On the last week of January Apple published its financial results for 2013. These were record results in monetary income - $57.6 billion, a rise in revenue of nearly 6% compared to 2012 and record sales in the number of products sold. Despite what can be described as highly impressive figures, the markets were not pleased, due to the perception that Apple's propriety operating system iOS is losing ground to Google's public domain operating system Android.
And with reason.
Apple is a technological giant but in the smartphone arena is a lone rider. Only Apple can make use its operating system iOS while countless developers and manufacturers can make use of the Android operating system.
Technology is a battle of wits and mind power. There is no doubt that Apple employs hundreds of talented developers but they are a proprietary, a closed entity. A very large closed entity perhaps, but a closed entity nevertheless. As a consequence Apple is losing global world share. In 2012 it held 19% of the world's smartphone market, by 2013 it had fallen to 15%.
After publishing its 2013 results, analyst Van Baker from the Gartner Technological research institute commented, "The era of the smartphone has reached its peak. The market is based on customers upgrading their products and not on those buying smart phones for the first time." Others believe that unless Apple reinvents itself again by developing a new hot product, it will inevitably continue to decline.
But such statements ignore the strength of the smartphone market.
Irrespective of whether demand is from upgraders or first time users, demand for smartphones is robust. In 2013 just over one billion smartphones were sold worldwide compared to 725 million in 2012 - a rise of 38%. These impressive figures show this is still a tremendous market and a company with a 15% share of this multi-billion dollar market cannot be considered weak.
But what is happening in the global smartphone market and ipso facto in Israel?
Accel Telecom is the exclusive importer of French-Chinese smartphone manufacturer Alcatel, which has become a major player in Israeli smartphone market. Accel CEO Marc Seelenfreund told the Jerusalem Post, "The global smartphone market is highly competitive and dynamic. Only a few years back, companies like Motorola, Nokia and Blackberry dominated the market, while today the landscape has completely changed with Samsung and Apple at the forefront. Though Apple is clearly an extremely strong company with great devices, it seems to have hit a wall because it is competing with a very large number of developers and manufacturers of numerous smartphone devices, as well as thousands of software applications that make use of the Android open operating system. As Android offers a large range of handsets manufactured by multiple vendors and at various price levels, combined with a richer offering of software and applications, it seems that in this war of the smartphones Android handsets have the upper hand."
Ayelet Serfaty-Rozen is the CEO of iDigital, one of the official Apple importers in Israel. She agrees that the smartphone market is dominated by the competition between the Android and the iOS smartphones but totally disagrees with those that claim that Apple is losing ground.
"Demand for Apple products is stable. The Apple brand iPhone is very strong and that is a terrific selling point. It is true to say that we operate in a very dynamic and competitive market but whoever implies that Apple is not up to competing with the technological advances in the market forgets that Apple is one of the most innovative technological companies in the world. It has always astounded the market with its inventive technological developments."
Indeed when discussing the smartphone market one must bear in mind that, as in all cutting edge technological products, the key to success is new and advanced developments. Despite the seasoned development team at Apple, the countless number of Android developers around the globe at multiple manufactures give it a big advantage in developing new smartphone technologies. It is not only vis-a-vis Apple that the small developers are gaining ground. They are also gaining ground over other large developers. In 2012 small developers held 35% of the smartphone market while in 2013 they held just over 40%.
The same holds true in Israel. In the last quarter of 2013 Samsung held 33% of the market, as opposed to 40% in the first half of 2012. Apple, at second place with a 24.5% market share, was at 34% in the first half of 2012. Third place was Alcatel, surprising the market with a 13.4% market share compared to a 4% market share in the first half of 2012. Alcatel’s success can be explained by a very efficient and focused marketing operation, but also by an attractive value-for-money approach which Israelis love. These technologically advanced smartphone devices sell for NIS 1,300 to NIS 1,700 and contain most of the important functions of their much more expensive Apple or Samsung counterparts. Alcatel sells its smartphones at all the cellular providers as well as at major retail chains in Israel, which makes it a real threat to the larger handset manufacturers.
Based on its knowledge of cellular hardware and the Android OS, Accel developed the first ever car-based smartphone, adapted to the needs of drivers - whether of private cars, commercial vehicles or Voyager trucks. Accel sells this device at Orange and has also started international sales with a multi-billion dollar market potential. This seems to be the first Israeli company to commercially launch a smartphone, which again shows the great potential in partnering with Android. But like all market products, Accel will have to continue developing more advanced technologies or decline in a market that shows no mercy. The smartphone market is tough in the extreme. Paul Lucifer, an ex-oficio Blackberry executive, told the Jerusalem Post, "Complacency is the biggest danger to smart phone companies, regardless of their size. Blackberry and Nokia were market giants in their field. Complacency led to their ruin; they failed to react to such innovations as the iPhone and the iTouch and they were brought down."