The Apple Market Share Problem: Or is it?
We all know Apple as the largest, most valuable tech company in the world. They have competed in the consumer technology industry for over 45 years, and have made extremely influential products along the way that have changed the industry. These range from the 1984 Macintosh with one of the first Graphical User Interfaces to the iPhone, which flipped the smartphone market upside down. But one thing is consistently absent from Apple’s list of accomplishments, and that is majority market share in most niches they compete in. Let me explain The Apple Market Share problem: or is it?
Why does Apple not have Majority Market Share?
Before we can understand why Apple does not have a majority share in most markets, let’s find out how they lost their market share.
Apple vs. Microsoft
Flashback to 1984. Apple pioneered the Graphical User Interface and almost perfected it with the Macintosh under Steve Jobs. It was simple, easy to use, and shook the entire industry. Microsoft, who was until now making MSDOS, a computer operating system based on command lines realized this was the future of software. So what did they do? “You ripped us off!” said Steve Jobs directly to Microsoft’s CEO Bill Gates. According to Apple, Microsoft Windows was a stolen product, but Microsoft had differentiated it enough that they avoided court.
Nowadays, it is common knowledge that Windows has a majority market share in the computer market, with Apple only making up about 10%. So how did Apple lose market share, when they technically entered the market before windows, and even then, it took Microsoft 3-4 years to make Windows as good as the operating system used by the Macintosh. The answer is that Microsoft licensed its operating system to hundreds of manufacturers. That means Apple, with its Operating System, wasn’t just competing with Microsoft, but with Dell, HP, Sony and hundreds of other competitors. Steve Jobs insisted that to provide a superior user experience, they needed to control the hardware and the software. This made the Mac experience (arguably) superior and helped them integrate future products like the iPod seamlessly with the Mac.
Apple vs. Google
Now let’s move forward to 2007. The iPhone is introduced, and the world is completely in awe of the radical new design. The iPhone went on to become one of the best-selling products in history. Meanwhile, Android was being built by Google to work on normal phones of the time, like the Nokia and BlackBerry flip-phones. This is what Android engineer Chris DeSalvo had to say when he saw the iPhone get announced, “As a consumer, I was blown away. I wanted one immediately. But as a Google engineer, I thought, ‘We’re going to have to start over.'” Android, as we know it, was finally released in 2008, almost a year after Apple announced the iPhone. However, it took only 2 years for Android to overtake iOS in terms of market share. Any guesses how Google did it? Well, they made Android open-source, which meant anyone can use the code of Android and modify it too. This meant hundreds of manufacturers including Samsung, LG, Xiaomi, and Sony were competing against the iPhone, allowing Android to have almost 80% market share today.
In the present day, iPhones tend to be the best-selling individual smartphone, but they cannot compare to the sales of hundreds of Android manufacturers combined. Many Android enthusiasts site reasons like freedom, customization, and the ability to download apps from the web as their primary reasons to use Android devices. But these advantages only originated because Android was open-source and distributed to many manufacturers.
The very nature of an operating system that can be licensed to other manufacturers meant that Windows and Android could appeal to a lot more people. For example, if you don’t like Apple’s notch, there are many Android’s with hole punches or other contraptions to make the screen bezel-less. Don’t like Android’s default launcher? You can change it to any other from the official store. Want a Mac with RGB, water cooling, and gamer-focused features? Or maybe a touch-screen on a Mac? Well, you’re out of luck. But with Windows, you can be assured that there is an option perfect for you due to the sheer number of companies making laptops based on Windows.
Does Apple Need Market Share?
On the face of it, absolutely! More market share means more revenue and more people using your products. That is good news for any company. But Apple hasn’t really done that. If anything, Apple made their products such that they have supreme control over the user experience, making it better, rather than distributing their OS for market share to other hardware makers who will not use the software to its maximum potential. This is another reason many developers prefer to make high-quality apps for iPhones rather than Android, simply because they have to target a smaller number of devices with fewer differences in internals, chipsets, screen sizes, etc. It’s a similar story with the Mac.
BUT, there is one important reason many, including myself until a few days ago, tend to miss. I put out a tweet asking why Apple should worry about market share. Here’s what renowned Apple Analyst Rene Ritchie had to say about it:
I mentioned in the very beginning Apple is the most valuable company on Earth, despite generally having less market share and a smaller product line. Take Samsung for example. They make laptops, smartphones, smartwatches, TVs, Monitors, SSD’s for computers, etc. They also have the largest smartphone market share. Yet, they are worth only $220 Billion, compared to Apple’s $2.08 Trillion. Why? Well, there are two reasons.
