Fast Company

The Smartphone Wars Are Over

Statistics, arguments, sales figures, and passionate explanations claiming one or another smartphone platform has sold or will sell more than another in a specific market might litter the web for a while to come.

But, really, it's all over but the shoutin'. 

"Android outselling iPhone by two to one in the UK," states one headline. "Android was the only OS whose sales grew in all markets it surveys," goes another. And remember this one from last year: "Android sales overtake iPhone in the US."

You could be forgiven for thinking that like a tide sweeping the world, Google's smartphone/erstwhile tablet OS has decisively won the smartphone wars and has been busy digging itself in, reinforcing its positions, and mopping up the entrails of survivors it's slain. After all, RIM's sales are in trouble, Nokia's future is in serious doubt, Microsoft's Windows Phone 7 plans haven't borne fruit yet, and HP/Palm's great webOS experiment is dead in the water. The only competitor to Android is Apple's iPhone, which started it all off, but Android fans love to point out Apple's outsold by Android handsets pretty much everywhere. 

Android powers a huge list of phones, with different capabilities from different manufacturers, across a range of markets and nations, and with prices from zero to Apple-beating highs--such as the recent DROID handsets, and Samsung's premium range.

Go ahead. You may happily conlude from sales numbers that Android has won the smartphone war, stealing the market (and, as Steve Jobs would have it, the very design ideas) that Apple created with the iPhone.

Samsung is the usual poster child for Android success, but HTC is also among the top runners. The firm just posted results that, according to some analysis, place it as the leading phone maker in the U.S. Its third quarter $4.53 billion in revenues are impressive all by themselves, but when you learn that's a 79% rise on the previous year's figure, it's downright eye-popping. That figure was propelled by smartphone sales nearly doubling, and it also meant HTC achieved a 9% revenue rise on the previous quarter. 

But HTC is also projecting that its fourth quarter results, which include the all-important holiday season, will decline versus this quarter's. Smartphone shipments for Q4 are projected to be 12 to 13 million, lower than Q3's. Simultaneously the average value of handset has slipped through this year--dropping from a high of $362 at the end of 2010 to $344. HTC blames this on the fact its local currency has appreciated.

You can also attribute the sliding average selling price on the Android market itself, which is incredibly crowded with offerings that are very similar in terms of design, specification, and OS. HTC's phones are distinctive, and sell well--evidently--but its peers have more iconic phones (Samsung's Galaxy line in particular) and newcomers ZTE and Huawei are achieving rapid market penetration for a number of reasons, including targeting lower-cost markets. The Android market, you may think from HTC's future sales, is already saturated.

HTC is actually an example that all of these firms, including Samsung, need to pay attention to because, as Android becomes commoditized, its market may become much like the dumbphone market is now ... a low-margin business where volume sales are everything and the battle for revenues and profit is based in refining margins and creating slightly unusual designs.

Then there's Apple.

"Apple's iPhone to make up more than half of Q4 smartphone sales across top-3 U.S. carriers," states one headline. Apple may have experienced a dip in iPhone sales in its last Q3 quarter, shifting 17 million units, but it's explained by buyers waiting for an updated device. The new iPhone 4S is selling like hotcakes (four million sales in the first three days--a record) and the expectation is that it will continue to do so into 2012 as Apple rolls out its international sales. Boosted by the fact Apple's selling the older iPhone 4 at reduced prices and the 3GS in some markets as a super-cheap entry level device (targeted at the lucrative pre-pay market) and Apple's iPhone future also looks promising.

And each iPhone is a vector for consumers to deliver a stream of money to Apple, in the form of its 30% take on every paid app sale--to say nothing of in-app purchases, newsstand subscriptions, and direct in-iPhone buys of music and other content from iTunes. Apple has maintained that iTunes merely helps sell hardware, on which it makes more money, but the arrival of the almost zero-price iPhone 3GS suggests that equation may now be changing.

And with Apple sitting on $80 billion in cash in the bank, confident predictions about its future sales figures, and hugely positive public reaction to its strong public image, it's hard to say that Apple has "lost" the smartphone war. Maybe, unbeknownst to Google, it was flanking the skirmish with a whole different army of customers. 

There's another fly in the Android ointment: Android doesn't necessarily make Google much money, and sometimes not much for its maker partners. China is a great example of this, with a prominent venture capitalist noting this week that "chaotic" market conditions in China, typified by a lack of an official Android app market, mean that "almost nobody" is making money off Google's platform despite the fact it dominates the mid-range of smartphone markets there.

Although Android app downloads have recently surpassed Apple's, the fact that there are so many more Android handsets out there mean that on the whole each owner is downloading fewer apps. The notion that consumers also, on average, spend more on iOS apps still holds true, and this is a fantastic draw for app developers (as is iOS's non-fragmented status).

