Tech Note: Samsung Becomes Top Smartphone Manufacturer

When I saw this headline today I was dumbstruck.  If you had asked me I would have said that Apple had such a big lead in smartphone sales that no other manufacturer was even close.  Fact is that Samsung now has around 23% of the market to Apple's 14%.  While Samsung's sales in the 3rd quarter jumped 44%, Apple's fell 16%.

One of the reasons Apple's stock sits so high is because I and apparently most people believe that they not only have the dominant OS for smartphones now, but will hold that dominance for at least the next five years.  This sales report now puts a lot of that into question.  One thing to note about Samsung is that they sell smartphones with three different OS's.  They have Android, Windows, and their own OS.  It was rumored for a while that they would buy WebOS from HP, but with Android stabilizing and Windows 8 on the horizon it's hard to see why Samsung would want to venture out on their own.

Anyhow the point is that just because Samsung has surpassed Apple in sales doesn't mean anyone has surpassed the iOS operating system.  But then I looked and found that Android holds 43% of the world marketshare as compared to 18% for Apple as of 2nd quarter 2011.

Again I was stunned by this.  I had stupidly assumed that iOS was by far and away the dominant OS for smartphones.  I have to say this has changed my whole perspective.  Apple does have a large marketshare, but the reason they are making so much money is because they are getting all the profit.  It's their OS, it's their devices.  Yes there are more Android phones out there, but it means a lot less money for Google.  The key question then is whether or not Apple can keep a large enough marketshare over time to continue to make huge profits.  Obviously there would be a tipping point for them on profitability though I'm not sure anyone knows just what that is.

Microsoft is gearing up to go aggressively go after the smartphone market next year, but honestly it may be too little too late for them as they currently sit with only 2% of the world market.  We learned from the botched HP Touchpad experiment that an OS can grow quickly in the marketplace if it's discounted and so Microsoft may be willing to take losses to build marketshare.   And they are going to be attacking this from three sides. The same OS for your computer, your pad device, and your phone.  Similar to the Google approach, though the difference is that Windows 8 will be a fully functional, backwards compatible OS to Windows 7.  With Samsung now passing Apple in sales, and Microsoft getting ready to launch their attack, we could be looking at a much tougher road for Apple than anyone was expecting over the next five years.

It gives us some idea why Apple is so willing to fight Android in the courts at every opportunity and why they have now discounted their iPhone3's to the price of free.  Something I would have never dreamed Apple to do.  For one reason they are now trapped to support an aging device and make their OS compatible with that aging device.  This is not how Apple usually rolls so it's a brand new world for Apple, and it will be fun to watch how they handle this new path.