Can iPhone reach 20% of global smartphone market?

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    Posted: 14 June 2010 04:34 PM

    On a yearly basis, iPhone has been growing at 270% in 2008, 83% in 2009 and 130% so far this year.  The growth has been faster than the growth of the smartphone market during the same time.  As a result, the market share of the iPhone has increased from 2% in 2007 to 13% in 2009.

    The question now is: What is the required growth rate for it to maintain growth in share as the overall market grows?

    Taking market estimates from Morgan Stanley, I tried to fit an iPhone growth rate which would result in a 20% share for Apple by 2013. This rate turns out to be a conservative 50%/yr. 

    You can see the data here:
    http://www.asymco.com/2010/06/14/can-iphone-reach-20-of-all-global-smartphone-market/

    Note that the overall market is expected to grow about 40% a year.  Any estimates which place iPhone growth below 40% would implicitly state that the iPhone will lose share in the next few years.

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    Posted: 14 June 2010 05:43 PM #1

    asymco - 14 June 2010 07:34 PM

    On a yearly basis, iPhone has been growing at 270% in 2008, 83% in 2009 and 130% so far this year.  The growth has been faster than the growth of the smartphone market during the same time.  As a result, the market share of the iPhone has increased from 2% in 2007 to 13% in 2009.

    The question now is: What is the required growth rate for it to maintain growth in share as the overall market grows?

    Taking market estimates from Morgan Stanley, I tried to fit an iPhone growth rate which would result in a 20% share for Apple by 2013. This rate turns out to be a conservative 50%/yr. 

    You can see the data here:
    http://www.asymco.com/2010/06/14/can-iphone-reach-20-of-all-global-smartphone-market/

    Note that the overall market is expected to grow about 40% a year.  Any estimates which place iPhone growth below 40% would implicitly state that the iPhone will lose share in the next few years.

    That 2013 iphone sales number is so high I don’t know where to begin. This phone is for the coming years “all the bells and whistles”. Because of that, IMO, I don’t believe we will see anywhere near the growth you are charting. The iphone is taking away market share and the upgrade cycle is not going to be as high. I have a version 1, just think how happy I will be when I get my Version 4. Those numbers are a set up for disappointment. I am trying to figure out how you calculated the growth rate of the first year. Please elaborate, thanks.

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    Posted: 14 June 2010 06:11 PM #2

    mbeauch - 14 June 2010 08:43 PM

    That 2013 iphone sales number is so high I don’t know where to begin. This phone is for the coming years “all the bells and whistles”. Because of that, IMO, I don’t believe we will see anywhere near the growth you are charting. The iphone is taking away market share and the upgrade cycle is not going to be as high. I have a version 1, just think how happy I will be when I get my Version 4. Those numbers are a set up for disappointment. I am trying to figure out how you calculated the growth rate of the first year. Please elaborate, thanks.

    The growth from 2007 to 2008 is based on the units sold in 2007 (3.7 million) vs. the units sold in 2008 (13.675 million). That is equivalent to 270% growth.

    From your comments I take it that your answer to my question is therefore: No, the iPhone cannot obtain 20% market share of the smartphone market.  You are also therefore saying that Apple cannot obtain 6% share of global 3G subscriptions.

    http://www.asymco.com/2010/06/14/can-the-iphone-reach-6-of-the-worlds-3g-subscribers/

    And in conclusion, assuming the iPhone will break away from the ghetto that the Mac found itself in is a setup for disappointment.  I believe your thesis is the the basis of the current valuation of the company.  In case your thesis proves wrong, the upside could be tremendous.

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    Posted: 14 June 2010 06:35 PM #3

    Eventually all phones would be smartphones.  If there are no prepaid scheme and a cheaper ‘no-commitment’ iPhone, marketshare of iPhone would eventually be around the same as for Macs.  Marketshare would depend on definition of smartphone.

    Is it possible to obtain % of iPhone penetration for countries that have 3G network only?  Better would be multiplied this number with % of 3G coverage in each country.

