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Apple Doesn’t Need MacWorld Expo Anymore
Apple’s very tight relationship with CE vendors
September 26, 2009
This year, like last year, they might as well have renamed CES the “iPhone and iPhone Accessories Show”. From Automotive, to mobile Apps, to home control, to RC Toy control, to Home Sound and Stereo, to portable Boom Boxes, to accessories, the iPhone was everywhere – even if Apple was not. It was in every booth’s demo, and integrated into hundreds of CE equipment, both from a software and a hardware/docking perspective.
 I was thinking that the iPhone’s free ride might end, with the plethora of Android devices and the momentum undeniably growing along with the Droid and Nexus One. But the reality is a ‘plethora’ is not what CE manufacturers want. They want a single device and form factor that they can integrate into their products, and nothing is even close to replacing the 3-year old iPhone.
While we in the telecom sector tend to focus on quarterly handset vendor shipments, or annual OS shipments, the CE vendors are much more concerned with platform stability and installed base.
But notice that “iPhone killer” handsets have come and gone via a revolving door, with none remaining the main contender for long: the N95, N96, N97, N97 Mini, E71, N900, the Samsung Instinct, the Omnia, SE Experia X1, X2, the Palm Pre, Pixi, the Blackberry Storm, the Storm 2, the Bold, the HTC Touch Pro 2, Droid, Eris, the Nexus, etc, etc. Each of these iPhone killers has failed to kill, but more importantly, is part of a fragmented allied assault on Apple, while the iPhone is able to mount its defense with no significant architecture or Industrial Design changes. And as time goes by, the installed base of the iPhone continues to grow.
Beyond device wars, we also tend to talk about the “mobile OS” wars, and in that regard, we discuss iPhone v. Android, or WinMo, Symbian, etc. And in that competition, once again, Apple looks less significant than the global leader Symbian or the segment-winner BlackberryOS. But the other OS tallies, too, are comprised of many phone models. The net result is that no single form factor of Android actually comes close to iPhone’s sales. The “OS” centric way of looking at the market makes iPhone look relatively weak, but it’s ONE PHONE that’s holding battle with a bunch of competitors.
Just as an example, according to Canalys, in 3Q09 Nokia was the worldwide smartphone leader, with a 40% share, RIM was second with 21%, Apple climbed to 18% up from 14% in Q2, and HTC retained its fourth-place position with 5% share. Now, HTC makes some great phones, but I’d like to note that they reached their 5% on the backs of some 34 different handset models, while apple got 18% on basically one. These are the quarterly numbers that telecom analysts tend to consider, but CE makers aren’t interested in the best selling hit that’s just a flavor-of-the-month.
For CE equipment makers, it’s time to stop talking about sales, and talk about installed base. In Apple’s 3Q09 Investor Call, COO Tim Cook said the iPhone/Touch devices have reached over 45M sales worldwide. Each one sold to an affluent consumer with money to burn on good consumer electronic devices. You can actually build in margin on products targeting an iPhone customer, and style and design tends to matter. So that’s why, at a trade show shunned by Apple (as are they all), the iPhone dominated the displays on the show floor.
In fact, many of you reading this have probably bought a product with an iPhone dock, whether you own an iPhone or not! Many cars now are sold iPhone compatible. Stayed at a hotel recently? Notice a familiar interface port on top of the clock radio? If you use a Creative Zen, like me, then the answer is probably no – but you’re welcome to dock and charge your iPhone there. Because of CE, it’s getting frustrating NOT to use Apple.
We telecom people often talk about the value the app store brings to the iPhone, and how the new apps enhance and modernize the older Cupertino design. That’s very true, but CES has helped me see that it’s not just software that supports a powerful iPhone ecosystem: it’s also hardware. The de facto standard in the CE industry pushes customers towards iPhones purchases, and increased the overall value of Apple products.
Apple offers CE makers a stable platform and an attractive market segment. CE makers offer Apple increased value in their devices. No formal relationship exists, but this ecosystem thrives. The CES exhibitors are in love with iPhone, and this is one advantage that the more fragmented Android can’t match.
by Elizabeth Kerton
Managing Director, The Kerton Group
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The Kerton Group provides insightful, expert consulting in wireless telecommunications to companies across the entire value chain and around the world. Our analysts' deep, vertical knowledge of the wireless industry delivers a complete understanding of the technology, market, and business issues our clients face today and in the future. The Kerton Group's expertise is internationally recognized in widely distributed industry reports, articles, newsletters, and frequent quotes in national press and industry publications. Our services include strategy, business development, research, marketing, product development, due diligence and technology transfer services. We also run the SPIF, a private investment forum for telecom investors. Our projects, clients and publications are detailed online: www.kertongroup.com.
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