The first is revenue. The 28% of the market that Apple has also represents the majority of total 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).
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:
- 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.
- 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.
- 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.
- 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.
