Apple Inc. is clearly the most important player in the world’s smartphone industry, but the firm still hasn’t convinced everybody that the iPhone is worth splashing out on. The latest report from Strategy Analytics shows that Apple now has more than 10 percent of the global smart phone market. That means that nine out of ten people still don’t think the iPhone 6 is the best option for them.
In the second quarter of the year Apple grew its smart phone market share by 35 percent to 10.9 percent. That’s up from 8.2 percent in the same three months of last year. The question is how, or whether, the firm plans to reach the final 90 percent of people that simply can’t see the worth in owning a phone designed by Apple.
Apple works on market share
Most of this comes down to price, of course. Apple charges a much higher average price for its phones than any other mass-market seller. Neil Mawston, who put together the report, said “Apple outperformed as consumers in China and elsewhere upgraded to bigger-screen iPhone 6 and 6 Plus models.”
Samsung Electronics Co Ltd remained the top smart phone vendor in the second quarter. It held 20.5 percent of the market, down from 22.3 percent in the same three months of 2014. The Korean firm sells a wide range of firms, at a wide range of prices. Apple could, but won’t, compete with the firm in those markets.
The other players are fighting for scraps at the lower end of the market while Apple has almost complete control of sales at the $600+ level. That’s why the firm has around 92 percent of the profits from the entire smart phone market with just 11 percent of the market.
Microsoft Corporation, which plainly gave up on becoming a major smart phone player in the June quarter, slipped to fourth place in world phone sales. Huawei, a Chinese phone maker that marks that nation as its major market, is now the third biggest player across the globe.
Apple beats them all
iPhone growth is set to slow in the coming year if the forecasts of Wall Street are to be believed. Apple eluded the wider slow down in the market over the last year, and those with shares will hope that Tim Cook can manage that feat once more.
In the twelve months through June 2015, sales of smart phones across the globe grew by just 2 percent. Sales of Apple phones grew by more than 30 percent in the same period.
Huawei was the only other notable grower in the three months. The firm secured 7 percent of the global market and placed in third. In the same three months of 2014 the firm sold 20.6m units. In the second quarter of 2015 Huawei managed to sell 30.6m smart phones.
Phil Schiller, Apple head of marketing, made growth happen by doing something Wall Street thought impossible. He made more than 10 percent of the world’s smart phone buyers go to Apple first.
Apple puts a cap on growth
There’s a certain cap on the number of iPhones that Apple can sell. According to data from the world bank, 11 percent of the world’s population has an average income of $15,000 or more. In the second quarter, that’s the same portion of the smartphone market that Apple had.
Sherri Scribner of Deutsche Bank said that she expects the iPhone to “underperform the overall market’s growth as we anniversary the iPhone 6 launch.” Scribner reckons that the outsized sales of the iPhone 6 were down to pent up demand for an Apple smart phone with a bigger screen.
Apple knows that the last 90 percent of the world’s population is mostly impossible to reach. That’s why the firm is looking for growth by taking more money from the 11 percent who already buy an iPhone.
With the launch of Apple Music, Apple Pay, and the growth of the App store, Apple is trying to increase the revenue it gets from the sale of each new iPhone. Brian White of Cantor Fitzgerald calls the process “Planet Apple,” and he has a $195 price target on shares because of his belief in that plan working.
The Apple Watch, an add on that’s useless without an iPhone, is the most blatant attempt at that. In the first three months of sale the device added more than $1B in sales to Apple’s numbers. That’s expected to grow as the device improves, and Apple refines its sales technique.
Apple has no plan for the last 90 percent
Apple may be able to increase its smart phone market share by another couple of points, but it’s clear that the firm doesn’t really have a plan to reach the 90 percent of the world’s population that don’t own an iPhone.
Despite rumors over the years that Apple would release a cheaper iPhone, the firm has never come close to putting anything affordable on the market. The last release with a lower price target, the iPhone 5c, came up short and rumors suggest Apple won’t be trying again when it launches the iPhone 7 later on this year.
Apple doesn’t seem to want to have anything to do with the 90 percent of the world that still hasn’t bought into the iPhone. The firm is planning on selling more to the people with money to pay for its devices.
That’s what the new service-facing Apple is about, and why the firm’s only new product category is an iPhone accessory rather than a full blown device of its own. Apple is also branching out into the home with its HomeKit devices, though we won’t see the firm push those fully for another year at least.
As more people across the globe get wealthier and buy more costly phones, the firm will see a disproportionate number of them buy the iPhone, but they aren’t going to chase people with little to spend just in order to boost total market share.
Chasing after the slim profit in those markets if for firms like Samsung and Huawei. Apple has no interest in areas where there’s little profit to be made, so it’s turning to current iPhone users in order to take more of their annual spend on entertainment, and electronics.
Apple has already convinced a lot of the world’s poorer people that the iPhone is worth spending money on. The limits on those tactics are clear, however, at a certain income level people just can’t buy an iPhone no matter how good the device is compared to a $50 smart phone.
Apple has no interest in the 90 percent of the world that can’t afford the iPhone, and unless something changes in the coming years Tim Cook and his team aren’t going to be offering them anything any time soon.