. Android looks zero sum for hardware players. The Android partners---HTC, Motorola and Samsung---have carved up the market nicely. Unfortunately, it's hard to see Android doing much better in market share than it is today. That fact means that HTC, Motorola and Samsung are going to wind up killing each other to grow share.

Topics: Microsoft, Apple, Hardware, Mobility, BlackBerry, Security, Smartphones

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  • Two things this chart doesn't take into account.

    The first is revenue. The 28% of the market that Apple has also represents the majority of [i]total[/i] profit in the sector. All the other manufacturers are fighting over the 35-40% of the money in smartphones Apple isn't taking. In the long run, I'm not sure that's tenable, for at least some OEMs (e.g. LG).

    Second, patent issues are becoming a bigger issue. HTC has already signaled a willingness to negotiate with Apple, probably intending to do an IP license swap with their new S3 patents Apple has been found to infringe. Whether that's enough or not, I don't know, but HTC is already paying Microsoft $5 per Android handset. If they have to pay Apple another $5 or more, that takes even more of the profit away from the non-Apple manufacturers. Extrapolate that out to Samsung and Motorola, and it quickly becomes clear that the only company making real money in smartphones will be Apple (it's a pretty fair conclusion that Microsoft already makes more money off Android phones, via the HTC payments, than it does on WP7, but that isn't really big money anyway).
    matthew_maurice
    • So what does this mean for the future?

      @matthew_maurice
      I agree with you that Apple is the only company making any money in the smartphone market. I'm curious what you think this means for the smartphone market in the future? What will this market look like in, say, 2 years? Do you think HTC will still be making smartphones? Motorola? HP? How long are these companies willing to lose money in this market? And if they leave, will new entrants come in to replace them, having seen what entering a market with no patents of your own will do to you?

      Just curious to get your thoughts.
      toddybottom
      • Curious???

        @toddybottom
        "I agree with you that Apple is the only company making any money in the smartphone market." - That's really a curious statement you made there... considering HTC posted their best profits ever only a short time ago (the past few months) and they've been in the smartphone market far longer than Apple.

        You may want to recheck your facts or re-examine your logic.
        NetAdmin1178
      • HTC? Yes. MMI? In Question. HP? Yes.

        @toddybottom

        HTC is an amazingly run and solid company. They have maintained their profit share quarter after quarter/year after year. Sadly, as the industry has grown, HTC's profit share has remained fairly constant. It is possible they may have grown that profit share a bit as RIM and Nokia's profits have dimminished and HTC had a great quarter.

        Any handset maker that falls into the red has never come out untouched. They either exit the market (Nextel) or merge (Sony/Ericson) or get spun off (MMI). This puts MMI, that dipped into the red 3 months back, in a bad position.

        HP, if they are willing to put resources behind it, can make odddles of money on a 4-6% market share. WebOS is a well thought out and well conceived. It might kill them if they go to the licensing route.
        Bruizer
      • Good points but things have to fall into place just right

        bruizer
        I think HTC's patent woes are going to get a lot worse. If Apple decides not to make any licensing deal with HTC, HTC is done. With no Android and WP7 tanking so badly and MS putting their weight behind Nokia, HTC will have nothing left. So HTC's past successes have been in an environment that I believe does not (or soon will not) exist any more. HTC's decline won't be slow, it will happen nearly overnight.

        I also think WebOS is done. Smartphones are about the ecosystem and at 4-6% marketshare, there is no ecosystem. We saw how masterfully Apple killed Palm when it tried to tap into the iTunes ecosystem and the same thing would happen if HP tried it. With 4-6% marketshare, you can't get your money back quickly on the R&D you spend for creating new models so you will see very few models with very few hardware upgrades and those upgrades will be very insignificant.

        RIM is possibly the only one with a chance although the ground is approaching them very quickly and their parachute hasn't deployed yet.

        I think in 2 years, the smartphone market will look like the iPod market. You will have Apple with the majority of marketshare, RIM is a big question mark, HP will quit, WP7 and Nokia may still be around losing money, and there will be a ton of cheap Chinese Android phones for developing markets that can't afford iPhones. If Apple does decide to put out a cheap version of the iPhone (like they do in the iPod market with the Shuffle) then everyone else is done.
        toddybottom
      • Apple is the only company making 30+% margins.

        @toddybottom Whether, or more accurately which, others stay in the market is hard to say. As patent issues work their way through the courts a lot can change. Many companies jumped on the Android bandwagon because it was free, but now we're seeing that it's, potentially, not. In fact, it could become quite expensive.

        That being said, I think most of the OEMs are hoping for a "rising tide raises all boats" scenario. Where the general increase in the smartphone market overall can give them a nice, if low-margin, niche-much like the Windows PC market. While it may be the way things actually fall out, there are many signs that the smartphone market of today is [b]not[/b] the PC market of 1990s.

        The potential winner in this is Microsoft. If Android get more expensive, and continues to suffer from fragmentation, Windows Phone could be the "one ring to rule them." MS has experience licensing out OSes to OEMs, and WP7 has a few things going for it,not the least is patent protection.

        Bottom line, it's still to early to call, but Apple is clearly in the best position going forward (their stock price reflects that). Besides, if I had real answers, I'd be doing something far more lucrative than posting it here. ;)
        matthew_maurice
      • HTC will be fine. Patent issues are over-blown.

        @toddybottom

        HTC has acquired S3 and that will help them. Unfortunately, iOS was not found to infringing but OS X was. At the end of the day, however, Apple has licensed technologies before and will again. It is not their primary business but it is money all the same.

        Likewise, there are work-arounds available even for the the "linkify" patents (such as hard-coding the search) and such. Not as flexible and harder to maintain but workable. Likewise, while capacitive multi-touch is nice, it is not the only method that can be used to achieve the same effect.

