Apple's market share might be too high, not too low

For most of the last few years, the discussion of the ‘smartphone wars’ has been couched in terms of market share of smartphones. Yet arguably, this isn’t really the most relevant metric any more. In 2012, around 1.7bn PHONES were sold, of which perhaps 700m ran Android, iOS, Symbian, BB or WP. By the end of the year, or perhaps the first few months of 2013, smartphone sales overtook non-smart unit sales.  Apple‘s market share of total phone sales, meanwhile, is heading up inexorably. (This chart uses estimated Q4 iPhone sales of 50m – it might be 45m, but that wouldn’t alter the point). Apple passed 10% of the market by volume in 2012. The reason that Apple’s unit share in smartphones isn’t growing is because Android is growing too, and faster. But what about revenue? This chart shows Apple’s iPhone revenue as a percentage of the total industry’s revenues. Apple has getting on for 40% of the revenue in the global mobile phone business, and growing.This, of course, is the bear story for the stock: not that it has too little market share, but too much: that Apple sales are already approaching saturation, and there may not be much more growth left. I’m not sure I believe that, but it’s certainly a credible view, given that smartphone sales are now 80% of US phone sales.Right now the other 50% of the handset market – the part that isn’t buying smartphones yet in the first chart – is mainly buying phones for under $100 with no subsidy. The totality of the ‘under $100′ market, in 2012, was worth perhaps $50bn for sales of 1bn handsets, while Apple probably cleared $85-90bn with 140m or so iPhones, at a higher margin.The really interesting question, to me, is how much those volume-at-price patterns can change. After all, before the iPhone no-one sold significant volumes of $650 phones. How many people paying $50 or $75 for a phone might be tempted to pay $150? How many paying $100 might pay $200? What you call those phones is a pointless argument – like arguing over whether Asha is ‘feature’ or ‘Smart’. The ASP and how it changes is the issue. It seems pretty unlikely that very many people buying $25 phone today will pay for a $650 iPhone under any circumstances.
Finally, at this end of the market the Android challenge of ‘low engagement’ changes to a ‘no engagement’ fact: cheap data plans are few and far between in many emerging markets, and even if the operators try, providing a useful amount of mobile data to someone with a monthly spend of $5 to $10 has pretty challenging economics. This, of course, is a major part of RIM’s resilience in some of these markets, and will change over time, but that’s a whole other topic.