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Clay Christensen in the Innovators Solution lays out an explanation for what is happening here. Apple used vertical integration to make a giant leap forward wit

Clay Christensen in the Innovators Solution lays out an explanation for what is happening here. Apple used vertical integration to make a giant leap forward with their iPhone that you couldn't have made in a non-integrated company. They ended up overshooting the typical consumer's needs though in the following iterations of the iPhone. And the technology that was at first difficult for competitors to reproduce became easier to replicate (thanks in part to Android). Samsung, HTC, and others were able then to provide good enough devices (and in certain ways, better devices) to consumers at a lower price point. Apple's response has been to move up market towards tablets, and have been able to use their vertical integration to produce devices that no other Android manufacturer could match at first. Microsoft is building their own device to have similar quality, but they are doing it as a vertically integrated company. Amazon showed you could do a partial vertical integration (heavily customized Android and integration into their own media resources) to take away the low end of the tablet market from Apple. And slowly the Android tablet manufacturers are catching up to Apple. So what this makes me ask is what will be next for Apple? They haven't been good at playing the high-volume, low-profit electronics game, so they'll need another "blockbuster", highly innovative device, and I am excited to see what that will be. It drives the industry forward, and creates exciting new technology we all get to benefit from eventually.

cloudwalking 14y ago
You are absolutely right in what you say regarding integration. I disagree with your final analysis of where this leaves Apple. I think Apple will continue to hold a significant chunk of the "high-end" luxury market. iOS will maintain high price points and Apple will maintain its polish--and consumers with expendable income will keep their sales strong. I suspect their market share in Europe, USA, Japan, and wealthy Chinese won't drop too much (30% of market? 45%?). Android will claim the entire low-cost market--the rest of China, India, South America. I think Apple will maintain its profits, but Android will secure the majority of the world market. Apple is trying to maximize percentage of industry profit rather than percentage of industry sales.
- nestlequ1k 14y ago
  Sure, Apple is trying to maximize profit. But how does that help me? We're developers right? We need to find the market with the most potential. If I'm developing for a platform where the platform holder is laser focused on maximizing their profit, but not their marketshare... it seems like I've made the wrong choice. I see a lot of iPhone devs (not you specifically) try to justify Apple's shrinking marketshare by saying it's fine since Apple is still taking the total profit in the industry. Either they've heavily invested their earnings into AAPL, or they're trying to pull any stat they possibly can to justify their platform choice.
  - bane 14y ago
    I agree, potentially less money in the consumer's pocket is less money they can spend on my product. I wonder how the mix of average money spent on iphone vs android apps per consumer has changed? Or at the very least, total dollars spent on apps on each platform?
    - briandear 14y ago
      But the cost-conscious consumer is typically less inclined to buy apps. This thread is relevant: http://news.ycombinator.com/item?id=2929612 http://news.ycombinator.com/item?id=2929612
  - kemiller 14y ago
    I think it's more nuanced than that. If Apple customers are more affluent than average, and/or more willing to spend money on apps, then it continues to be a great market even if the sheer volume is lower. If you're making something that you give away for free and make money on the volume of participants somehow, then Android is probably a better bet at that point, but if that's your strategy you probably want to target everything.
  - enraged_camel 14y ago
    Simple: people who have the kind of income to pay a premium for Apple devices will also be more willing and able to pay a premium for good apps. There lies your profit. (Not to mention your costs will be lower since iOS ha no fragmentation.)
sinnerswing 14y ago
Nothing impressive with this. I know of a few companies that sold crappy devices with crappy OS's. RIM, Nokia, etc. and they dominated the market. Android has become the new Nokia. Big Market Share. Worthless user-base.
- drivebyacct2 14y ago
  Yep, 75% of the market loves to buy crappy devices with crappy OSs. The fact that high end Android devices are popular and sell well (SGSIII? Samsung's profits being damn impressive next to Apple's?) is just a weird inconvenient fact.
  - sinnerswing 14y ago
    75% of the market also like Britney Spears. people are idiots.
    - drivebyacct2 14y ago
      If we accept the framework that all people are idiots, which I certainly often find myself thinking, then it's probably great to be Android in that world. You know? Whether or not people are dumb (which is obviously a gross exaggeration of people's perception of Android... but let's be serious, you know that) does not change the numbers.
      - sinnerswing 14y ago
        I'll take 25% of the smart, willing-to-pay-and-buy userbase, than 75% of the dumb, not-willing-to-pay-for-anything android users.
        drivebyacct2 14y ago
        Why are you being so stubborn? Just, why? What do you stand to gain from this?
bane 14y ago
I'd bet that Apple is taking Glass very seriously. Or at least the wearable, always on, always connected computer.
- Steko 14y ago
  The first NYT article on Glass reported that Apple was also doing a lot of research on wearables. Predictably when they come out with whatever they do everyone will say they are "reacting to Google" but I'm sure many companies have been hard at work on this for years. If I had to bet I would bet on a startup that just takes bluetooth accessories to the next level and leverages the phone in your pocket for the connection/cpu/gpu. Bluetooth headset with a camera and custom voice control app. It's not near what Project Glass promises but you could build it today and sell millions for $99/$149.
  - jonmrodriguez 14y ago
    Shameless but very relevant plug :) My startup is doing what you describe: http://vergencelabs.com/ http://vergencelabs.com/
rogerbinns 14y ago
Asymco (highly recommended analysis site for the mobile industry) has an excellent article on this "over serving" issue http://www.asymco.com/2012/09/18/is-the-iphone-good-enough/ http://www.asymco.com/2012/09/18/is-the-iphone-good-enough/ One thing he notes is that Apple sell the current (new) generation device at the same time as they sell the previous generation for less. By looking at sales they can tell if they are over serving - people will buy the previous generation because the new generation doesn't add sufficient value to their needs.
- mtgx 14y ago
  And yet, even with that strategy being implemented for the past few years, the iPhone is losing in global market share, and Android is 5x bigger now. So it's not very effective in this context.
  - r00fus 14y ago
    Apple has never been interested in marketshare alone, unlike Google or Microsoft. For Apple, it's all about profit, profit-share and units sold. All else matters little to them if they don't have those three.
  - rogerbinns 14y ago
    What "market share" are you measuring? If it is number of devices sold then so what. Maybe narrowing down to number smartphones sold? A little more interesting. How about instead we look at market share of revenues? Even better what about share of profits since that makes more business sense. Asymco has a post for that: http://www.asymco.com/2012/02/03/first-apples-rank-in-mobile-phone-profitability-and-revenues/ http://www.asymco.com/2012/02/03/first-apples-rank-in-mobile... I prefer Android myself, but claims of Apple "losing" need to be substantiated. It is certainly the case they are losing the least profitable customers but that is a very hard business to be in.
sputknick 14y ago
Sounds a lot like the PC market circa 1986. Except with Google playing the "good enough device" role.
mongol 14y ago
I think it could be a better TV experience ("smart tvs"), or something related to wearable computing, such as watches.

