Three Guys and a Podcast

Three Guys and a Podcast: Apple News & Analysis

December 03, 2013 at 1:44pm Pacific Time
by: Mark Reschke
Categories: iPhone

Iphone_factory_galThe world seems a blaze with Android news, and for good reason — Android is everywhere on almost every type of device imaginable. Android also creates a media frenzy, allowing any business to make news with their shiny new gadgets. This is perfect for sites like c/net and engadget whose lifeblood relies on a constant flow of shiny new devices to talk about. But for all the Android devices roaming the planet, only a scant few are making Google or the hardware makers a dime. On the other hand Apple continues to increase sales of their iOS devices and pull in a stunning average selling price (ASP). and margin. How can it be that Apple is expanding iOS sales with Android dominating everywhere?

Market share and any individual company’s sales are two completely different areas of discussion. Apple continues to grow their iOS world, just not at the same pace that Android has, and is, growing the middle to low-end market share.

Apple's strategy is playing out in the U.S. market first, world-wide second. Depending on which report one leans on, Apple holds anywhere from 40% - 53% of the U.S. smartphone market. The key for Apple is that their U.S. market share continues to grow, while the overall fragmented Android deployments continue to shrink. This isn't a one quarter burst, but a trend that has been taking shape for over a year. Android has exploded in world-wide sales, but as users expect more from their mobile devices, users will begin to shift purchases to the more stable and consistent iOS platform. 

Japan is the next market to be making the shift from Android to iOS, as Softbank and now NTT Docomo are both selling the iPhone in amazing volumes. According to Kantar Worldpanel ComTech, Japan's October iPhone sales represented 76% of all smartphones sold in the country. Just like the U.S. which saw an initial rise in Android devices, the trend has shifted to iPhones moving into the majority position of sales.

As Asia continues to grow their middle class, people's tastes and appetites for higher end products also increases. iPad mini with Retina display orders are said to be increasing well past the original iPad mini launch. The research firm Canalys recently released data indicating Apple's strengthening position in the tablet space due to the iPad Air and iPad mini with Retina display. Lorraine Luk of the Wall Street Journal reports that Foxconn is burning the midnight oil, working to churn out 500,000 iPhones 5s smartphones per day in order to fill demand and prepare for China Mobiles launch on December 18.

The math reveals a shocking statistic. Based on 500,000 iPhone 5s' produced per day, that equates to 45 million iPhone 5's built per quarter. This does not include the iPhone 5c or iPhone 4s figures which look to add at least another 10 million in sales in any given quarter. China is poised to become the next major country to cause the iPhone rise and Android smarphone decline. Apple may never achieve 50% of China market share due to economic factors, but Apple is likely to occupy the mass majority of high-end smart phone sales, representing tens of millions of new iOS sales, and a market share that drives developers and high stakes relevance into the region.

Can all this iPhone activity add up to Apple climbing over the 50 million iPhone sales figure for the December quarter? Not likely, as ramping of the iPhone 5s was, and is apparently, still taking place. However, with China Mobile launching just ahead of the Chinese New Year (December 18, being their equivalent of of the U.S. Black Friday), coupled with world-wide supply finally catching up with demand, the March 2014 quarter is likely to be Apple's first 50 million iPhone quarter.

As the rest of the world catches up with the U.S. moving past their first and second generation smartphones, constantly upgrading to higher end devices, iPhones will be there, waiting for those markets to move north en mass. The question will no longer be whether Apple can break the 50 million iPhone barrier, rather, the talk will be as to what year and quarter Apple will hit the 100 million marker. By this point, Android will likely be resigned to working along side thise Linux-based toaster ovens.

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