I published a note for Enders subscribers at the end of last week, and I wanted to capture a few of the more striking points here.
First is a chart about Apple’s scale. There are a lot of these floating around, but this one is a favourite. I’ve taken annual (calendar year) revenue at five year intervals and adjusted for inflation (BLS data), so these are all in 2010 dollars.
Apple’s explosion is of course astonishing, but almost as surprising is the growth at Microsoft. This is, after all, a company that’s done almost nothing interesting since about 1995 - yet revenue is up 6x. This year, Apple will have both more revenues and more profits than Microsoft, and more phone revenue and profit than Nokia.
Second is a diagram that I think is useful in understanding the competitive dynamic between Apple and Android.
The point of the diagram is that it is quite possible to make a phone for substantially less than the iPhone’s ~$600 ASP and still have a pretty good experience. Indeed Vodafone is about to launch an Android phone (manufactured by Huawei) for just £90 ($140) with no contract. It isn’t as nice as an iPhone but it’s perfectly usable. In the next couple of years something like half the western European and US population will get phones like these.
Conversely for a tablet this looks very different - the iPad is about as cheap as it is possible to make a decent tablet. Tablets that are cheaper are pretty much worthless except for very limited use, and the usual suspects that try to compete directly with Apple (Samsung, HTC, Motorola et al) are actually selling their tablets at higher prices than the iPad.
In other words, Apple is bound to end up with a minority of the smartphone market unless it sells a cheaper phone (whether that matters to Apple is another question). But the iPad is both the best and the cheapest product on the market, a quite different dynamic, and that means its market share might be much larger for much longer.