cloudwalking 14y ago

You are absolutely right in what you say regarding integration. I disagree with your final analysis of where this leaves Apple. I think Apple will continue to hold a significant chunk of the "high-end" luxury market. iOS will maintain high price points and Apple will maintain its polish--and consumers with expendable income will keep their sales strong. I suspect their market share in Europe, USA, Japan, and wealthy Chinese won't drop too much (30% of market? 45%?). Android will claim the entire low-cost market--the rest of China, India, South America. I think Apple will maintain its profits, but Android will secure the majority of the world market. Apple is trying to maximize percentage of industry profit rather than percentage of industry sales.

nestlequ1k 14y ago
Sure, Apple is trying to maximize profit. But how does that help me? We're developers right? We need to find the market with the most potential. If I'm developing for a platform where the platform holder is laser focused on maximizing their profit, but not their marketshare... it seems like I've made the wrong choice. I see a lot of iPhone devs (not you specifically) try to justify Apple's shrinking marketshare by saying it's fine since Apple is still taking the total profit in the industry. Either they've heavily invested their earnings into AAPL, or they're trying to pull any stat they possibly can to justify their platform choice.
- bane 14y ago
  I agree, potentially less money in the consumer's pocket is less money they can spend on my product. I wonder how the mix of average money spent on iphone vs android apps per consumer has changed? Or at the very least, total dollars spent on apps on each platform?
  - briandear 14y ago
    But the cost-conscious consumer is typically less inclined to buy apps. This thread is relevant: http://news.ycombinator.com/item?id=2929612 http://news.ycombinator.com/item?id=2929612
- kemiller 14y ago
  I think it's more nuanced than that. If Apple customers are more affluent than average, and/or more willing to spend money on apps, then it continues to be a great market even if the sheer volume is lower. If you're making something that you give away for free and make money on the volume of participants somehow, then Android is probably a better bet at that point, but if that's your strategy you probably want to target everything.
- enraged_camel 14y ago
  Simple: people who have the kind of income to pay a premium for Apple devices will also be more willing and able to pay a premium for good apps. There lies your profit. (Not to mention your costs will be lower since iOS ha no fragmentation.)

