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Apple and Google have Swallowed the U.S. smartphone market

February 7, 2013

Apple and Google have completely swallowed the U.S. smartphone market. And nowhere is this duopoly better illustrated than in this chart from analyst Horace Dediu of Asymco. The iPhone and Android have consumed all other platforms and in the U.S.A., they are quickly converging to have a 50%-50% split of the market. This chart is based on comScore data. ComScore released its newest mobile data this week. It receives its market share numbers by surveying thousands people and asking them about their smartphone. As such, comScore’s data tends not a forward-looking predictive indicator of market share. It is an indication of what platforms are being used looking at from today and backwards in time several years.

The chart shows that Apple has 36.3% of the market purely from a "Platform" perspective. Other outlets have put Apple above 50% in the U.S. Looking at smartphone activations reported by carriers, Apple share of the U.S. market is significantly higher than 36.3%.

Apple iPhone Sales represent 73% of AT&T’s total smartphones sales. AT&T announced on Tuesday that 62% of its total subscribers are using smartphones. The company sold 5.1 million smartphones in the second quarter, representing 77% of its postpaid device sales. While iPhone sales are down from the last quarter, a typical slowdown that comes as the prospect for a next-generation model approaches, AT&T sold 3.7 million iPhones, or 73% of AT&T’s smartphones sales in the last three months.

Apple iPhone Sales represent 45% of Verizon’s total smartphones sales. Verizon’s recent announcement that 50% of its subscriber base is now using a smartphone, and the company sold 5.9 million total in the second quarter. As with AT&T, iPhone sales declined sequentially, but the 2.7 million iPhones that Verizon sold represent 45% of its smartphone sales.

iPhone represents 58% of smartphone sales Combining the two largest US carriers, AT&T and Verizon activations, which share two-thirds of the US mobile market. Most of the remaining sales were shared among up to 16 Android device makers and models.

The U.S. is a different market for Apple as compared to the rest of the world. In the U.S. smartphone sales are heavily subsidized making the iPhone similarly priced as compared to Android phones. Globally, the subsidy policies differ where the iPhone subsidy is significantly lower, and the iPhone net cost to the customer is significantly more expensive. This factor is preventing the iPhone from making big market share gains outside of the USA. Apple is phenomenally profitable doing what it does, and the way they do it.

How does the subsidy work in the USA market: When a customer buys an iPhone with AT&T for example, the real sales price if the iPhone, to the user is say $650 with no 2yr contract, (this is referred to as an "unlocked" phone); or $200 if the customer signs a 2yr contract; What happened to the $450 difference? Its simple, AT&T literally pays Apple up front the $450, approximately 70% of the price of the new iPhone. AT&T does this because the customer agreed to be an AT&T subscriber to their network for 2 years.

Why does AT&T and other providers charge penalties for early termination: The reason AT&T charges penalties like $375 for early cancellation, is because AT&T is literally out-of-pocket, in your behalf, for $450 at the time you signed up with AT&T and you paid the $200. Therefore in either case, Apple receives $650 ($200 from the customer + $450 from AT&T) on the Day of the sale, for every new iPhone on average, adjusted up for which memory capacity the customer selected.

In other Countries around the world, their network providers do not provide 70% subsidies for Apple iPhones. Therefore this makes the iPhone more expensive to non-USA customers, and brings some Android smartphones into a better competitive advantage, hence lower iPhone global market share.

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Notice in this graphic, that with the four major US carriers, they carry on average 16 different Android models.
Recall with Apple, it makes the iPhone, principally the iPhone 4, 4s, and iPhone 5

Notice in this graphic, that with US carriers combined, they carry on average 12 different Android models.
Recall with Apple, it makes the iPhone, principally the iPhone 4, 4s, and iPhone 5

Notice in this graphic, Likely the best for comparison as it eliminates the "cheep" Android smartphones; With US carriers combined, they carry on average 6 or 7 different premium-priced Android models.
Recall with Apple, it makes the iPhone, principally the iPhone 4, 4s, and iPhone 5

When a customer buys an iPhone with AT&T for example, the real sales price if the iPhone, to the user is say $650 with no 2yr contract, (this is referred to as an "unlocked" phone); or $200 if the customer signs a 2yr contract; What happened to the $450 difference? Its simple, AT&T literally pays Apple up front the $450, approximately 70% of the price of the new iPhone. AT&T does this because the customer agreed to be an AT&T subscriber to their network for 2 years.

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