First of all, there are strong rumours of a cheap lower specs iPhone coming out. which indicates that they are willing to work with lower margins. And if tablet sales is any indicator of smart phone sales, people will still chose the cheaper iPhone over similar priced Android phones with better hardware specs.
"At some tipping point, it becomes uneconomic to make them, and the trend away from high-priced phones seems to be accelerating. "
Your point about the tipping point is very valid. But the thing is, Apple makes only very limited number of device models, its pretty easy for them to hit this tipping point. Lets take the example of notebooks. Apple has 6 models and all of them share pretty much the same manufacturing process. If you want to buy a good build quality notebook, you will find that Apple's price is cheapest in the category. When I did a comparison myself for an ultrabook, I found the similar quality windows devices cost atleast 2X that of Apple's notebook(thinkpad X1 carbon, sony Vaio a few models). These companies find hard to hit the tipping point because they sell 20 different models.
Inshort Apple will always have the volume for the tipping point.
Inaddition, the only company in smartphone market which has strong brand affinity from its customers is Apple. Samsung/HTC/Sony doesnt have it. People will change Android phones based on who gives the best hardware spec at the cheapest price.
Microsoft has been trying to create the smartphone market since the CE era. Symbian follows. Nokia launched multiple products with Symbian and MeeGo. So is Ericisson. Android came next in 2003 if you still remember the bulky Android smartphone. No products were getting enough attention. At the time, iPhone was no where to be seen.
However, I have to give credit to Apple that successfully creates the smartphone market by training user to use touch screen and by leveraging capacitor touch on a glass screen. The big leap of improvement of user experience comes into place. This makes the legacy of Jobs.
If we look further back in time, Newton is no doubt the first PDA that has ever made. Although the market didn't response well. It did pave the road to the creation of iPhone. To me, iPhone is an evolutionary product starting from Newton to iPod Touch with 3G capability. In between, there are Palm, Windows CE, Symbian and Android.
@Tom Murphy: The article talks about units (market share), I talk about profits, as market share is irrelevant.
So I talk about profits, you start talking about stock market value, which is as irrelevant as market share.
What has market value to do with how good a company performs??? Everybody knows that stock market value is determined by people and companies manipulating stock prices (as they only make money with stock prices going up and down a lot - either way -, as long as stock prices don't stay stable).
What I say in my post is that profits and only profits matter, not market share (or stock market value). Where is the wrong direction you are talking about? Their 12 percent year-on-year growth??? Because other companies except Samsung give smartphones away (as they are not making any profits by selling smartphones), it does not mean that Apple (or Samsung) are going in the wrong direction.
If the lunch does not have variety to cater the entire market segment it will not be accepted by all, Apple has failed to supply the models that can be affordable to different level of purchasers. Most of the others are being able succeed by providing many variant of their models of Smartphone. So it is natural that Apple's Lunch will be surely getting eaten by others.
eewiz: make not mistake....Apple's fat profit margin on its phones are the very reason why it is losing market share. At some tipping point, it becomes uneconomic to make them, and the trend away from high-priced phones seems to be accelerating. By then, the iWatch or another amazing gizmo had better be ready to wow the masses because Apple's future will hang in the balance.
Wondering: Does it make sense that Apple is spending billions on a new corporate headquarters right now? Is it fiddling while Rome begins to smolder?
The only company that has any hope to stand through the coming commoditization of smartphones is Apple.. Sure it will have lower market share.... But so is the case with the pc market. and look what happened. The major share of profits in pc industry is collected by Apple. Dell, HP, Lenovo gets a few leftovers. Rest of them work for free.
WielTukhut: I disagree. With all due respect the great 10-year run Apple had through last year, the company's market value has fallen by 38 percent due to its recent lack of innovation and slowly descending market share. Simly put: there are better, cheaper phones on the market. While Apple continues to collect a nice margin on gear sold to well-heeled fans, it is heading in the wrong direction as others are nibbling around the edges of its lunch, prepared to gobble.
Everybody in the smart phone business knows that market share (units) and profit are two completely different things. You can buy market share, you can't buy profit. Last time I looked, Apple and Samsung had 103% of the profits (so the rest of the firms combined had only losses). Why should Apple be interested in more market share, if more market share means less profit? So nobody is eating Apple's lunch, as nobody eats Apple's profit (as the Apple's shipments are still on the rise).