iPhone market share predicted peaking at 22 percent in 2014

Apple Event 20111004 (iPhone 4S introduction, Worldwide handset market share)

Is the iPhone ready to join the crowd of technology has-beens? That seems to be the impression from a Thursday report from one research firm. The Apple handset, which has been pummeled by negative headlines recently, now faces its marketshare high this year, followed by flatline growth through the rest of this decade.

According to ABI Research, Apple’s handset in 2013 will reach 28 percent of the smartphone market, its growth flat through 2018.  The reason: the future of smartphones is in emerging markets and inexpensive handsets, an area Apple executives say they won’t chase….

By 2014, smartphones “will account for 50 percent of all handsets shipped”, according to ABI Research.

Furthermore, by 2018, smartphones will comprise the majority – 69 percent – of handsets, the company predicts. Indeed, as we reported, accounting giant Deloitte is forecasting 2 billion smartphones will be shipped by the end of  2013.

What’s fueling this future trend? Apparently, ABI is jumping on the ‘cheap smartphone’ bandwagon. Although we’ve heard calls for an inexpensive iPhone for some time, the drumbeat  has gotten louder following a Wall Street Journal report earlier this month.

The story, which cited “people briefed on the matter”, suggested an inexpensive iPhone could appear in late 2013 in response to Apple’s slowing marketshare. Now, this isn’t the first time the WSJ has reported there were plans afoot to build a cheap Apple phone. In 2011, the newspaper said a cheaper version of the iPhone 4 would appear.

iPhone 5 keynote (Macbook is top US notebook)

But just days after the latest Journal report, Apple’s marketing chief Phil Schiller threw cold water on the idea.

In an interview with a China newspaper, Schiller acknowledged cheap smartphones are popular, but the iPhone maker is not going to cheapen the Apple brand by chasing marketshare. Schiller told the Shanghai Evening News:

Despite the popularity of cheap smartphones, this will never be the future of Apple’s products. In fact, although Apple’s market share of smartphones is just about 20%, we own the 75% of the profit.

It is well known that while Apple trails in the number of smartphones shipped, its profits are beyond compare.

Of course, this isn’t the first time Apple has publicly announced opposition to a new product concept, only to produce such a device. Remember how the late CEO Steve Jobs railed against a smaller iPad, saying such a tablet would require users shave down their fingers?

The 7.9-inch iPad mini now appears to be Apple’s most-popular tablet.

iPad mini (three-up, front, back, profile, white)

Matthew Panzarino picked up on this tactic on The Next Web, noting Schiller’s denouncement of  “cheap smartphones” should not be viewed as a Sherman-like statement.

But, note that Schiller’s statements aren’t conclusive in the way that they refer to exactly what price points that Apple will be targeting, only that ‘cheap smartphones’ aren’t really Apple’s fare.

This has always been the case and even with the ‘free’ iPhones, you’re still getting top-notch build quality, just from a couple of models ago.

A ‘cheap’ smartphone would imply worse materials or construction in order to meet a price point.


In fact, the current mania over whether the iPhone is still in demand could put us closer to Apple potentially releasing a more inexpensive handset. One of the more rational explanations for the dip in supplier orders is that Apple has further refined its supply chain.

Concept artist Martin Hajek created this nice mockup of a 3.5-inch budget
iPhone next to a four-inch iPhone 5.

This area is where Apple gets rich, not the eye-catching designs or the gee-whiz new technology.

And it is little wonder.

Before becoming CEO, Tim Cook was Apple’s supply chain maestro.

If Apple can reduce the cost to supply the same top-shelve components, coupled with it winning designs, it is a short leap from the upcoming iPhone 6 to an inexpensively-produced iPhone – and continued marketshare growth.