        Android will live. WP7 will live. iOS will live.

        In all, HTC may be in the best position. If they can strike a deal early (like they did with MS), they may be able to keep Android's royalties down to $10-$15/handset when competitors (like Samsung) pay $25+ handset.
        Bruizer
      • RE: Android vs. Apple and the state of smartphone industry: 4 takeaways

        @toddybottom Yeah uh no. Samsung had a record setting quarter for both its phone divisions and its parts fabrication divisions. Your assertion that Apple's the only company making profit is just false. Motorola's in trouble, but that's because of other issues, not their phone division (hence the profitable spinoff). And HTC is making major $$$ on phones, but is only in trouble with the patent case... It's looking like either there will be a cross licensing deal or those patents may be invalidated.
        snoop0x7b
      • @snoop0x7b: MMI is far from the profitable spinoff

        @toddybottom

        It was spun off because it was and is bleeding money.
        Bruizer
    • RE: Android vs. Apple and the state of smartphone industry: 4 takeaways

      @matthew_maurice <br><br>On the very same day that the ITC said that Apple violated two S3 pattens, the patten office revoked the same two pattens because of prior art.<br><br>So it looks like HTC bought S3 and is still not going to be any better off.<br><br><a href="http://www.scribd.com/doc/60821993/First-Patent-Group-Reexam-OAs" target="_blank" rel="nofollow"><a href="http://www.scribd.com/doc/60821993/First-Patent-Group-Reexam-OAs" target="_blank" rel="nofollow"><a href="http://www.scribd.com/doc/60821993/First-Patent-Group-Reexam-OAs" target="_blank" rel="nofollow"><a href="http://www.scribd.com/doc/60821993/First-Patent-Group-Reexam-OAs" target="_blank" rel="nofollow"><a href="http://www.scribd.com/doc/60821993/First-Patent-Group-Reexam-OAs" target="_blank" rel="nofollow">http://www.scribd.com/doc/60821993/First-Patent-Group-Reexam-OAs</a></a></a></a></a>
      SaxonXXX
    • benefit

      @matthew_maurice
      From a consumer point of view more competition and sharper price are a benefit.
      For shareholders that may be an other story. Still sharper competition should lead to better products and an advantage in the long term.
      Software patents for pseudo inventions are anti-competitive and it is the consumer who pays for that game in the end.
      bezoeker
    • benefit

      @matthew_maurice
      From a consumer point of view more competition and sharper price are a benefit.
      For shareholders that may be an other story. Still sharper competition should lead to better products and an advantage in the long term.
      Software patents for pseudo inventions are anti-competitive and it is the consumer who pays for that game in the end.
      bezoeker
  • RE: Android vs. Apple and the state of smartphone industry: 4 takeaways

    Yup it all comes down to $$$ and that's where Apple will win... they also have iTunes, the number one app and music store in the world and there's only 1 iPhone and as you've heard, most people want to buy the next iPhone which isn't even out yet.
    Hasam1991
    • RE: Android vs. Apple and the state of smartphone industry: 4 takeaways

      @Hasam1991 - Nope, not interested in the Iphone. I've looked it over and it simply doesn't work for me, whereas Android does. WP7 may work, I haven't tried it yet, but my boss had it and tossed it to go to the Droid 2 that I have. With Touchdown, we have a clean Exchange client that works and is secure, Citrix access, and Teamviewer access. I have what I need and it is stable. I don't have Exchange access on Iphone, so it is a non-starter for me.
      bobs@...
      • &quot; don't have Exchange access on Iphone&quot;

        @bobs@...

        Everyone else on the planet does.
        Bruizer
      • RE: Android vs. Apple and the state of smartphone industry: 4 takeaways

        @bobs@... [b]I don't have Exchange access on Iphone, so it is a non-starter for me.[/b]

        How do you not have Exchange access on the iPhone? That's been integrated with iOS since 2x and the ability to have multiple exchange accounts has been part of iOS since iOS3x...

        If you aren't interested in the iPhone that's fine and dandy with me but you "not having Exchange access" sounds like an attempt at FUD IMHO.
        athynz
      • RE: Android vs. Apple and the state of smartphone industry: 4 takeaways

        @bobs@... <br>>>I don't have Exchange access on Iphone, so it is a non-starter for me.<br>lie, total lie and FUD. Like @Bruizer and @anthynz said iPhone has native exchange support at the platform level, unlike Android, where you have to rely on 3rd party software like TouchDown or OEMs agreement with Microsoft like HTC.
        Ram U
  • RE: Android vs. Apple and the state of smartphone industry: 4 takeaways

    I don't think Apple will be able to muscle Android out of the market. But if they do and wind up in too dominant a position I think they'll run afoul of Anti-Trust regulators in Europe.
    MajorlyCool
    • RE: Android vs. Apple and the state of smartphone industry: 4 takeaways

      @MajorlyCool
      Actually Winding Down Android is possible if Oracle proves Google infringed on Java Patents and Apple and Microsoft can pressure the ODMs enough to pay more than $10 per device each respectively, then that bloats the device cost more than $20 and the price of Android will go up. And the lack of governance and regulations on Android Market will kill it because of increase in the malware in Apps and Content and Googles lack of interest in unifying the user experience and making strict about it. Google is just interested in activating more devices per day, so they could target their ads more and more that is the problem. There is a proverb, anything that goes up will come down and that may just happen to Android, if Google is not correcting these.
      Ram U
  • RE: Android vs. Apple and the state of smartphone industry: 4 takeaways

    Unless you display the comparable graphs from 3, 6 months ago, most of your speculation is meaningless (and pointless). It's a fast changing world, and market trends will *always* tell us more than one graph - a snapshot in time. You should know that.
    Heenan73