The smartphone market is ruthless, cutthroat, and can feel like an all out war.
And that constant clashing of titans runs so parallel to George R.R. Martin’s fictional Game of Thrones realm that we couldn’t ignore it anymore.
Much like the known world in Martin’s Thrones is divided into two main continents—Westeros and Essos—the smartphone market is split in a similar fashion. Everything from innovation in the space, to overall command, to market supremacy is predicated on how well manufacturers perform in the U.S. If consumers in the ever-important Western market don’t bite, there’s no use in even attempting to overthrow the powers that be.
And, as the main seat of Westeros rests in the capital city of Kings Landing under the control of a single house—in Martin’s case, the Lannisters— the U.S. smartphone market is dominated by the iPhone, a product of House Apple, based out of Cupertino, California.
The parallels don’t end there, though. Other major houses in the realm of smartphones have been working for years to overthrow the king. Threats to the throne come from others here in the U.S.—your Googles and Amazons of the world—while plenty more have raised their banners and are coming in as foreign invaders—your Samsungs, LGs, and countless lesser-known Chinese firms.
To understand the lay of the land it’s best to divide this story and the characters in it. But it’s equally important to note how each side impacts the market here in Westeros… er, the U.S.
If history has taught us anything with the smartphone market, it’s that innovation happens at breakneck speeds. The smartphone has only been a reality in the consumer tech world since the turn of the century, but by all accounts, it’s already been dubbed one of the most important inventions in human history—they’re also already the best-selling gadget ever.
We can pinpoint the specific advent of smartphones as January 9, 2007. On that day at the Macworld convention, Steve Jobs stood on a stage and introduced to the world a device that was three things: a mobile phone, a wide touchscreen iPod, and an “internet communicator.” At the time he called the iPhone just another revolutionary product made by the company that’s been fortunate to have quite a few of those in its portfolio. Albeit an egotistical kind of comment from the CEO and founder, Jobs wasn’t wrong.
The iPhone brought into the world the smartphone form factor that we’ve all come to know and love. It killed the physical keyboard. It introduced us to the concept of applications. It familiarized consumers with the multi-touch input system.
In a word, it upended the consumer tech market.
Similar to what Amazon is doing to today’s brick-and-mortar retailer, Apple’s iPhone disrupted the industry. Brands like Blackberry and Nokia practically went out of business in a few short years after the iPhone was introduced. (They’ve both attempted comebacks in the past year, but nostalgia alone can’t save a brand.)
Since its launch in June of 2007, Apple has sold north of 1.2 billion iPhones. Three of the top five smartphones ever sold are Apple products. They’ve been the standard-bearer for the smartphone industry.
Total sales alone don’t tell the whole story though.
In today’s smartphone landscape, Apple is by far the best performing brand, capturing 43.9 percent of the U.S. market from an OEM standpoint, as of April 2017. However, Android has become the dominant mobile operating system. Google’s mobile OS—or at least some version of it—is active on around 54 percent of all smartphones in use today and growing fast.
Apple was able to quickly capture a majority of the market after its initial launch. But over the years, Android has proliferated as a platform due almost entirely to the fact that, unlike Apple, Google is willing to share its operating system with manufacturers. Practically every non-Apple device that hits the market today ships with Android. Google does produce its own hardware, but historically other OEMs like Samsung, LG, and HTC have produced the devices that bring Android into consumers’ hands.
Apple, on the other hand, keeps everything in house. In his iPhone launch speech, Jobs referenced a quote from computer industry pioneer Alan Kay that he said perfectly sums up the way Apple operates as a company: “People who are really serious about software should make their own hardware.” And even without the support of other OEMs producing phones that run iOS—Apple’s mobile platform—the company has been able to maintain a strong grasp on just under half of the total market from a platform perspective.
Looking at sheer market penetration, there are really only two major manufacturers of smartphones in the U.S.: Apple and Samsung. Combined, according to the most recent figures, the two own 73 percent of the market—Apple at 44 percent and Samsung at 29 percent. The next closest manufacturer, LG, holds 10 percent of the U.S. market, and no one else has been able to crack 4 percent.
So that leaves the big two. And the rivalry between them has never been more real than it is today, down to the unwavering support of their respective fanboys and fangirls. Though Apple will never admit it, the two brands clearly keep close tabs on one another, see what technology the competition is putting into their devices, and try to one-up the other with each new smartphone launch.
In just the past few years, we’ve seen a new interpretation of plus-sized models hit the market. Each have added highly water resistant models to their lineups. Their ads constantly poke at one another. Analysts near and far can’t help but compare the two on any possible level. Looming in the background as well is the history of patent infringement lawsuits between the two in a whole host of countries around the world. And all of this is going on while one (Samsung) continues to manufacture screens and other components for the other (Apple).
In keeping score, Samsung had a major win in August as it logged a larger quarterly profit than Apple for the first time. That was driven by the launch of the much-anticipated Galaxy S8 during one of Apple’s historically weak quarters. But that streak will likely end at one, as Apple enters its most profitable quarter historically, and with an iPhone launch that’s shaping up to be the company’s biggest yet.
The central plot point in Martin’s world involves a quiet threat from the East that is slowly building momentum, waiting to crash down on the world as the main kingdoms fight within their current boundaries in the West. Westerosians warmly call this threat by her preferred name—the Mother of Dragons, Breaker of Chains, First of her Name—but, metaphorically, we see her as the Chinese smartphone market.