This week Business Insider tried to stir up fuss about the growth of Android, suggesting that "Samsung blowing past Apple to become the biggest smartphone vendor is not good news." But if you look at the context, dumbphones are giving way to smartphones, and the phone market itself is growing. Samsung targets the full width of this market, as it used to for dumbphones and feature phones, as do other makers. So of course Apple wasn't going to retain its position at the lead of the smartphone vendor list. The difference is that Samsung doesn't necessarily have the same chances of ongoing income from its Galaxy-buying customers as Apple does, and it wouldn't take much for a rival firm to out-innovate and slightly under-price Samsung and very quickly steal its sales thunder--after all, they're all making very similar Android phones.

Make no mistake, the Cold Smartphone War will go on. 

Apple and Google have "won," but in different ways. Apple has huge consumer popularity, a strong and almost unassailable brand and business model, and will certainly continue to expand its sales (perhaps most in China). It delivers a tight, polished package of products and services that constantly updates. Google's partners sell more phones in aggregate than Apple but have created a vast and fragmented empire with different versions of the OS, cross-device app incompatibility issues, and a slight nagging sensation that Android lacks a cutting edge (with developments like Apple's Siri pushing this point).

So now we have a Cold War situation, with both brands locked in tense legal and commercial battles, and a cluster of competing smartphone brands jockeying for third place. Oddly enough, just as the real Cold War drove a massive amount of innovation, this new battle may actually see even more interesting developments being pursued by Apple, Google, and Google's partners as they compete to win the hearts and minds of the smartphone-buying public. 

[Top Image: portobeseno; Image: Flickr user toasty]

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27 Comments

  • DAVID SCOTT

    Android outselling iPhones. This may be due to low cost Android phones are available. I agree Android is a good smartphone OS but when it is compared to IOS they are not much advanced. Android comes with various manufacturers so it has a lot of different hardware specs which will attract users. But Apple is still considered as the arch rival of Androids. I don't think the Smartphone wars are over. Yeah Nokia's future is in doubt because they doesn't concentrate much on smartphones and now only coming up with Windows OS. But Apple is still in the competition. So we can expect a lot from them.

  • waterman

    Apple made one mistake - restricting sales to AT&T initially.  Finally adding Verizon and recently Sprint.  If they had made the iphone available to all wireless operators they would have a huge lead over Android.  To this day that is still their downfall.  When iphone comes to US Cellular I will get one.

  • Bud Thompson

    I have both iPhone and an LG Android. Battery life on Android far better without much increase in thickness or weight. . 

  • Matt

    I have to be honest I got to about the middle of the article and it lost my attention. I then proceeded to scan very rapidly for the part that had an intellectual perspective on why it was over...

    Secondly

    Counting out WP7 is big mistake, it's a long term strategy and they wont be backing off anytime soon. Mindshare may take some time but it's a great platform that is enjoyable to use. When I talked about Android back in the HTC Dream (G1) days no one was interested. Everyone knows the real reason Android is flying of the shelves today is because of availability of handsets globally priced high and low (example prepaid LG Optimus One for under $100).

    If your going to label an article this way at least include relevant information in the content. 

  • David Lyman

    So, let's see. The one thing we learned from this article is that the smartphone wars AREN'T over. Bogus headline, then. And, for that matter, a pretty bogus article - there's no news. What a waste of my time.

  • Windroid

    The War = over... And the winner = Microsoft!

    55% of all Android devices sold are built by manufacturers that pay license fees from 10-15$ per handset to Microsoft.

    And their Windows Phone 7 strategy is just about to come to full force when Nokia launches their first WP7 handset just before x-mas.. Lumia 800 anyone?

    http://youtu.be/rdMoRhfd1Sk

  • Dave Everitt

    I think you have missed a lesson from history.

    I think Wize Adz statement "A single-source platform against an entire ecosystem or two (if you include Windows and Linux).  History suggests that there's room for single-source platforms and multiple software ecosystems." should be considered.

    Apple is a single source platform
    RIM is a single source platform
    IBM included the circuit diagrams of the PC in the user manual and forced all clones to pay patent royalties.
    CP/M, Dr DOS, Gem Dos, Osborne 1 ... were all pre-IBM and PC-DOS ... and yet Windows is #1, why.
    The killer app, it was SuperCalc and Word Perfect ... or VisiCalc ... either way its was spreadsheets and word processing available on an entire multi-sourced ecoystem that made it for Microsoft.

    Now, Google, ... Google Docs is not the killer app. ... its not even corporate grade.
    RIM, a great Outlook client ... wrapped up in Exchange, but single source platform.

    Google are trying with Android to recreate the PC history ... entire ecosystem ... but they seem to be hoping for the killer app to appear magically .... 

    Me, I pin my belief that the war will be over when Microsoft Windows Mobile 8 with Office 365 appears on multi-sourced, broad ecosystem hardware .... to get Word, Excel, Powerpoint, Access and Outlook from any pane of glass anywhere .... now, that will be a smartphone ... RIM get it, you can now get Office 365 for free from RIM .. they figured its the only way to be part of the winning team.

