Apple's iPhone Battle Plan: 6 Factors - InformationWeek

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8/21/2013
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Apple's iPhone Battle Plan: 6 Factors

Apple's forthcoming iPhone 5S, iPhone 5C and iOS 7 could help the company win back some of the market share it has lost to Android devices.

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On Sept. 10, Apple is expected to release new iPhones as well as iOS 7. That Apple will make billions is a foregone conclusion -- but the devices will nonetheless face intense pressure and tough scrutiny.

There's good reason. To an extent, Apple can afford for the iPhone to trail Android in market share. But research firm IDC said Android accounted for almost 80% of smartphone shipments in the most recent quarter, which means Apple's not just trailing -- it's getting killed. CEO Tim Cook is reportedly under pressure from the company's board, which is allegedly "concerned" that Apple's innovation has slowed under his leadership.

Despite the doom and gloom, several reports indicate that Apple continues to win the smartphone battles that matter, and that it's well-positioned, with the upcoming releases, to improve its few weak points. Will Apple gain back some of what it's lost to Android, and can it fend off rising momentum from Windows Phone 8? Here are six considerations.

1. Apple beats all comers in the premium market, including Samsung.

As Android has devoured iOS's global market share, analysts have frequently commented that it is low-budget devices in emerging markets that account for much of Android's gain. Outside of low-cost models, Apple has retained an edge, but has still given up ground to premium Android phones such as Samsung's Galaxy series.

[ What killed the BlackBerry? Read BlackBerry's Collapse: 5 Key Mistakes. ]

How much premium ground has the iPhone lost? Based on an Aug. 5 note by investment research firm Consumer and Intelligence Research Partners (CIRP), Apple's still holding its own; over the last year, 78% of iPhone users upgraded to another iPhone, but only 67% of Android users upgraded to another Android device. CIRP derived its numbers from quarterly surveys conducted within the U.S., which, as a mature smartphone market, bears a strong influence on premium device sales.

In addition to better retaining customers overall, Apple also appears to have had an edge among high-end shoppers. According to CIRP, those buying a smartphone for the first time preferred Android to iOS by a wide margin, 56% to 35%. Those upgrading from another smartphone, however, preferred iOS 49% to 46%. First-time buyers tend to be less affluent, and to go for budget devices. Longtime smartphone owners tend to be more affluent, and to maintain or improve the luxury of their devices.

An Aug. 12 CIRP note added more context. It found that whereas 20% of Apple's customers come from Android, only 7% of Samsung's customers come from iOS. This is despite the fact that Samsung, according to IDC, now represents half of all Android shipments. Samsung users were also less likely than iPhone users to upgrade within the same brand.

2. Apple already achieves excellent product margins -- and they're about to get better.

Many Android OEMs have gained customers, but because most of them have done so by basically giving away phones, Samsung is the only one making profits.

Apple, in contrast, has built its empire on stellar profit margins; it's the only smartphone player reaping more profits than Samsung. Apple accomplished this, despite seeing its margins fall, because more users are buying discounted versions of Apple's older iPhone models, instead of the newest, most expensive edition.

According to ISI Group analyst Brian Marshall, Apple's low-cost iPhone 5C could boast higher margins than Apple currently is achieving with its discounted versions of older phones. By displacing low-end and mid-range sales with the higher-margin 5C, Apple will profit even if sales don't increase -- and they almost certainly will.

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Michael Endler
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Michael Endler,
User Rank: Author
8/22/2013 | 4:50:28 PM
re: Apple's iPhone Battle Plan: 6 Factors
A note from the CIRP study: The data suggests iPhone users are more likely to own Macs, which is predictable, but it also suggests many iPhone users own Macs AND Windows PCs. The rate of Mac/Windows dual ownership was lower among Android users. I found this interesting. It could speak to the appeal and convenience of multiple Apple devices. That said, without more data (e.g. where did the Windows PC and Mac purchases fall relative to the purchase of iOS devices, etc.) it's hard to tell.
Laurianne
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Laurianne,
User Rank: Author
8/22/2013 | 2:54:26 PM
re: Apple's iPhone Battle Plan: 6 Factors
These "customers everyone wants" also value the convenience of the multiple Apple devices in their homes, iTunes, iCloud. It's just easy. Android hasn't matched that yet -- nor does it offer a genius bar equivalent.
Shane M. O'Neill
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Shane M. O'Neill,
User Rank: Author
8/21/2013 | 9:48:17 PM
re: Apple's iPhone Battle Plan: 6 Factors
Android may be winning the market share race, but Apple owns the affluent, brand-loyal, educated consumer. "The customers everyone else wants," as the article points out. It's a good place to be and should guarantee iPhone stability. But what's Apple's plan for longevity and growth? More awesomeness?
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