However, it’s not just the U.S. that is being invaded by Chinese brands; their plan is worldwide domination.
On the surface, the players in the space appear limited. Of course, Apple and Samsung have a footing worldwide, but those are the only non-Chinese brands in the global market worth mentioning. Excluding Apple and Samsung, other notable mobile stalwarts such as Motorola, LG, Blackberry, and Nokia seem to be spinning the drain despite a deceptive 40 percent market share.
“In my opinion, the biggest change in the second quarter is the size of the contraction among the ‘Others’ outside of the top 5 OEMs,” Ryan Reith, program vice president with IDC’s Worldwide Quarterly Mobile Device Trackers, said in a report. “It’s no secret that the smartphone market is a very challenging segment for companies to maintain or grow share, especially as already low average selling prices declined by another 4.3 percent in 2016. The smaller, more localized vendors will continue to struggle, especially as the leading volume drivers build out their portfolio into new markets and price segments.”
The top five global brands break down as Samsung, Apple, Huawei, OPPO, and Xiaomi, according to IDC. Samsung and Apple combined take is 35 percent of the global market share, coming in at 23 percent and 12 percent, respectively.
As the second-quarter numbers rolled in for 2017, global smartphone shipments grew 3 percent year-over-year, totaling over 365 million units. Counterpoint Research has pointed out that a majority of U.S. consumers will have bought a Chinese-branded smartphone in the next five years.
And this should come as no surprise.
There was once a time when every TV in the home was a Zenith, Motorola, or RCA. Now, Korean, Chinese and Japanese brands dominate in the living room.
The deciding factors, as it will always be, comes down to price.
The U.S. market is saturated with premium-level smartphones that have a premium tier price. In fact, the newest iPhone is rumored to have a price tag north of $1,000. This could lead other heavyweights, notably Samsung and Google, to release their flagship smartphones at the same price, opening the door for Chinese manufacturers to release their product at nearly half the price.
Notable Beijing-startup Xiaomi, who was valued at an “unfeasible $45 billion” in 2015, is determined to disrupt the market, especially ahead of the unoffcial Fall smartphone refresh cycle. Xiaomi’s meteoric 324 percent worldwide growth in 2017 alone is proof of that. At the same time, Apple and Samsung have actually lost footing in China, to the tune of about 1 percent and 53 percent, respectively. Topping it all off, Xiaomi bought nearly 1,500 patents from Microsoft, giving them easy passage to U.S. markets, which historically has had tougher IP regulations.
Following close behind Xiaomi is Huawei, whose steady line of flagship Honor phones has been targeting Millennials and offering intangible solutions to selfies and social media—i.e. they know that we know that Millennials are the main proponent of new technology surviving in this market. ZTE and TCL-Alcatel also hold a portion of the smartphone share in America and have already been spotted at nationwide brick-and-mortars.
Between razor-thin margins, extensive social media marketing, and direct-to-consumer business models; there is a shocking amount of truth that helps change the conversation from fear mongering a Chinese smartphone takeover to quantifiable evidence.
There’s no denying that smartphones have become one of the most important pieces of technology ever known. Consumers keep proving that there is basically no end to how invested they are in their tiny mobile computer. In terms of total minutes spent ingesting digital media, smartphone usage has doubled. Smartphone market penetration is nearly tapped out at this point. According to a recent comScore report, 81 percent of all mobile phones in use today are smartphones—that’s up from just 6 percent in December 2007.
The continuing promise for retailers is that smartphones have a relatively short shelf life compared to other consumer electronics. Apple itself admitted that it doesn’t expect consumers to go more than three years before needing to upgrade their device. And that plays right into the hands of wireless carriers’ business model around smartphones. The “two-year contract” has allowed carriers to subsidize the cost of these increasingly expensive devices while tying the consumer up for 24 months of payments. Other options—such as the monthly installment plans —have been introduced to allow quicker upgrade cycles, but consumers have essentially been conditioned to the two-year model for years now.
Then there’s the cycle of innovation around the smartphone itself. They’ve become a 21st Century Swiss Army Knife capable of completing nearly every task we ask of them.
Smartphones have throttled the digital camera market. They’ve helped to reshape the newsmedia landscape. They’ve given us instant access to troves of information, music, and email. We use them to stay connected to friends and family near and far. And, of course, they’re still capable of making phone calls and sending and receiving text messages.
Innovation today—as far as iPhone 8 rumors are concerned—includes things like facial recognition, display-embedded sensors, OLED screens, wireless charging, and augmented reality applications. Minor improvements will always continue to happen around things like the camera hardware, how much memory capacity these devices have, and maybe even (we can only hope) batteries that last longer than a single day. But how much more can smartphones be innovated?
A better question might be, do they even need to keep being innovative? Have they reached their potential, and that potential just so happens to be all that we really need out of them?
The big unknown looming over this entire industry is the rollout of 5G networking. Apple has already been approved to begin testing the new ultra-high-speed network, as have Verizon and AT&T. But its true rollout is likely still a few years away. 5G will provide a major boost to the smartphone, allowing it to be consumers’ remote control to the connected world. With so many other developing platforms out there though—virtual, augmented, and mixed reality to name a few—it’s fair to wonder whether the smartphone’s days atop the Iron Throne are actually numbered.