Apple loses marketshare but still makes the most money

By

Apple profits
Apple can afford to lose some marketshare because of how profitable it is.
Illustration: Cult of Mac

Apple is the headline in two new studies. One seems alarming as it shows Apple’s share in the smartwatch market has declined by 14 percent.

But the second study shows Apple as the biggest money maker in the smartphone market by a long shot. Thanks to iPhone X, Apple held 62 percent of the market share in Q2. Its closest rival, Samsung, has suffered double-digit sales losses and is a distant second at 17 percent.

The two surveys show how pure market share doesn’t tell the whole story. Apple faces increased competition, which may take a cut out of its customer base. But Apple, as the smartphone research by Counterpoint shows, consistently makes all the profits in the middle and high parts of the market. This leaves all other competitors fighting near the bottom where profits are hard to come by.

Apple profits in the face of more competition

What each survey shows is the number of competitors facing Apple keeps growing.

The Apple Watch is the top-selling smartwatch worldwide but its market share between Q4 2017 and Q1 this year dropped 14 percent thanks to new competitors entering the space, ABI Research reported earlier this week.

Even so, Apple is likely to regain some of that market later this year after creating buzz over the new Series 4 watch that debuted during the fall product showcase Wednesday. The Series 4 has a new user interface and has the ability to record an electrocardiogram and detect when the wearer could fall.

And it sold out during pre-order today in under a minute.

The new watch is so exciting to Apple’s enigmatic chief design officer Jony Ive, that he gave a rare interview to the Washington Post. He told the Post, “Every bone in my body tells me this is very significant,” Ive said. “(Series 4) will be a more marked tipping point in understanding and adoption of the product.”

As Ive indicated, smartwatch usage has been slow to take off, but ABI projects shipments will grow from 40 million this year to more than 108 million by 2023.

With smartphones, Apple has proven that its customers aren’t shy about paying the higher prices on its products. Chinese companies, like Huawei, are growing fast and even taking over larger chunks of market share.

“(The) iPhone X, which drove a new design language, helped Apple command a significantly higher Average Selling Price during the second quarter, at a point when the overall smartphone market was beginning to saturate,” according to the Counterpoint study.

The iPhone X is so last year and Apple has even discontinued it thanks to three new X models that rolled out on Wednesday, the iPhone XS, XS Max, and XR.

Like the watch, the iPhone XS sold out quickly during pre-order today.

Samsung ships more smartphone and Apple was surpassed last quarter by Huawei for second place. Still, Apple remains the most profitable smartphone maker by a long shot.