In a surprising turn of events, Apple's dominance in the smartphone industry continues to grow despite the usual pattern of increased competition and falling prices as devices age. On Tuesday, Apple is set to unveil the 17th iteration of its flagship product, the iPhone, which has defied gravity and maintained its appeal to consumers. This is evident from the fact that over the past five years, the iPhone has not only increased its percentage of total smartphones sold worldwide but has also expanded its share of sales in major regions such as China, Japan, Europe, and India.
Counterpoint Research, a technology firm, reveals that in the United States, the iPhone now accounts for more than 50 percent of smartphones sold, up from 41 percent in 2018. This trend is not limited to the US alone, as Apple has claimed about a fifth of the world's smartphone sales, up from a low of 13 percent in 2019. Interestingly, while Android smartphones have faced significant declines in sales over the past two years, the iPhone has managed to attract new customers and maintain its market share, despite being the industry's priciest device.
So, what has contributed to Apple's success in the face of increasing competition and rising prices? One factor is the company's ability to create a business model reminiscent of U.S. car sales. Similar to how cars can last for years and be resold to offset the cost of a new one, iPhones have a long lifespan and can be resold, making the purchase of a new model more affordable. Wireless providers also offer discounts and monthly payment plans that make it easier for customers to buy the latest iPhone. Additionally, customer loyalty plays a significant role, as many users prefer to stick with Apple and its operating system, iOS, rather than switch to Google's Android.
Apple has also benefited from the missteps of its competitors. Both Samsung and Huawei, two of its biggest challengers, have faced difficulties in recent years. Samsung's reputation suffered in 2016 when its flagship smartphone batteries started exploding. On the other hand, Huawei, which was popular in China, encountered obstacles in 2020 when the Trump administration blocked it from buying U.S. components. These setbacks have allowed Apple to maintain its position as a reliable and trusted brand.
Furthermore, the popularity of the iPhone is expected to continue growing, especially among younger generations. Piper Sandler, an investment bank, reports that nearly 90 percent of teenagers in the United States own an iPhone. For young people, owning an iPhone is seen as a status symbol and a means of inclusion. Many choose iPhones over Android devices because of Apple's exclusive messaging service, iMessage, which distinguishes iPhone users from non-iPhone users in messaging groups through color-coding. The stigma associated with having green text messages has become so pronounced that teenagers, like Dave Storrs's 14-year-old son, demand iPhones over any other type of smartphone.
This shift towards Apple is not limited to younger generations. Even longtime Android users like Dave Storrs have made the switch to the iPhone. Storrs, a 49-year-old Army retiree, finally succumbed to the pressure from his family and purchased an iPhone 13. The convenience of instantly connecting his AirPods to the iPhone compared to the laborious process on his Android phone was a deciding factor.
This transition from Android to Apple is becoming more common, with research showing that about 94 percent of iPhone customers are likely to buy another iPhone, compared to 91 percent of Android customers who are likely to buy another Android device. Promotional discounts, financing plans, and trade-in offers have made higher iPhone prices less of a barrier for potential buyers. Wireless carriers have also joined in by offering attractive deals to gain or retain customers.
While Apple's dominance in the smartphone market seems secure, challenges loom on the horizon. Huawei, Apple's main competitor in China, has recently unveiled a new premium smartphone featuring chips capable of running on 5G networks. Additionally, the Chinese government has directed national government agencies not to use iPhones for work, promoting domestic smartphone brands instead. This nationalist momentum could potentially undercut future iPhone sales in China. However, Apple may be able to offset any dips in the Chinese market with growth in India. By manufacturing iPhones locally and improving affordability, Apple has been steadily increasing its market share in India, which is projected to double to 10 percent next year.
As Apple prepares to unveil its latest flagship iPhones, which are expected to feature faster processors, improved cameras, and titanium cases, analysts predict that loyal iPhone users will not be deterred by the $100 to $200 price increase. Monthly plans and trade-in options have made the cost more manageable for consumers. With the economy doing well and consumers becoming desensitized to price increases, Apple's dominance in the smartphone industry shows no signs of faltering.
themes: Military China