Android Leads Inevitable March Towards Smartphone Commoditization

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Includes: AAPL, BB, GOOG, MSFT, NOK
by: Joel West

Had meant to write Tuesday about the latest quarterly market share data for Android, but it got buried in between grading, meetings and of course watching the election.

Perhaps more significantly, what can you say? Android market share is monotonically non-decreasing, so every quarter the Google (NASDAQ:GOOG) -controlled alliance gets more good news.

Still, the Canalys Q3 estimates were impressive:

Platform
US
World
Symbian
n.r.
33%†
Android
43.6%
25%
iPhone
26.2%
17%
BlackBerry
24.2%
15%
Windows
3.0%
3.0%
Other
3.0%
Total
80.9m
† “Nokia (NYSE:NOK)”, not “Symbian”


Apple’s (NASDAQ:AAPL) smartphone share has clearly peaked. The iPhone is losing to Android despite its obvious advantage on two key metrics — ease of use and variety of applications. Instead, all that matters are product proliferation and distribution — there are dozens of Android phones at various price points from all the major carriers. You want a keyboard? Or no keyboard? Big screen or small screen? Android offers these choices and iPhone doesn’t.

Adding Verizon (NYSE:VZ) someday isn’t going to change this. And as the dumbphone dies and every phone becomes a smartphone, Android will gain share in the segments Apple is ignoring. Android has made the smartphone a commodity — an adequate OS is no longer an entry barrier — consigning the iPhone to the top 10% niche of buyers willing to pay a premium for better quality.

Meanwhile, Nokia (NOK) has knifed the Symbian baby by sacking most of the engineers it hired after losing the allies that once vowed to support it (before Android caught on.) Its current path seems to be using its proprietary QT APIs to migrate developers off Symbian to Meego, its proprietary Linux that competes with Google’s slightly less proprietary Linux.

In the near term, the story for Apple on tablets is much more promising, as latest estimates show it with a 95% worldwide market share. (The figures are misleading since it excludes e-book readers, and the Nook Color shows there is no clear boundary between the two categories.)

In Apple’s favor is that unlike cellphones, there is no need for the needless variants and pseudo-differentiation that we see because network operators control nearly all the cellphone distribution. As with the iPod, Apple could conceivably keep a 50+% market share in tablets, assuming it overcomes its irrational (and Newton-like) aversion to smaller tablets and aggressively engages in product proliferation as it does with the iPod.

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