Apple’s iPhone strategy is simple. Premium phones. That seems to be working rather well for Apple despite directives from the technorati elite and market prognosticators that the company must cut iPhone prices or fall at the feet of the growing Android hegemony. The most recent estimates give Apple more than 90-percent of the entire smartphone industry’s profits, not just the premium device segment.
In fact, profits are so meager and scarce for Android smartphone makers that Charles Arthur opines that premium Android smartphones have hit a wall, and backs up his premise with a table that displays each maker, approximate revenue, and operating profits.
Actually, that should be operating losses because only Samsung is making any money selling Android smartphones, whether in the premium end of the spectrum or not. Even worse, Android smartphone makers are selling fewer devices this year vs. last year.
What’s going on?
While these are estimates from educating guesstimators, no one is denying their accuracy. That’s telling. Meanwhile, Apple continues to sell more iPhones than ever, which tells me the aforementioned technorati elite and market prognosticators don’t have a clue when it comes to knowing what’s going on in the industry.
What’s the problem?
I view this whole situation of profitability vs. unprofitability between iPhone and Android devices as more akin to the Windows vs. Mac wars of yesteryear. There are two things to remember about these ongoing battles. First, they’re not apples to Apple. Windows is an operating system and the Mac is a computer brand which, importantly, runs OS X and not Windows. Second, Windows PCs are not easily differentiated between each other, but Apple has done an excellent job differentiating the Mac as a premium, secure, friendly, and durable device.
So it is with Android devices and the iPhone. It’s not apples to Apple. Android is an operating system and the iPhone is a smartphone brand which, importantly, runs iOS and not Android OS. So, Android devices are not easily differentiated between each other, hence the race to the bottom of the pricing spectrum by manufacturers who can only compete on price. That leaves Apple alone at the premium end of the product spectrum, and, just like the Mac, that’s where the profits are.
The question I have is this. Why don’t members of the technorati elite and market prognosticators who track and analyze such situations understand that?