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iPhone loses US market share in Q1 2008 ... the real story

According to IDC, the Apple iPhone actually lost ground in the first quarter of 2008 in the US:

Research in Motion's BlackBerry increased its share of the U.S. smartphone market in the first quarter while Apple's iPhone lost ground, according to a report from IDC.

According to the report RIM's share of the U.S. market for advanced phones with computer like features such as e-mail rose to 44.5 percent in the first quarter from 35.1 percent in the fourth quarter while iPhone's share fell to 19.2 percent from 26.7 percent in the fourth quarter.

This is notable for a number of reasons, none of which I feel have been accurately communicated online yet. These are:

  1. Apple's market share in rich countries like the US are usually touted by the iCabal because it is so much higher there than in developing countries. In this case, Apple's best market actually saw a significant quarter-over-quarter decline. That doesn't happen very often with Apple successful products, the iPod and Mac.
  2. That said, the iCabal, is of course, trying to defend this drop by noting that Apple is about to release a brand new iPhone, after all. So customers are clearly waiting for the new version. That's just spin. It's almost June as this IDC report appears, and just 10 days before the expected introduction of a 2nd generation iPhone. Q1 2008 covers January through March, not January through May, so the quarter in question ended almost two full months ago. There is no way that actual customers (i.e. non-iCabal, non-tech enthusiasts) put off iPhone purchases between January and March because of a possible new hardware revision. That's just fanciful, and it assumes that the wider cell phone buying world (i.e. "the world") is as tuned into Apple's release schedules as is the iCabal. They're not.
  3. While Apple has attempted to keep sales of the iPhone at least somewhat steady by regularly introducing the device in new markets around the world, this strategy hasn't garnered much success from a units sold perspective. In 2008, iPhone sales are flat (actually, down from 2007) and the device isn't selling well in many markets, especially in Europe. When you combine that with slowing sales in the US (i.e. the one market the iCabal always points to), there's a bad trend here.

I expect that Apple will see a nice and expected bump when it introduces its 3G-capable iPhone in June (or whenever it does). But 3G isn't really enough to keep momentum going. After that, Apple will have a few major new markets to enter (China and Japan? I can't remember) and then... what?

Before anyone gets their panties in a bunch over supposed Apple bashing, I'm actually concerned about this. The iPhone is, I believe, a revolutionary device and it deserves to be hugely successful. Once you get past 3G and its lack of availability in key markets, you can tackle the only meaningful stumbling block to iPhone adoption: It's far too expensive. There are two things Apple can do here, and both will have sustainable, real world effects on unit sales: First, the company needs to dramatically lower the price, even to the point where they're taking a serious loss on each one sold. I'm talking by at least 50 percent. (Not to parrot an old SNL skit, but they can make it up in volume: At this phase, Apple simply needs to establish the iPhone as a major, credible mobile platform that has long-term legs.) Second, Apple and its wireless carriers need to lower the monthly cost of their wireless plans and up the capabilities/features to bring this product more in line with the other devices offered by the same carriers. I can't speak for the rest of the world, but AT&T offers much friendlier data plans (not to mention all-you-can eat data plans for international travelers) on non-Apple devices than they do on the iPhone. This needs to be rectified.

Apple CEO Steve Jobs said that he would sell 10 million iPhones in 2008 (not, as so many have mistakenly reported, that he would sell 10 million iPhones through 2008, which includes all 2007 sales as well). So far, they sold 1.7 million units in Q1 2008, and it's hard to imagine sales were much better in Q2, given that by that time, potential customers really were more attuned to a new model coming soon. To get to 10 million, the company can't just come out with an evolutionary hardware update. It must lower the cost of acquiring and using an iPhone, and make the decision a no-brainer.And it must do so before Android hits and before Microsoft finally gets its Windows Mobile act together. It's simple math. (So simple even I can do it.)

I want Apple to make this happen. The iPhone is the kind of device that excites consumers and competitors alike. But it needs to be more than an inspiration. It needs to be hugely successful.

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