SAN JOSE, Calif. – Apple has reached a summit in what is becoming a mature smartphone market. Its biggest issue now is whether the rest of the journey is all downhill.
Apple rose from zero to king of the smartphone hill this year, largely on the strength of its realization in the iPhone that the handset is an open mobile Web browser and applications platform. But now competition has become a game of adding incremental features and rounding out product lines, and the competitors are coming on strong.
"Other" is already the biggest player in the category with 20 percent market share and growing at 310 percent a year, according to the latest figures from IHS iSuppli (table at bottom). At number two to Apple, Samsung is coming on strong at an astounding 600 percent growth and is already nearly even with Apple's 18.4 percent share, the market watcher said.
The iPhone 4S launched today proves the smartphone is no longer about big breakthroughs in technology or high concept. It's about smartly taking small steps forward. It is not the first smartphone to sport a dual-core processor, 8 MPixel camera or 1080-progressive video support. Those kudos have already been handed out to its Android competitors.
(It will be interesting to see if my UBM TechInsights colleagues were correct that this is still the Samsung-made 45nm A5 used in the iPad 2, not the 28nm version still reportedly grinding through the TSMC fab. They also predicted an 8MP Omnivision camera and an overall underwhelming iPhone 4+.)
When the thought leader is making only incremental advances that largely catch up with competition, I think it says the thought leader is in trouble.
Even iCloud in some ways is only Apple catching up with Google's online offerings.
Indeed, we can now see it will be at least 2012 before Apple rolls out an LTE handset using near-field communications for mobile payments—big steps its Android competitors have already taken. That's probably the iPhone 5 a year from now, basically a two year old high-end Android handset.
It's also worth noting Apple has not rolled out a low- or even middle-end smartphone to date. That's not the game as Apple plays it. Unfortunately for Cupertino, market watchers agree most of the smartphone growth for the next two years will be in those mid- and low-end segments where Apple won't play.
Others see this, too.
"We expect Apple to continue to maintain its momentum in the smartphone market in the third quarter and beyond,” said Francis Sideco, senior wireless analyst for IHS in comments released just before the iPhone 4S launch.
“However, Samsung has been coming on strong during the last few quarters, driven by its participation in both the high- and low-end smartphone segments," Sideco said. "One of the key indicators of how the smartphone competitive landscape will evolve during the next six to 12 months will be whether or not Apple will continue to stay exclusively in the high-end market,” he added.
That question just got answered by Apple's silence. For my money, the smartphone game is Samsung's, HTC's and Others' game to lose at this point.
That's not to say Apple doesn't have some great things going for it. It's vertically integrated model of owning everything from the A-series processor and iOS to the retail outlet is the envy of everyone in the consumer business.
Also strategic is the way Apple is providing ease of integration across iOS devices with its iCloud services. But an iTunes song on your Mac; it appears on your iPhone. Buy a book on your iPhone; it's available on your iPad.
This is the sort of thing Apple does better than anyone, and it is bound to attract users with Android devices from multiple vendors that don't work together nearly so well—if at all.
No doubt, Apple will gain some growth from such smart user-centric software integration. But it cannot hold off the Android herd forever.
And we have yet to see what Nokia and Microsoft will come up with in the next few months. I don't expect to be blown away, but they have the clout to create an ecosystem that grabs a slice of the expanding mobile pie.
The Kindle Fire could be the first to eat into the iPad tablet franchise in a big way. If Amazon buys HP's WebOS group, its appetite will grow considerably. And Apple can't use court actions to keep the well designed Samsung Galaxy iPad-alike devices out of all markets indefinitely.
I see Apple riding the crest for a few quarters then slowly riding the downward curve awhile. Unless it can grab one more brass ring and help define yet another major digital consumer market in say 2015 or so.
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