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    Posted: 15 June 2010 12:30 AM #4

    Asymco, I am not trying to be contentious here but you are comparing 6 mo sales to 12 mo sales. To me a more effective (and accurate) comparison would be from June to June. I just have a hard time wraping my hands around 138 mil iphones sold in 2013, I will go out on a limb and say, never gonna happen. I would love for it to happen, don’t get me wrong, I am long AAPL. I have been through all the missed iphone targets. That famous one being 6 mil back in Jan 07 and it came in at 5 mil which was a huge success by the way. I guess there are a lot of investors like me who want to see it to believe it. I enjoy reading your post and I hope you are not offended because I disagree with you. When people can communicate and disagree it is a good thing. :innocent:

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    Posted: 15 June 2010 09:15 AM #5

    mbeauch - 15 June 2010 03:30 AM

    Asymco, I am not trying to be contentious here but you are comparing 6 mo sales to 12 mo sales. To me a more effective (and accurate) comparison would be from June to June. I just have a hard time wraping my hands around 138 mil iphones sold in 2013, I will go out on a limb and say, never gonna happen. I would love for it to happen, don’t get me wrong, I am long AAPL. I have been through all the missed iphone targets. That famous one being 6 mil back in Jan 07 and it came in at 5 mil which was a huge success by the way. I guess there are a lot of investors like me who want to see it to believe it. I enjoy reading your post and I hope you are not offended because I disagree with you. When people can communicate and disagree it is a good thing. :innocent:

    The basic question here is whether Apple planned the iPhone to be a niche product or something that was meant to reach some significant market share.  Apple certainly knows how the market will grow into a half billion unit smartphone market by 2012.  Steve Jobs pointed out that the “phone” market was more important than the tablet market when they roadmapped the touch UI so they went into this market with eyes wide open.

    My point is that if anyone suggests that iPhone numbers grow slower than the market, they are also suggesting that competitors are better positioned to benefit from the overall market growth.  A corollary of believing that Apple will not maintain 50% growth is the belief competitors like RIM, Nokia, Motorola and Samsung will, as a group, grow their smartphone businesses much faster than Apple. 

    As none of them have competitive platforms today, the belief has to be that Android will grow 100% or more compounded or that somehow Microsoft or Nokia will pull a rabbit out of their hats in the next year.

    To sum up, the thesis against 50% growth depends on potential platform change of guard whereas the thesis for 50% growth depends on Apple reaching for a broader market.  I like the odds that Apple will be motivated to go for growth.

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  • Posted: 15 June 2010 09:54 AM #6

    Can Apple go to a 20% market share?

    Si, se puede.

         
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    Posted: 15 June 2010 11:55 AM #7

    I took a look at the whole market measuring three underlying quantities:
    1. the number of total wireless subscribers world-wide
    2. the number of 3G subscribers
    3. the number of smartphones sold every year 2007 to 2013

    The forecast for 2013 is:
    1. total subs: 6.2 billion
    2. total 3G subs: 2.4 billion (38% of all WW users)
    3. 660 million smartphones sold in 2013

    The growth rates of each of these are in the table below.

    I also computed the installed base of iPhones based on units sold per year according to the following schedule: 100% of iPhones in use during first year, 75% in use after second year, 50% in use in the third year, 25% in the fourth and 0% in the fifth and after.

    If the iPhone can sustain 50% growth then the following are possible in 2013:
    1. 4% share of world’s users are using an iPhone (248 million iphone users)
    2. 10% of 3G users are using the iPhone
    3. 21% of smartphones purchased are iPhones

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  • Posted: 15 June 2010 12:21 PM #8

    Interesting numbers Asymco.  Many thanks for crunching them.

    Any chance you can compute the forecast number of iPhone’s sold between 2010 and 2013 whilst holding steady the iPhone share of the smart phone market at 16.3%?  If you therefore forecast that the iPhone stays steady in terms of market share, how does the rising number of smart phones sold (ie market growth) affect the numbers of iPhones sold?  This might be at least an interesting ‘base’ case scenario to run with in modelling iPhone growth going forward.

    Once we have those numbers, we can then start playing around with increasing market share to the 20% you mentioned above.  It will at least give us a range of units sold and perhaps help in coming up with a downside, base, and bull case for modelling.

    Thanks,

    Jonathan

    P.S.  My thoughts on this are that clearly the iPhone has two tremendous drivers - that of operating in a rapidly growing market (which will clearly raise all ships with it, RIMM, Android etc. as well) coupled with a clear opportunity to steal market share.  The first, in my opinion (and pretty much everyone else’s) is a given, however, growing market share of the smart phone market is not so clear cut.  Either way I look at it, the number of iPhones sold will keep rising at the rate of market growth at a minimum, everything else is just the cream on top!  Keen to hear your thoughts.

         
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    Posted: 15 June 2010 03:01 PM #9

    JonathanU - 15 June 2010 03:21 PM

    Interesting numbers Asymco.  Many thanks for crunching them.

