IBM, General Motors, and Microsoft have not been involved in such a seismic shift in profits that matches what Apple is doing to modern computers and the mobile device industry. This shift is almost insane and one of two things will happen to Apple and the remaining competition.
What. Goes. Up.
Apple is a company with many competitors on many fronts. The company is a giant war machine fighting battles all over the earth against many entrenched enemies with deep pockets. What’s happening?
Apple is winning. Apple is winning everywhere.
Unlike IBM, General Motors, Microsoft, and Google, all of which gained their riches and status (some more recently than others) through traditional market share monopolies, Apple has won battle after battle where it matters.
New research suggests that the smartphone industry may be in for a massive shakeout if the current trend continues. Trend?
Back in 2010 Apple had absorbed over 40-percent of the entire industry’s profit margins. That means it was Apple at the top, Samsung, LG, BlackBerry, HTC, Sony, Lenovo, Microsoft, Nokia and others trailing badly.
In 2011, Apple’s blitzkrieg through the competition grew profits to more than 60-percent and the smartphone industry became a two-horse race between iPhone and Samsung. That race ended two years ago as Samsung failed to keep up to Apple’s growing profit dominance. Today, researchers point out that Apple owns almost 95-percent of the entire industry’s profits, and the growth is increasing.
Where is the competition?
Samsung has been in a downward spiral that brings the company’s fortunes closer to the bottom of the barrel, still #2, but losing everything except marketshare.
Must. Come. Down.
The iPhone is responsible for a gigantic shift in profits from an entire industry into a single company. That has never happened on a similar scale in the past, regardless of technology or industry. Year after year Apple’s profits increase while competitors scrounge for crumbs, losing more money, and that becomes ominous.
Profits are required for research and development. Profits are required to create products that are both high quality and competitively priced. Without profits, a consolidation will begin and some of that has already taken place. Previous industry giants– BlackBerry, Sony, HTC, Motorola, Nokia– all dead or dying. Samsung is more diversified. Microsoft’s cash comes from other non-mobile sources. Ditto for Google.
What could happen?
More consolidation. And, Apple could trip up and lose the aspirational branding that helps to keep the company so profitable despite a barrage of competitors selling wares at lower prices (and lower margins, which only exacerbate the situation).
So far, that has yet to happen. There’s not even a glimpse of a leak in Apple’s profit dominance, but there are leaks in what helped move Apple into such a dominating, commanding position.
Rather, the lack of quality. Just as Apple’s riches have climbed beyond the reach of weakening competitors, the company seems to have lost the ability to launch new products which ‘just work.’
iOS 7, iOS 8, and perhaps to a less extent, iOS 9 were plagued with bugs unlike previous versions. More user friendly capabilities, yes, but problems which are heightened because they affect not just a few million customers at once, but hundreds of millions of customers.
Ditto for OS X versions going back to Mavericks, Yosemite, and El Capitan. Plenty of features, some new eye candy, but the larger number of customers make flaws more apparent. Even new hardware suffers.
Apple Watch took almost a year to launch. Apple TV, while boasting plenty of future, remains an overpriced beta-like product waiting for the future to catch up (that may not seem to make sense, but it does). This is the new Apple. Ship and fix. That new position leaves Apple exposed to a competitor who can build a better widget, an improved ecosystem, and products that, in Apple’s finest tradition, just work.
So far, that has not happened and Apple continues to bask in the riches of a monopoly position on profit share. It’s world domination by profits.