- Even though Apple has about 20% of the smartphone marketshare, they amount for 66% of global smartphone profits. For context, Samsung sits at a tiny 17% of total smartphone profits. This means Apple generates a larger amount of profit from almost all its lines of products. How do they do it? The very fact that Apple designs their own chipset, operating system and hardware saves the amount of money a company like Samsung has to give straight to Google and Qualcomm for providing the operating system and chipset. This was only possible because Apple had tight control over every aspect of their products. Unlike their software competitor Google, Apple relies primarily on hardware sales for profit. This means they need to focus on making as much profit from the devices they sell. Google on the other hand makes over 80% of its revenue from ads served to its users, so it is in Google’s best interest to have its software in as many people’s hands as possible, even if they don’t make profit from hardware or the Android software itself.
- The second reason is mind share. Even though many people don’t buy Apple products, they still know Apple. It might be because they were outraged at the extremely high price of some wheels for a desktop, or maybe because they know Apple for cool industrial design. No matter the reason, almost everyone has heard of Apple. They have a very strong brand, and it pays off when it comes to stock. Due to all the talk around their brand, their stock price remains extremely high. This is a big reason why they are valued at $2 Trillion.
What Happens When Apple Gets Market Share?
Now we know why Apple doesn’t chase after market share. But, what happens when Apple does gain majority market share? Let’s take a look:
A) iPad- Apple has over 50% market share with the iPad. So what do they do differently? Nothing! Apple maintained their strict control and offered a superior user experience because of that. The reason they were able to achieve this success was simply that Android messed up in the tablet market. Apple’s closed approach with developers making tailored applications for a small number of products gave way to a far better App Store than that on Android tablets. It resulted in consumers opting for the better iPad.
So what did Apple do after they gained majority market share? They kept pushing the boundaries more than they do on their other devices. 120hz Pro Motion debuted on the iPad Pro in 2017, LiDar was first introduced to the 2020 iPad Pro and the M1 chip made the iPad Pro more powerful than a lot of $1000-$1500 computers.
B) AirPods- Apple also gained majority market share in the wireless music industry, with about 60% market share beating dedicated music brands like Sony, Jabra and Bose. The reason? Apple bought beats, which gave them a huge leg above all other vendors. But, Beats don’t even come close to the success of AirPods. They connect seamlessly to apple devices and even people with Android’s tend to buy them because of their convenience. There is no other set of earbuds that connect completely wirelessly, offer a pocketable design and provide the level of noise cancellation (and transparency) that the pro and max AirPods do. On top of which, AirPods became most successful on the backs of the iPhone. The way they seamlessly connect with every Apple product you own and switch between them seamlessly is something you have to experience to fully realise who good it is.
So what did Apple do after they gained majority market share? They made a Pro version, which offered features like Silicon tips and noise cancellation (also made them cost more). They followed up with very expensive, $550 headphones called the AirPods Max, which MKBHD describes as “Luxury Listening”. It’s not just Apple users, because hardcore PC/Android user Linus from LTT also admits that AirPods Max are worth it for iPhone users, and might just be worth it for Android users who miss some functionality.
Conclusion: Apple’s Marketshare Problem
Apple leaving profit and chasing after market share would be stupid. But we see that even when they do gain market share, they remain stubborn to control each part of the user-experience to make it better. This puts many people off, because it means less customisation and far less options. If someone loves iOS but doesn’t like iPhone hardware, they don’t really have another option because no one else makes iPhones. This means Apple captures less of the market, and this can be a huge downside in some situations. For example, there is a lot of software that isn’t available on Mac, because it doesn’t have a lot of market share, making it a second thought for developers. If you’re an iPhone user, it means you can’t play Fortnite because of the Epic Games lawsuit, but you can on Android by simply side-loading. These are problems, but the average user sometimes benefits from low market share. The reason Macs have lesser viruses can be credited to the fact that many hackers don’t invest a lot of time to infect Macs because they have low market share. Other than that, Apple controlling the user experience and keeping market share low just means a controlled user experience, and it’s up to you if it is something you prefer.
If, as a side-effect of making good prdocuts, Apple gains market share, they obviously won’t complain and may even brag about it. They’ve made new Macs that are more powerful than anything they made before, but it is very clear Apple made the best possible product, not a market share winner. Did these Macs make professionals and everyday users switch to Mac? Yes! But these Macs will definitely not be able to knock Windows of the top spot in terms of Market Share.
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