    Any chance you can compute the forecast number of iPhone’s sold between 2010 and 2013 whilst holding steady the iPhone share of the smart phone market at 16.3%?  If you therefore forecast that the iPhone stays steady in terms of market share, how does the rising number of smart phones sold (ie market growth) affect the numbers of iPhones sold?  This might be at least an interesting ‘base’ case scenario to run with in modelling iPhone growth going forward.


    Thanks,

    Jonathan

    Not a problem.  For a growth rate the maintains the current share, the iPhone has to grow at the same rate as the smartphone market.  These rates are, starting with 2010:
    63%, 40%, 40%, 35%.

    My assumption of 50% growth is not dramatically higher than the underlying market growth (around 40% compounded).

    The resulting units for iPhones (starting with 2010):
    41 million, 57, 80, 108.

    So for the iPhone to keep up with market growth, it would still need to ship more than 100 million units in 2013.  I would find it hard to believe that the iconic product of an era that is head and shoulders above the competition in both execution and network effects cannot manage to keep up with the market.

    Keep in mind that just keeping up with the upgrade cycle will be a significant base of sales (as today’s pre-order pandemonium in the US is demonstrating).

    [ Edited: 15 June 2010 03:56 PM by asymco ]

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  • Posted: 15 June 2010 03:10 PM #10

    Awesome - many thanks for that Asymco.

    Those numbers are pretty staggering to be honest.

         
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    Posted: 15 June 2010 05:09 PM #11

    asymco - 15 June 2010 06:01 PM

    Keep in mind that just keeping up with the upgrade cycle will be a significant base of sales (as today’s pre-order pandemonium in the US is demonstrating).


    Asymco, are you just messing with me now? Your lower chart shows 108 mil and the chart I had questions about shows 138 mil. The 108 mil number is a lot more reasonable. Whats 30 mil among friends anyway. LOL

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  • Posted: 16 June 2010 07:33 AM #12

    Check out Google Insights with the search term iPhone and iPad - throws up some very interesting analysis of which regions of the world are searching the most for each term.

    Check it out here: http://www.google.com/insights/search/#q=ipad&cmpt=q

    I really like how you can watch the data through time how it has changed, especially for the iPhone. 

    Note that the iPad is searched most in the following countries:

    1. USA
    2. Japan
    3. Singapore
    4. HK
    5. Canada
    6. Australia
    and so on..

    These trends show that with the iPad at least, things are looking very promising for sales throughout the wealthier, more developed regions of the Far East.

         
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    Posted: 16 June 2010 12:33 PM #13

    mbeauch - 15 June 2010 08:09 PM
    asymco - 15 June 2010 06:01 PM

    Keep in mind that just keeping up with the upgrade cycle will be a significant base of sales (as today’s pre-order pandemonium in the US is demonstrating).


    Asymco, are you just messing with me now? Your lower chart shows 108 mil and the chart I had questions about shows 138 mil. The 108 mil number is a lot more reasonable. Whats 30 mil among friends anyway. LOL

    My second chart was in response to a question on what volume would be necessary to maintain current market share.

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    Posted: 16 June 2010 12:50 PM #14

    JonathanU - 16 June 2010 10:33 AM

    Check out Google Insights with the search term iPhone and iPad - throws up some very interesting analysis of which regions of the world are searching the most for each term.

    Check it out here: http://www.google.com/insights/search/#q=ipad&cmpt=q

    I really like how you can watch the data through time how it has changed, especially for the iPhone. 

    Note that the iPad is searched most in the following countries:

    1. USA
    2. Japan
    3. Singapore
    4. HK
    5. Canada
    6. Australia
    and so on..

    On a per capita basis, I’m guessing that Singapore, Norway, United Arab Emirates and Lebanon are showing the most intense interest.

         
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    Posted: 16 June 2010 09:06 PM #15

    As a follow-up question, since some consider 20% share of smartphones to be unattainable after 7.5 years in the market, I was wondering who should we expect to be the dominant platform in three years?

    Today Nokia’s Symbian and RIM are bigger than iPhone.  Assuming iPhone remains niche, is there any consensus on whether Android will take over the top spot?  Can Android be dominant enough so that iPhones <20% share puts Apple in second place?  If Android were to reach 50% share, that would take it from zero to 300 million units in about 4 years.

    Is Microsoft destined for a come-back?  Is RIM going to maintain share?  Is MeeGo going to save Nokia?  I’d love to hear which of these near-death platforms are going to trounce the iPhone.

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