Apple’s Competition Is Going to Have a Tough 2016

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There’s a reason why I barely follow anything around tech that doesn’t pertain to Apple. At first, other companies didn’t seem to be doing anything interesting business-/design-wise, and that doesn’t seem to have changed. Now it seems there’s even less reason to follow those companies knowing the opportunities they’ve been robbed of by Apple (perhaps with exception to Amazon and Twitter, which I should probably be following more).

Daniel Eran Dilger from Apple Insider tries to ground everyone back to the reality behind the numbers. Here’s a good point he makes about Macs (emphasis mine):

 

 "Virtually all of the established PC makers seemed to be evaluating how to get out of the business, even as Apple's premium-class Mac sales gained significant new ground. Including tablets with PCs, Apple now sells the most computers and the most expensive computers (and nearly all of the expensive computers), an apparent contradiction of the "common sense" understanding of price elasticity of demand and the premium-eroding nature of commodity products."

 

It’s no secret the PC market’s been in decline for years now, yet Apple’s still getting people to buy a lot of Macs at a high price. It’s almost paradoxical.

A similar point is made about iPad:

 

"Remember in 2012 and 2013 when iPad was supposed to be under grave threat from Nexus 7 at its breakthrough price of $199? Everyone watched in anticipation to see how Apple would react to cheap 7 inch tablets. But in reality, it didn't even bother to respond. Apple continued selling its own tablet products at prices more than twice as high as Google's bargain tab."

 

I think overall it’s primarily a testament to good, sustainable design. But these, to me, tell slightly different stories.

I think better design contributes to the Mac’s growth story - despite Macs being around almost as long as Apple itself, the number of Windows users shouldn’t be underestimated. While the market itself isn’t growing, people are realising the benefits of having a Mac, and strangely enough it’s been like this for a long time. I expect it to continue being this way, albeit with comparatively slow growth since the enthusiasm for PC’s overall is a far cry from that of phones and tablets.

In contrast, I think better design contributes to the iPad’s decline story. Fewer perceptible benefits seem to come about from upgrading to the latest iPad compared to that of iPhone, and as iPads get better, so does longevity, in that iPads can be kept for a longer time before hardware fails to catch up with software. In other words, people are probably keeping their iPads and using them until they break. Bad for sales, but indicates good design.

That’s among other factors affecting sales growth, the biggest perhaps being the decline of tablet sales overall.

All of this is to say how much of Apple’s problems could pertain to their commitment to other goals apart from financial, like design, and fluctuation of trends in the overall markets they compete in. But a problem to Apple is an absolute nightmare for the competition.

Here’s a point Dilger makes about Samsung and the iPhone:

 

"Over the past year, iPhone 6 proved itself it be both very popular among early adopters and extremely satisfying to those who bought it, in stark contrast to Samsung, which witnessed a massive collapse in demand for its comparable, premium-range Galaxy S6 and Note 5 models. 

Samsung is facing not just flat growth for the coming year, but has already experienced an end to its smartphone growth last year! Not only is Samsung Apple's largest hardware competitor, but it's the only significant firm that offers any real competitive threat to iPhones at all. And it's collapsing. It's actively warning its employees (and again warned investors this week, just as it did last year) that things are not going well." 

 

With 94% profit share of the global smartphone market, essentially the whole thing, it’s impossible to look away from Apple, as it’s impossible to associate any credibility with any other smartphone manufacturer attempting to “compete” in the same premier tier as iPhone.

 

"Over the previous three years, Samsung essentially paved the way for larger smartphones, but then flopped badly in response to Apple moving into the big-phone product category that Samsung could previously point to as a real and obvious differentiation...

...Samsung also can't keep releasing larger and larger phones, because the value of a large display quickly starts to become a size, weight and clumsy interface liability after 5.5 inches."

 

It’s now easy to see that bigger-screened phones were Samsung’s claim to fame. Once that stopped being a differentiator, it stopped sales dead in its tracks. Cheaper prices and Android licensing seem to be the only thing keeping their smartphone business alive. It’s a dynamic felt by the rest of the industry:

 

"Now that the shoe is on the other foot, Apple has a series of clear advantages that Android makers can't afford to add to their downmarket portfolios, because Android hardware is increasingly differentiated only by price, and being cheap also means you don't have money to invest in new technology."

 

A big reason why I don’t buy the unit share metric, since a lot of what’s being sold is basically crap.

The other tech companies that Apple seem to be “competing” against are its Silicon Valley neighbours, being Facebook and Google, which confuses me because of how different they are. Put plain and simple, they earn through selling ads and user data. While that’s boring and borderline disgusting to me - albeit to their credit, quite stable - it’s also an entirely different business model to that of Apple. So I’ll expect them to be around for a while, investing in their tech bubble pet projects with their ad money that “analysts” will continue to somehow shoehorn into Apple doomsaying.

I think as Apple grows, its competition will come from elsewhere. It’s dominant in their existing markets and are reaping almost all the benefits.

For example, the story is a little different in the smartwatch market, as discussed in the previous post. If you look at the overall wearables market, there’s healthy demand for products from other manufacturers. But I think that’s only the case by principle of the market being young and the Apple Watch even younger. Again, it’s a Version 1 product. We’ll see how this plays out in the long-term.

I think the real competition could come from the likes of Tesla and other car manufacturers veering away from fossil-fuel-based cars (See: CES 2016). I think Apple will make a car, for many reasons which I can’t list now, but long story short, where there’s smoke, there’s a flame.

The car industry is ripe for some real disruption championed by real design, and every year Apple’s not in the car industry is another year Tesla and co. learn more and deal with the real-world set backs of their products. That said, Apple itself has unique expertise to bring to the table. In the advent of climate consciousness among all these other things, the car industry is an increasingly interesting space.

Apart from that… Apple’s having the best of times, and everyone claiming to compete against them are having the worst of times.

(Via Apple Insider)