2012 Apple Strategy: Split OR Steal?

Reading the “For Apple it’s SplitWatch” post on the Communities Dominate Brands Blog I find myself for the first time having a slight disagreement with the suggestion of my favorite mobile industry analyst Tomi Ahonen.

Tomi’s predicting that Apple would do best in 2012 by splitting the range and introducing an entry level iPhone. Key points:

> Apple’s smartphone market share has plateaued (at about 17% of the global smartphone market)
> Growth is now virtually flat for 2 years (growing annually in 2010 and 2011 at the rate it had been growing per month in 2008 and 2009).
> Apple has exhausted all other options short of splitting it’s model range

I think this is a great opportunity (and Apple would do very well to seize it) but I wonder if there is a much bigger and more aggressive opportunity that only Apple are positioned to take and that would open up longer term opportunities and give them even more dominance by not playing fair with their operator partners and taking more of the premium smartphone revenues from the operators (or “stealing” as per the style we see exhibited by the younger contestant in the above video)?

First I completely agree that the reason for the iPhone 4S sales plateau today globally is its price. I also agree that there is a natural ceiling to the global market for luxury things like Rolls Royces, but ‎I don’t see brands like Rolls Royce heading down into the larger ‘premium’ market before they’ve capitalised on the luxury market with bespoke accessories, financing, servicing, warranty packages, approved used sales, etc, etc and it’s in a similar opportunities that I think lies Apple’s best opportunity to grow.

I’m challenging the predictions of the mobile industry’s guru here so here’s some points I think are worth noting (please note I know mobile industry people are more than aware of these I’m just listing them for other readers):

> Unlike Rolls Royce I don’t think Apple’s hardware has a significant premium edge to it over mass market smartphone competition (eg. the Samsung Galaxy range) that will enable it to differentiate on hardware design for much longer.

> Apple may have only 17% of the smartphone customers BUT they make over half of the profits in the entire cellphone manufacturing industry.

> 78% of global mobile industry revenues are still made by the service providers. Whilst mobile operators may look like they’re getting a short straw every time they pay Apple a $600 subsidy for an iPhone it’s important to see the lifetime costs AT&T extracts from the customer (typically several thousands of dollars over a couple of years).

> Apple has prior form for this taking value added service revenues eg. when it launched iTunes it billed for content that was formerly billed by mobile operators, iMessage is taking SMS revenues, FaceTime is offloading calls onto network independent WiFi, etc

> The growth of sales of dual sim devices from competitors (eg. Samsung’s Duos devices) are creating a need to follow suite and innovate in this area. This issue will be highlighted in 2012 as 4G data experiences start making their way to customers using multi-3G-networked Smartphones.

> Market analysts are now agreed that Apple’s shelved plans for the iPhone 5 happened because Operators threatened to completely remove their retail support for the devices. As a result of this we now see leading mobile retailers completely obscuring the iPhone (the no.1 selling Smartphone in the UK) from their store frontage etc.

There is no doubt that Apple’s continued sales success (shown in it’s ability to continue to sell devices despite a huge withdrawal of support from the telcos) is a vote of confidence that it is now powerful enough and has enough brand loyalty to completely reform the mobile industry with a direct to consumer value proposition.

I personally think loyal Apple customers will quite like the idea of buying minutes, texts and data plans from the AppStore especially when bundled with competitive prices, Apple Store sales processes, device leasing options, extended warranties/insurance, presence enabled calling/messaging and the end of all those ridiculous roaming penalties.

As iMoney eventually emerges the ability to have tight integration of your device, location, presence, identity etc is going to have massive fraud control implications and I think mHealth developers will be equally well placed to leverage these.

There is no doubt that 2012 will be another bloodbath in the Smartphone market whether Apple with Split or Steal is still uncertain but my bets are on it behaving true to form and stealing more of the value that’s generated from the telecom needs of the worlds most affluent mobile subscribers…

About David Doherty

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1 Response to 2012 Apple Strategy: Split OR Steal?

  1. Pingback: What happens when you can no longer sell mobile services? « mHealth Insight: the blog of 3G Doctor

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