In an earlier post predicting that there will be 200M BB connections in India by 2015, I raised the following questions
- Which OS/platform will dominate?
- Will incumbents like Microsoft and Nokia maintain leadership in the new paradigm?
- Will the iPhone become the way to access the web in India? Or will India be the country where Google first takes market leadership with Android and Chrome?
- And finally, will it matter who wins?
Soon after I wrote the post, Apple announced fabulous results. Apple announced that in 3 years, it has sold 100 M iOS devices. Interestingly Blackberry also announced that it had sold 100M BB devices, albeit with the difference that Blackberry has been in the market since 2002. With such a backdrop, is the issue of which platform will win even worth debating?
I think so. What Apple did not announce is that it is losing market share – Google is activating 160,000 Android phones every day as against ~100,000 for Apple. And the HTC EVO 4G which is being sold by Sprint has a significant order backlog. Or that both the 4G networks being rolled out in the US (Sprint, T-Mobile’s HSPA Plus) are only offering Android phones. Read Walt Mossberg’s review of the new Samsung Galaxy phones to see how far Android phones have come. And All of this pales beside the fact that, in China, Android is winning against iOS hands down. In a recent TechCrunch post, Richard Yu talks about how Android’s open source business model is fueling a virtuous cycle of innovation on 2 fronts: devices and applications. In an earlier post, I already talked about how prices for smartphones and tablets are dropping. Since then, I got a quote from a Chinese vendor willing to supply an “APad” with a 7″ screen for $ 65.
It looks pretty good, huh? The catch is that it has a 500 MHz processor which will struggle to render HD or to multi-task. But for many, its good enough. And the $ 65 price wins vs. $449 for an iPad.
On the application front, there are ~100,000 apps in the Android marketplace and it could catch up with iTunes in a year. And the fact that both China Mobile can launch Ophone (which its own Android marketplace) and Motorola can launch Android devices with Baidu in China is further evidence of the innovation underway in the Android ecosystem.
In India, where consumers are ultra-price sensitive, Apple has virtually no presence, and Google/Nokia/Microsoft are very well entrenched, it’s hard to see Apple being a major player. In India (IMO),
- Android shall rule and will likely have ~50% market share in the “smart phone+ tablet” market within 3 years
- Nokia, with 60% market share, cannot be ruled out and it will end up with 25 % of the mobile + tablet market
- Microsoft could actually claw back some market share in India, given its overall dominance/brand position but it will end up being # 3 with 15-20 %
- Blackberry will be next, leaving Apple behind in the dust
Now for the real question, does it matter? For consumers, the platform battle will fuel innovation and drive costs down and so, they win, irrespective of how this plays out. With HTML5 and development platforms like PhoneGap, I suspect that most app developers will feel the same way and say, “chalta hai” (Hindi for “whatever dude!”)
What do you think?
Global Choupal 
Ashu:
I see a great connection between this and your last post about Jeff Bezos’ Princeton speech (choices?).
In fact Chindia represents the same challenge to Apple as the US market was in the 90s. Price point that forces the buyer to think about compatibility, app availability and so on (detracting from the real use/usability). I believe the current price point in the US (with carrier rebate) is a “dont care” point.
Android does provide a free/open platform and the PC story will most likely repeat. Apple will still do well this time, I think catering to a customer base that cares about usability/experience. Big difference this time is the Apple has a strong content based revenue stream. On the device itself a Mac makes 8-10 times net margin of a PC; add that content to the iPhone/iPad/iBook mkt and a very different economics emerges. So while Android will pick share (and may be able to exract revenue); Apple will remain strong (stock price is not my measure of strength !!) and will hopefully continue to bring us new products for a while.
Its a hard business model – but I am sure when Jobs has that most private conversation with himself at 80; his business life will be in his thoughts more than any philanthropic endeavours he undertakes …. 🙂
cOdo8Z I’m impressed! You’ve managed the almost impossible.
I agree with the overall observation. I am not sure that I agree that Apple will continue to do well. Over time (5-7 years), if Apple does not win in Chindia, the iPhone will struggle to be cutting edge even at the high end, IMO.
Of course, Thats why I said that this is a very hard business. That iPhone will not rule in 5-7 years is almost a given; just given the category cycle these days. Apple doing well; is predicated on delivering a new platform every so often. I am sure there will be some core elements carried into the next iXYZ; but as a company they are hitting the law of large numbers as well (Hence my comment that success for them will be hard to measure by stock price). Any truly innovative business will be volatile and if Apple can tide over the next 10-15 years or another 3 or so categoty changing entries ; new platform possibilities will be open to them in Chindia with some great revenue opportunities.
One interesting aspect that I will be watching for this time is the differences in cost. Feature for feature; Apple’s BOM for iPhone is competitive; in fact it is very competitive for the iPad. So the question then is that Apple’s cost is more a function of design choices driven by functionality they would like to offer and to some extent the margin they desire (which is of course a function of % of internal failures, R&D costs etc).
I think on the Chindia front Apple can be successful in the 10-15 years horizon; not in 5-7. In 5-7 years it can still pull in good revenue. There is already 2MM+ iPhones in China and 300k+ already sold by their carrier China Unicom despite an almost 800$ price tag. China’s ARPU is almost 3.5% of GDP per capita and India’s is almost 5%. Compare that to 1.2% in the USA. So there is either more income than reported or there is a willingness to spend on telecom. In either case, price sensitivity is not what it used to be.
I am in no way saying that innovation is not happening in the Android world; but the fragmented ecosystem is unlikely to deliver the punch that a focused company like Apple can. I would be much more convinced if the goal of Google was to make Android a revenue maker core business; as they are the only party in the ecosystem that can drive the completeness and quality of the platform.
Another “if” in 5-7 years is whether Mr. Jobs will still be involved at AAPL. I think he matters primarily a someone who can strictly enforce the strategic choices made by the company and not letting them be watered down by the alleged constraits that other companies bring upon themselves.
Alas; culturally we are still to build large companies that can do blockbuster products themselves as well as manage lean periods … My hopes are alive.
I agree Ashu that Android has the best chance of success over the next decade.
My imperfect analogy is that Apple is like the IBM and Android is like the Microsoft of the PC world 2-3 decades ago in the Chindia context. The imperfection in the analogy comes from the fact that the software platform in smartphones is not device independent. But I think hardware is now reasonably commoditised to make that an almost irrelevant factor
Apple’s relevance comes from its tightly knit ecosystem – and the value in that ecosystem is in the content and delivery. IMO, if Jobs doesn’t crack the content side of the equation for Chindia, he’s never going to get to rule the market the way he can in the US.
Android’s relevance comes from the fact that its cheap/free and completely open. The last is also its weakness. What are your views on the value of a Android app market moderated by Google (or someone else?) like the iOS app market is by Apple?
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I think Apple has a problem in India that is more fundamental than just price. A lower price matters everywhere in the world. But in India the trade-off between “form” and price is dramatically different from how it is made in the developed world. How the device looks (or for that matter any product) is given a much lower priority than matters like price and features. Performance, another important tenet of Apple design, also matters much less in India.
Most of India still leaves the plastic covers on their scooter seats well after they are in tatters.
agreed.
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