Apple has its peculiar 'only one new smartphone per year' release cycle, which always produces a weak quarter in the period before the next new model comes out. We knew to expect this Q2 iPhone sales to be less in unit sales than Q1. But I was surprised in how weak Apple's Q2 iPhone unit sales were. Apple did 31.2 million iPhone sales, down 17% from 37.4 million in Q1.
Apple's market share in smartphones is down also, obviously, I have it at a preliminary 14.3% (down from 17.6% in Q1).
All this would be pretty 'regular' news, except for a little historical perspective. When looking at market share, we have now seen 3 consecutive quarters where Apple's market share has declined, when compared to the same period 12 months before. That has never happened to Apple before. And now for the first time ever, the 12 month rolling average market share for Apple has fallen. Yes, even as we still include the very strong Q3 results from 2012, with the next 3 quarters all producing declining market share, the annual rolling average has fallen to 19.6%.Yes, it's only a tiny decline, from the peak we saw last quarter of 19.7%, but yes, this has been expected for a while. I was the first to suggest we will see 'peak iPhone' but I was obviously wrong (too early) with the timing…
Yet this moment was inevitable, due to Apple's strategy of skimming the top-end of the market. The unsubsidized price of the iPhone is consistently above 600 dollars when the global average price of all new mobile phones sold (smart and dumb) is about 50 dollars. And Apple's share of the global handset market has been stable at about 5% to 7% for several years now.
So here is the market share trends for the past 3 years, by quarter. Note that I use the standard calendar quarters, not the 'fiscal quarters' which Apple reports which are offset by one period.
Calendar quarter . . 2009 . . . 2010 . . . 2011 . . . 2012 . . . 2013
Q1 . . . . . . . . . . . . 10.8% . . 16.0% . . 18.4% . . 23.9% . . 17.6%
Q2 . . . . . . . . . . . . 11.7% . . 13.6% . . 18.7% . . 17.0% . . 14.3%
Q3 . . . . . . . . . . . . 17.4% . . 17.6% . . 14.3% . . 15.7% . .
Q4 . . . . . . . . . . . . 16.1% . . 16.3% . . 23.4% . . 22.0% . .
I have indicated in red each quarter, where - compared to the same quarter 12 months before, the current quarter has lower iPhone market share. Note that up to 2010 this never happened. In 2011 it was once out of four, in 2012 it was half, two out of four. Now in early 2013, it has been both 2 of 2 reported quarters. The signs are very strong we have seen 'peak iPhone' and that on any rolling-12-month period coming in the future, Apple will not breach 20% global market share in smartphones. Its peak was 19.7%, while on an individual quarter performance their quarterly peak was reached in the first quarter of 2012 when the iPhone hit 23.9%.
The above is further proof that Apple should split its product line and introduce a lower-cost iPhone aimed at the emerging world markets and those customers who can't afford the current prices. Alternative case scenario is that the company could suffer the perennial story of 'again falling market share' which it seems now doomed to experience, with its one-model-per-year high price iPhone strategy.
Just for the record, yes, there is the iOS ecosystem which includes the iPad, and that is always larger than just the smartphone market. I do not report on the tablet market except in occasional observations, so this blog looks only at the smartphones.
Yes, Apple reported very large profits again, that is to be expected and it continues the enormously strong loyalty Apple has by its users, for its brand. Where most handset makers struggle to remain profitable, many report long stretches of losses, the iPhone remains the dominant smartphone in terms of profitability. But Samsung is running away with the smartphone market - by a strategy of a wide selection of smartphones (on several platforms too)
Is it high time for Apple to give us the 'iPhone Nano' as I have argued on this blog for many years now? The reality is that the company sells three generations at the time (iPhone 5, iPhone 4S and 4) but the markets are obviously not biting hard anymore. And unless Apple splits its product line this year, the signs look very alarmingly that we will see the first year when Apple's iPhone market share in smartphones actually falls.
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