Android has good reason to fear Apple’s resurgence

In recent weeks, a drumbeat has grown among tech analysts that Apple’s iPhone is poised for massive uptake while Android smartphone sales may have peaked in developed nations. Also, Android is threatened in the developing world from a Google creation called AOSP, which strips out Google’s services (where Google makes its money) and lets any device maker avoid paying Google service royalties. This is especially significant in China, the world’s biggest emerging market, where AOSP is the top-selling mobile OS and which accounts for 20 percent or more of global “Android” sales. At the same time, various analysts have noted that Samsung is being squeezed by both Apple and AOSP, and Samsung may have already peaked in mobile, with 2012’s Galaxy S III representing the high point.

Although some of the claims are clearly inspired by techno-partisanship, I’m struck that several thoughtful, nonpartisan analysts like Jackdaw Research’s Jan Dawson and Yankee Group’s Philip Elmer-DeWitt are noting these trends, not just Apple fans like Creative Strategies’ Ben Bajarin (who have excellent data, but their interpretations tend to favor Apple). What in the world is going on?

[ Why Google seems to be having second thoughts about AOSP. | Keep up on key mobile developments and insights with the Mobilize newsletter. ]

For years now, we’ve been seeing competing storylines in the tech press:

• On one hand, Android will take over the mobile world — it’s on 85 percent of smartphones shipped today, says a recent report — while Apple’s iPhone will fade into a niche product for fashion-conscious rich buyers. In this view, iPads are a fad yet Android tablets are not.
• On the other, Android is an unholy mess that includes lots of not-really-Android devices like those AOSP units common in China and much of Asia, as well as Amazon.com’s Kindle Fire, with little actual usage for the cheapie models that dominate sales. Meanwhile, Apple’s iOS is what people actually use for real business and entertainment, as evidenced by its majority presence in website-usage tracking data. In this view, the fractured Android has little cohesion beyond the use of the robot icon, so it doesn’t really matter.

Both storylines are true, which is why you keep seeing them. As in economics and politics, everything you read is filtered through someone’s perspective, which sometimes is actually a deep bias. Sadly, much of the research you read of tech market wars is created to support a predetermined point of view.

Even when analysts try to figure out the market trends without a presupposed result, the data they rely on is inherently biased. Most Android sales data comes from guesstimates, not actual sales figures — because companies like Samsung, HTC, and Amazon.com don’t report sales figures. (Apple is the only major mobile provider that provides data on actual sales to customers.) In those sales guesstimates, some people include AOSP and Kindle Fire devices, some don’t. Plus, some companies — Samsung is notorious for this — produce false data to look better.

What you can actually believe about the mobile wars As a result, you can be sure that the Android sales numbers you see are inflated. The truth is that Android’s market share is not as high as the reported data would suggest. But no one knows the extent to which these numbers are inflated. What you can reasonably believe is this:

• Android, in all its forms, outsells iOS — except in business.
• Apple devices and related services generate the vast majority of the mobile industry’s profits: iOS makes real money; Android, not so much.
• People use iOS devices much more than they do Android devices, from app usage to Web usage to media consumption. That’s especially true for tablets.
• Apple is on a roll when it comes to iPhones, but not when it comes to iPads.
• The major non-AOSP Android device makers — such as Samsung and HTC — are currently struggling to stay level, much less grow.

The reasons people are seeing an Apple resurgence That last item is what’s new and why you’re seeing all those “Apple’s resurgence” stories. Apple is growing more in the high end — the users who spend real money both on devices, then apps and peripherals — while the AOSP vendors are sopping up the low-end market outside the United States. “Full” Android is feeling the squeeze.

In China, a year ago the punditocracy was abuzz with predictions that Samsung would trounce Apple because the iPhone 5c wasn’t cheap enough to gain mass adoption. Now that the sales data are in — whatever their reliability — we see the iPhone 5c and 5s did better than ever in China. The “overpriced” iPhone beat Samsung’s flagship model, even if Samsung’s overall sales surpassed Apple’s. But China’s Xiaomi beat them both using AOSP phones that look suspiciously like iPhones.

