The Mobile Wars: 2015-2020 (Part 1)
The end of 2014 is near and the product launch cycles for the major mobile manufacturers have ended. The biggest launches in recent months, Apple's iPhone 6 and iPhone 6 Plus, as well as Samsung's Note 4 and Note 4 Edge, have already reached plenty of markets around the world.
While Apple and Samsung continue to dominate profits and market share, the questions that everybody is always asking are: (a) how long can Apple and Samsung sustain their positions at the top of the market? and (b) What will be the fate of the second-tier players like Huawei, Lenovo, Xiaomi, HTC, Sony and LG? The following is my take on what might happen in the next 5 years in the mobile space. There will necessarily be a lot of assumptions and conjecture, as with all opinions of such nature. And I will try to spell them out clearly so that you, the reader, can assess for yourself whether they make sense or not.
Apple
Apple will continue to sit pretty and generate the lions' share of profits for the next few years. The logic is simple: unique amongst all the smartphone vendors fighting for a slice of the pie, Apple owns its own ecosystem, from the platform to iTunes (music, movies, books, apps). Barring a major disaster (the U2 album and the iCloud hack do not count since there has been no lasting financial or PR impact), Apple will continue to mint money here and make its products as sticky as always. Furthermore, its practice of not discounting consistently means it will generate a higher margin than its competitors as each iteration of iPhone and iPad moves through its lifecycle. Additionally, as production runs continue, it is usually the case that the production cost per unit of iPhone and iPad will get lower (to a point). I would speculate that Apple might possibly generate higher per unit margin in the second and third quarter of a particular model's sales cycle.
Where market share is concerned, Apple continues to hold its own (and sometimes, it even increases) market share in the USA, its worldwide market share is trending down.
This last point must be especially troubling for Apple as the emerging markets are where the smartphone markets are growing. While Apple has demonstrated that it continues to hold a large and significant percentage of the population in developed markets in its thrall, it has struggled in markets where median income ranges from a couple of hundred to a thousand US dollars a month. With household incomes at that level, it is hardly surprising that people in these markets can't and won't spend a month's income (or more!) on an iPhone or iPad. The alternative for them? A cheap Android handset that retails for USD150.
Even so, there might be a silver lining for Apple in emerging markets, namely through the trade in used handsets. To date, I have not seen any attempt to discover how many used handsets are being traded around the world. Yet, personal experience tells me there is a large and lively trade for such devices in countries where people cannot afford the most expensive products. But while these provide consumers in emerging markets the means to get a hold of Apple products, the danger for Apple is that there isn't a means to monetize these transactions. Furthermore, while Apple can track (and earn) from transactions through iTunes even for used handsets, it is more likely that such handsets are jailbroken and therefore bypass Apple's own ecosystem altogether.
To sum up (ceteris paribus), Apple's ownership of its ecosystem, together with its loyal following in developed markets, will stand it in good stead to remain a key player in the smartphone and tablet market in the next 5 years. Beyond that, as emerging markets develop and incomes grow, the question remains whether Apple will be a key player, or simply a sideshow.
And of course, it goes without saying, there could be another player coming along with the next 5 years that provides starry-eyed consumers with something that's out of this world. In which case, all bets are off.
More to come in subsequent posts.
- WG
"Open your eyes, the world is not what it seems"
Disclaimers:
1. Opinions expressed are my own.
2. This is not an academic work and neither am I a journalist so I won't be posting sources. In any case, my comments are based on my own observations and experience, mixed in with the news that's being reported. Conclusions are my own (as far as I know).
3. This post is not 'sponsored' in any way, no money or gifts changed hands for this posting. If a post is 'sponsored', I will clearly state so at the beginning. Feel free to comment if you disagree with anything I've said
The end of 2014 is near and the product launch cycles for the major mobile manufacturers have ended. The biggest launches in recent months, Apple's iPhone 6 and iPhone 6 Plus, as well as Samsung's Note 4 and Note 4 Edge, have already reached plenty of markets around the world.
While Apple and Samsung continue to dominate profits and market share, the questions that everybody is always asking are: (a) how long can Apple and Samsung sustain their positions at the top of the market? and (b) What will be the fate of the second-tier players like Huawei, Lenovo, Xiaomi, HTC, Sony and LG? The following is my take on what might happen in the next 5 years in the mobile space. There will necessarily be a lot of assumptions and conjecture, as with all opinions of such nature. And I will try to spell them out clearly so that you, the reader, can assess for yourself whether they make sense or not.
Apple
Apple will continue to sit pretty and generate the lions' share of profits for the next few years. The logic is simple: unique amongst all the smartphone vendors fighting for a slice of the pie, Apple owns its own ecosystem, from the platform to iTunes (music, movies, books, apps). Barring a major disaster (the U2 album and the iCloud hack do not count since there has been no lasting financial or PR impact), Apple will continue to mint money here and make its products as sticky as always. Furthermore, its practice of not discounting consistently means it will generate a higher margin than its competitors as each iteration of iPhone and iPad moves through its lifecycle. Additionally, as production runs continue, it is usually the case that the production cost per unit of iPhone and iPad will get lower (to a point). I would speculate that Apple might possibly generate higher per unit margin in the second and third quarter of a particular model's sales cycle.
Where market share is concerned, Apple continues to hold its own (and sometimes, it even increases) market share in the USA, its worldwide market share is trending down.
This last point must be especially troubling for Apple as the emerging markets are where the smartphone markets are growing. While Apple has demonstrated that it continues to hold a large and significant percentage of the population in developed markets in its thrall, it has struggled in markets where median income ranges from a couple of hundred to a thousand US dollars a month. With household incomes at that level, it is hardly surprising that people in these markets can't and won't spend a month's income (or more!) on an iPhone or iPad. The alternative for them? A cheap Android handset that retails for USD150.
Even so, there might be a silver lining for Apple in emerging markets, namely through the trade in used handsets. To date, I have not seen any attempt to discover how many used handsets are being traded around the world. Yet, personal experience tells me there is a large and lively trade for such devices in countries where people cannot afford the most expensive products. But while these provide consumers in emerging markets the means to get a hold of Apple products, the danger for Apple is that there isn't a means to monetize these transactions. Furthermore, while Apple can track (and earn) from transactions through iTunes even for used handsets, it is more likely that such handsets are jailbroken and therefore bypass Apple's own ecosystem altogether.
To sum up (ceteris paribus), Apple's ownership of its ecosystem, together with its loyal following in developed markets, will stand it in good stead to remain a key player in the smartphone and tablet market in the next 5 years. Beyond that, as emerging markets develop and incomes grow, the question remains whether Apple will be a key player, or simply a sideshow.
And of course, it goes without saying, there could be another player coming along with the next 5 years that provides starry-eyed consumers with something that's out of this world. In which case, all bets are off.
More to come in subsequent posts.
- WG
"Open your eyes, the world is not what it seems"
Disclaimers:
1. Opinions expressed are my own.
2. This is not an academic work and neither am I a journalist so I won't be posting sources. In any case, my comments are based on my own observations and experience, mixed in with the news that's being reported. Conclusions are my own (as far as I know).
3. This post is not 'sponsored' in any way, no money or gifts changed hands for this posting. If a post is 'sponsored', I will clearly state so at the beginning. Feel free to comment if you disagree with anything I've said
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