sinnerswing 14y ago

Nothing impressive with this. I know of a few companies that sold crappy devices with crappy OS's. RIM, Nokia, etc. and they dominated the market. Android has become the new Nokia. Big Market Share. Worthless user-base.

drivebyacct2 14y ago
Yep, 75% of the market loves to buy crappy devices with crappy OSs. The fact that high end Android devices are popular and sell well (SGSIII? Samsung's profits being damn impressive next to Apple's?) is just a weird inconvenient fact.
- sinnerswing 14y ago
  75% of the market also like Britney Spears. people are idiots.
  - drivebyacct2 14y ago
    If we accept the framework that all people are idiots, which I certainly often find myself thinking, then it's probably great to be Android in that world. You know? Whether or not people are dumb (which is obviously a gross exaggeration of people's perception of Android... but let's be serious, you know that) does not change the numbers.
    - sinnerswing 14y ago
      I'll take 25% of the smart, willing-to-pay-and-buy userbase, than 75% of the dumb, not-willing-to-pay-for-anything android users.
      - drivebyacct2 14y ago
        Why are you being so stubborn? Just, why? What do you stand to gain from this?

bane 14y ago

I'd bet that Apple is taking Glass very seriously. Or at least the wearable, always on, always connected computer.

Steko 14y ago
The first NYT article on Glass reported that Apple was also doing a lot of research on wearables. Predictably when they come out with whatever they do everyone will say they are "reacting to Google" but I'm sure many companies have been hard at work on this for years. If I had to bet I would bet on a startup that just takes bluetooth accessories to the next level and leverages the phone in your pocket for the connection/cpu/gpu. Bluetooth headset with a camera and custom voice control app. It's not near what Project Glass promises but you could build it today and sell millions for $99/$149.
- jonmrodriguez 14y ago
  Shameless but very relevant plug :) My startup is doing what you describe: http://vergencelabs.com/ http://vergencelabs.com/

rogerbinns 14y ago

Asymco (highly recommended analysis site for the mobile industry) has an excellent article on this "over serving" issue http://www.asymco.com/2012/09/18/is-the-iphone-good-enough/ http://www.asymco.com/2012/09/18/is-the-iphone-good-enough/ One thing he notes is that Apple sell the current (new) generation device at the same time as they sell the previous generation for less. By looking at sales they can tell if they are over serving - people will buy the previous generation because the new generation doesn't add sufficient value to their needs.

mtgx 14y ago
And yet, even with that strategy being implemented for the past few years, the iPhone is losing in global market share, and Android is 5x bigger now. So it's not very effective in this context.
- r00fus 14y ago
  Apple has never been interested in marketshare alone, unlike Google or Microsoft. For Apple, it's all about profit, profit-share and units sold. All else matters little to them if they don't have those three.
- rogerbinns 14y ago
  What "market share" are you measuring? If it is number of devices sold then so what. Maybe narrowing down to number smartphones sold? A little more interesting. How about instead we look at market share of revenues? Even better what about share of profits since that makes more business sense. Asymco has a post for that: http://www.asymco.com/2012/02/03/first-apples-rank-in-mobile-phone-profitability-and-revenues/ http://www.asymco.com/2012/02/03/first-apples-rank-in-mobile... I prefer Android myself, but claims of Apple "losing" need to be substantiated. It is certainly the case they are losing the least profitable customers but that is a very hard business to be in.

sputknick 14y ago

Sounds a lot like the PC market circa 1986. Except with Google playing the "good enough device" role.

mongol 14y ago

I think it could be a better TV experience ("smart tvs"), or something related to wearable computing, such as watches.