Addressable markets for high-end phones

There are all sorts of ways to estimate the addressable market for a high-end phone like the iPhone. One way is to look at price sensitivity, the propensity of lower income groups to spend on expensive entertainment products and how that might be affected by the increasing capabilities of cheaper devices. Another is to look at the mobile operators that do and do not actually offer the iPhone, which gives you a figure for people who cannot in fact buy one, at least on subsidy, even if they want to (assuming they're not willing to switch operator). 

However, it seems to me that the central issue in sales of the iPhone and other high-end models is the availability of subsidies themselves. After all, if a phone is good enough for consumers to want it and the OEM has the scale and budget to provide it (an issue for some) then distribution is just execution and time, not a fundamental constraint. Ability to pay, too, is a moving target: people substitute spending for products they really want, and $600 isn't that much money over two years for a large proportion of the world's population. 

So actually, the real questions are the big numbers: how many people are getting subsidies? How many are buying phones? 

Hence, my first chart shows just how the smartphone install base compares to the total global population. 

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There were about 5.2bn adults on earth at the end of 2012. Of those, around 3.2bn had mobile connections, though not necessarily phones (some people have a SIM but no phone, and many have multiple SIMs, which is why the number of connections is well over 6bn). Within that, roughly 1.1bn had 'smartphones' at the end of 2012, of which around 900m ran either the iOS or Android versions of Unix. (As an aside, it is pretty striking that almost a fifth of the earth's adult population has a Unix box in their pocket.)

So how does that relate to contracts, and hence subsidies? According to my old colleague at The Mobile World, there were around 1.6bn contracts in place at the end of 2012. 

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For now, the overall smartphone base remains below the contract base, though it is growing fast. But the non-contract portion of the world's population is much bigger. If I turn the chart upside-down the point is clearer. 

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At the end of 2012, 2bn adults had yet to buy a mobile connection of any kind, and another 1.6bn were on prepay and not eligible to get subsidies. It doesn't matter how many operators Apple or Samsung puts on distribution: those people are not going to buy a $600 phone.

However, that leaves about 1.6bn who might.