NEWS ANALYSIS: For Apple's iPhone to truly be a world-class smartphone, it needs to be everywhere in the world. But the iPhone isn't officially distributed where it needs to be most: China, the world's largest cell phone market. Recent noise about possible future iPhone deals with U.S. carriers shouldn't drown out the silence about China.
Last week, bloggers chattered about AT&T's exclusive iPhone contract
expiring in 2010 and Verizon's desire to carry Apple's smartphone in 2011. It
was a silly discussion because Apple's bigger problem is China.
The company desperately needs a carrier distribution deal in the world's
largest cell phone market. China
distribution is something that must
happen soon, if Apple ever hopes to
make the iPhone into the successful platform it has the potential to be.
Sure, Apple needs Verizon-Sprint and T-Mobile, too. But AT&T's exclusive
distribution deal and Sprint and Verizon technology limitations are barriers to
iPhone availability through any other U.S.
carriers. Even without AT&T exclusive deals, Verizon would be no immediate
option for the iPhone. Apple decided against making a CDMA iPhone, a good
choice with the world largely standardized on GSM (granted frequencies vary
across some geographies). Forthcoming 4G networks will put more carriers
everywhere on the same technologies, including Verizon, but not for several
Is iPhone Smart Phone Enough?
No question, Apple's exclusive AT&T deal has lost luster. In 2007, the
exclusive agreement made sense. Apple was a new and untested handset
manufacturer. Apple was a beggar, and one turned away by Verizon. The exclusive
AT&T deal got the iPhone to market and gave Apple a decided amount of
control over the device and supporting services. But two years later, the
AT&T exclusive deal holds back the iPhone, allowing BlackBerry a greater
sales surge and market share gains. Two things are working well for BlackBerry:
The hip president of the United
States, Barack Obama, uses the smartphone.
Research In Motion distributes BlackBerry
through all major U.S.
carriers. Apple has one.
Between the third and fourth quarter, iPhone sales dropped from about 4.7
million units to 4 million. Sequential BlackBerry sales rose from 5.8 million
units to 7.4 million. Apple will announce first calendar quarter iPhone
shipments in just a few days, on April 22. Wall Street consensus is about 3.3
million units, or another sizable sequential decline in shipments.
Looking only at smartphones, in 2008, BlackBerry's market share rose to 16.6
percent from 9.6 percent a year earlier. During the same time period, iPhone
share increased from 2.7 percent to 8.2 percent. For the broader handset
market, iPhone market share was 0.9 percent.
In 2008, according to Gartner, the United
States was the world's fastest-growing
market for smartphones, growing 69 percent year over year. Smartphones accounted
for about 20 percent of all U.S.
handsets sold last year. By comparison, worldwide, smartphones accounted for 11
percent of all cell phone sales in the fourth quarter and 12 percent for the
smart phones sales increased 3.7 percent year over year in the fourth quarter
for 38.1 million units sold. For the year, smartphone sales rose 13.9 percent,
for sales of 139.3 million units. U.S.
smartphone sales were about 9.8 million, assuming 20 percent of sales. By
comparison, for China,
smartphones accounted for between 7 percent and 8 percent of all handset
shipments in 2008. If measured at 7 percent, then manufacturers shipped 12.6
million smartphones, making the market already considerably larger than the United
States. Global leader Nokia lost about 2
percentage points of market share in the Asia-Pacific region in the fourth
quarter, without Apple officially selling one handset in China.
Nokia's share loss shows the potential gains with the iPhone available to