It’s funny how quickly things can change. Three months ago it seemed like Apple was on track to grab the global smartphone market share crown from Samsung, only to be shoved into third place by Chinese maker Huawei.
What does this mean for Apple?
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Here’s a chart that tracks the fight between Apple, Samsung, and Huawei over the past five quarters (courtesy of Bloomberg, based on IDC data):
Well, on a totally business front, market share and revenue (and profits) are two separate things, and it might be foolish to focus too heavily on market share. Look at the dollars and cents, if we take the last quarter revenues and profits, it’s clear that market share isn’t everything.
- Samsung – Revenue: $44.7 billion | Profits: $5.3 billion
- Huawei – Revenue: $26.8 billion | Profits: $2.1 billion
- Apple – Revenue: $58 billion | Profits: $11.6 billion
See how revenue and profits tell a different story.
But this doesn’t mean that Apple shouldn’t be worried.
The key to Apple’s business is market share. The bigger and more robust market share it can create, the more loyal its customers are, and the more it can sell to them in terms of services and accessories that both help to drive profits and lock users deeper into the ecosystem.
The more handsets Samsung and Huawei sell, the harder it becomes for Apple to expand its ecosystem. The companies may even be able to grab customers away from Apple – especially at the bottom end, where consumers are more sensitive to price – further eroding Apple’s iOS ecosystem.
Another thing to bear in mind is that the Huawei effect hits Apple at the core of a vulnerable market – China. Apple has been eyeing China for years now, seeing it as the perfect venue to cause a market explosion.
But this effect hasn’t materialized. And with increased pressure from the likes of Huawei, it now seems unlikely. And this could, in the longer term, become a much bigger problem, especially as iPhone sales are going soft all round.
And if Huawei is right, and it is able to grab 50% of the smartphone market share in China, and take the global market share top spot away from Samsung by 2020, this could squeeze the iPhone even more.
While it’s never wise to try to predict the future in too much detail, it’s hard to not come to the conclusion that Apple’s woes are only just beginning, and that the company’s focus on services and things like credit cards might be happening at just the right time.