    PS No, I do not work for any of the phone or OS vendors ... I am just using history to predict the future.

  • Michael Jones

    Well ANDROID needs to stop resting on their laurels - I will be moving to iPhone soon if they don't fix their O/S problems with FroYo. My Samsung Charge has yet to be upgraded to FroYo which means my stand-by battery life is max 3 hours and forget talking on it. It also moves very slowly between screens/apps, and that is after stripping it of any of the widgets or technology that is supposed to make it worthwhile. And the bugs still cause the ringers to randomly go silent at some point most days and does not reverse itself so reboot is required - have missed so many calls as a result. PLEASE SOMEONE - ANYONE - put competitive pressure on Android so they stop taking customers for granted!!!

  • Dev Rupesh

    War has never been over !! One shouldn't think that this Android, iOS have achieved all expectations of users. They have been successful to impress mass of users, but at some point they are going to get tough competition already soon. 

  • Jim Tobin

    There's a big gap in all the analysis about Android. Android was sold to the mobile phone providers as a great deal for them, because it would commoditize the handset OEMs thereby shifting power back to the carriers.  AND, it was supposed to give the carriers a bigger play in mobile data services especially in search, location-based services, advertising, etc.  Now a few years into it, Android certainly HAS commoditized the handset makers but has left them all ill-equipped to innovate well against the more integrated approaches of Apple and others.  If you talk to folks in carrier stores, they'll tell you they have far higher return rates and other quality issues for Android devices than for other types because the responsibilities for support and service are unclear between Google and the OEMs.  For the carriers, this is "be careful what you wish for."  Worse, now that Android has gotten big enough that Google is publishing results related to Android, the carriers are seeing that Google is capturing nearly all of the value-added service upside in mobile leaving next to nothing for the carriers.  The carriers are beginning to realize they've created a Frankenstein through Android.  All the hype about Android is in North America, largely because of Google's huge influence over the press, analysts, and Washington.  Verizon largely bet their company on Android, so Verizon stokes the Android hype, too. If you ask carriers ANYWHERE else in the world (which is important since the US is less than 7% of the global mobile market and shrinking), they'll tell you they're actively seeking ways to rein in Android and Google.

  • Damian

    Apple got the idea for the iPhone from PDA's. So Apple saying that anyone stole their idea is a crock.

  • Bud Thompson

    Let's get over the idea that the iPhone is technically superior. The battery won't last a full day under moderate use. There are no turn-by-turn voice directions...and if there were, the battery would die while using them. The iPhone - visually - is quite good, but the company has sacrificed usability to get a thinner phone. 

    You can't even carry a spare battery to get you through the day because the iPhone battery is wired inYou can get a far less expensive Android phone with longer battery life and full GPS capability, and you can carry a spare battery for emergencies. 

  • john waring

    Interesting article,
    but I think most people with a memory will not attribute Apple as
    being instigators –

    What did they start
    (iPhone first released in 2007)?

    You don't credit Nokia
    with doing anything prior to 2007? what about Blackberry (2003)? Or
    dare I say Microsoft with Windows Pocket PC (2002).

    Apply may have brought
    smart phones in to 'pop' culture but there were many of us who were
    using smart phones long before Apple jumped in.

  • Andrew Norris

    i totally agree, reading the headlines from many in the press, you do indeed get that impression. and from reading the articles too. sales of android up and up, and in short space of time, now surpassed iphone. but android is really for the bottom end of the market as I see it. People that just want a phone, even basic phones now are smart as you said. Apple tends to be people willing to pay for better tech, and as such they are willing to pay for apps. Esp. as copying is much easier on android. That's why in starting app development I will start out with the iphone, as the revenue is much more from the app side. 

  • David Brier

    Since every "war" article compares itself to Apple's iPhone, does anyone need to read past that one point? Really. Apple set the standard.

    Plus if you're talking about brand loyalty, Apple wins.

    If you're talking quantity, then choose your stats.

     It's like Microsoft that has the lion's share of computers, but Apple is what everyone loves and craves for.

    It's the old game of Quantity vs. Quality in terms of marketshare. And Apple wins that war, hands down. Customers are loyal and brand loyalty is unrivaled.

  • Robert Cooper

    Interesting article, despite the somewhat disingenuous headline. One thing I've never seen covered in an article like this is the idea of "engagement" by platform. I say this as I sit looking at a client's October web stats and note that for mobile visits (to their mobile site) are 8:1 for iPhone over the next identifiable handset and 3:1 over all the next identifiable handsets combined. 

    Don't get me wrong, I love to see what Android is doing (and my beloved iPhone 4 will likely get swapped for an Android phone when I upgrade). That said, Apple literally has no competition right now when it comes to actual engagement.