Why Apple May Not Be Worried About Google’s Android Momentum

Much ink is spilled daily about the rivalry between Apple and Google in the mobile market. Avi Greengart, the Research Director for Consumer Devices at Current Analysis, makes the case that a lot of the coverage is misguided.

In a Nov. 16 research report, Greengart punctures the oft-made argument that Google’s “open” approach to creating and distributing mobile products will defeat Apple’s “closed” one, similar to the way PCs powered by Microsoft’s Windows became dominant over the Macintosh, due to Apple’s tight control.

Greengart sums up that position as:

Thanks to the open nature of the Android platform, vendors from HTC to Motorola to Samsung are building more powerful hardware than Apple, and soon the iPhone will be relegated to a small percentage of the market, and Apple will be in trouble once again.

Greengart then explains why this thinking is misguided.


Android’s success doesn’t necessarily mean failure for the iPhone. The mobile industry is not a zero sum game, writes Greengart.

Any story that portrays Apple as “relinquish[ing] its dominance of the smartphone market to Android” is also mistaken, adds Greengart. Despite its incredible success over the past three years, Apple is not the No. 1 seller of smartphones globally. That company would be Nokia.

Trumping this all is the matter of profitability, a.k.a. the real reason why Apple may not be too worried about Google’s Android momentum. Apple’s combination of high-margin devices coupled with consistently huge sales means that it makes more money than anyone else in the mobile industry, writes Greengart. Apple doesn’t specify how profitable its individual business units are, but Greengart notes that its iPhone revenues totaled $8.6 billion last quarter and its corporate gross margin was more than 36%–figures that point to “extremely robust” iPhone profits “no matter how the numbers are actually broken down.”

The numbers also mean that right now Apple outsells any individual Android licensee, such as HTC, Motorola or Samsung, and out-earns all of them combined, says Greengart. The figures also indicate that Apple will remain the profitability leader even if Android takes a larger share of the market overall. To stay in the lead, Apple simply needs to keep a “top three” or “top four” smartphone vendor ranking and continue selling high-margin devices, says Greengart.

That’s not to say that Apple is invincible. Greengart cites two cases in which Apple could stumble. The first: missing a major shift in how consumers use smartphones. Other market leaders, such as Motorola, lost their crowns by arriving late to or ignoring major trends. The second potential hazard, according to Greengart, is the possibility that Google will subsidize Android phones with the money it makes from mobile ads. Wide availability of low-cost yet high-end Android phones would place Apple at a “severe disadvantage,” writes Greengart. He adds, however, that Google is unlikely to make such an unusual move, at least in the near term.

In short, no matter how the quarterly cellphone shipment rankings shift, Apple will stay on top, at least in some respects. As Greengart concludes, “Apple is just fine with Google ‘beating’ it in market share as long as it can corral the lion’s share of industry profits…Apple wins the real game among handset vendors, which is making money.”