Of course, China is a special case — its government is systematically attacking Western tech companies in an attempt to favor its own companies, many of which have deep, if hidden, government connections. It blocks Google’s services because it doesn’t want anyone but itself to spy on its citizens. (Meanwhile, Xiaomi phones have been found to send user data to a Chinese server. Surprise, surprise.) It wants Western tech companies to make their goods in China (where their technology can be copied and given to Chinese “partners”), but not sell them there.

So let’s put China aside as a highly manipulated market in which Western tech companies really should rethink their involvement. In the rest of the world, the basic trend is this:

• Apple’s iPhone series leads the U.S. market, and that lead seems to be growing as Samsung has had a series of disappointing Galaxy models and HTC has failed to ignite any real interest in its One series. Each new iPhone sells better than its predecessor, and it’s clear everyone believes that will be the case for the new “iPhone 6” models to be announced on September 9.
• Europe is divided from country to country, but it’s largely the province of major Android providers like Samsung, followed by the iPhone in the 15 to 25 percent range and, in some countries, pockets of Windows Phone sales in the 5 to 10 percent range. Like the Mac, the iPhone has never been dominant in Europe (not even in terms of reputation, unlike the United States). But the European market wars have stagnated, so most eyes are elsewhere.
• Japan is practically an iOS-only country, as it is for Macs.
• South Korea shifts allegiances frequently, but “full” Android devices dominate.

It’s the rest of the world that’s up in the air, as Nokia Symbian, Nokia Asha, and BlackBerry devices — the old market leaders — fade away and Android and AOSP device makers seek to fill the vacuum. So far, the cheapie Android and AOSP devices are winning the masses. (The iPhone is, unsurprisingly, the choice of the rich.)

But there’s a sense that “full” Android devices, iPhones, and maybe (but probably not) Windows Phones will supplant them over time as those countries get richer and want more than substandard devices. The truth is we won’t know for several years how the various winds blow there.

So is Apple poised to resurge and dominate mobile as it did in the late 2000s? Yes and no. I do believe Apple’s mobile platform is both technically better and more compelling than Android devices, even those from the likes of Samsung and HTC, who both make good products. I’m not one to pay attention to the endless Apple rumors, but the indications I’m getting out of Apple suggest we’ll finally see some significant iPhone advances next month that will only add fuel to the iPhone fire.

But as with the Mac, the iPhone is a premium product, whose real price was masked by carrier subsidies now coming to an end. That limits the iPhone’s growth mainly to richer nations.

As a result, I believe we’ll see a similar pattern for smartphones to what we see in the “Mac versus PC” trend: The iPhone will continue to grow share in richer nations, even as subsidies end. Android buyers will in aggregate take almost all of the rest of the market, divided between Galaxys (which cost as much as iPhones) and basic but reasonably capable Android devices like the Moto G from Motorola Mobility. That’ll leave the middle-of-the-road Android devices out in the cold, as well as Windows Phones. The strong Apple bias in the United States is a factor, but we’ll see that same basic trend in other developed countries, even if the Apple contingent is a smaller percentage there than in the States.

As for tablets, the iPad will continue to dominate “real” usage — the Android tablet platform simply can’t do what the iPad can. Capable Android tablets aren’t appreciably cheaper than their iPad counterparts, and the cheapie models aren’t satisfying buyers, as market share data shows. Until there’s an Android tablet equivalent to the Moto G smartphone, iPads will continue to dominate across the market’s price segments.

This article, “Android has good reason to fear Apple’s resurgence,” was originally published at InfoWorld.com. Read more of Galen Gruman’s Mobile Edge blog and follow the latest developments in mobile technology at InfoWorld.com. Follow Galen’s mobile musings on Twitter at MobileGalen. For the latest business technology news, follow InfoWorld.com on Twitter.