Market Share isn’t Everything

In fact, Nokia, Samsung and LG combined sold roughly 400M mobile handsets worldwide in the first half of 2010 with a combined value share of 32% of handset industry profits, while Apple sold roughly 17M units over the same time period and captured an estimated 39% of industry profits, or greater than the top three global handset OEMs combined. Apple leads the industry in every metric except for unit share…

Apple figured out a long time ago that you can easily make money without having the most popular product. Just make sure you have the most profitable product. And profitable doesn’t necessarily mean “most expensive” either.

Personally, I think market share is a crock. The method of counting is always skewed. With PCs, they count all sorts of products, like cash registers at supermarkets, and other types of machines that Apple doesn’t even make, as PCs. And they compare Apple with every other manufacturer combined, since all those other manufacturers make Windows machines. You rarely see comparisons between Apple sales and Dell sales, for instance.

For this reason, most people still believe that only about 5% of people have Macs in their houses. That’s never been true, and is far less true today than it was ten years ago. Macs are still far from the majority, but they have a lot more share than we’re led to believe.

With phones, every single type of Android phone is counted as one item vs. the one iPhone. As if Android phones really had that much in common. They never show you a chart with the Droid X vs. the iPhone. Or the Nexus One vs. the iPhone. Any such chart with any other single device would be an embarrassment next to the iPhone.

Sooner or later, all these other manufacturers are going to figure out that even with the free Android, they still can’t make a whole lot of money on phone sales, no matter how many they sell. The only company benefitting from Android is Google. It’s not a mutually beneficial relationship to HTC, Motorola, etc.

Some are saying that soon the iPhone will shrink down to a 5% market share, just like the Mac. Even if that were true, Apple would still make plenty enough profit to keep making iPhones. But it won’t be true, because Android phones (and Windows 7 phones, and RIM phones, etc.) can’t beat the iPhone on price. At least not by much. Phones are pretty much $200 with a 2-year contract, no matter which phone you buy. So why would people not choose an iPhone?

The price difference was the leading factor to PC dominance throughout the 90s.

With the iPad, the competition is still trying to figure out how to react. Samsung seems to be resorting to locking people into another 2-year commitment in order to appear to be price competitive. I’m not so sure people are going to fall for that. If manufacturers can’t figure out how to beat Apple’s $499 entry price without a contract, Apple is going to enjoy another year of dominance in the tablet market in 2011. Even before you factor in the improvements Apple will make with the next gen iPad early next year.