As the smartphone industry collapses, the iPhone expands its dominance

There is a general rule when it comes to consumer electronics: the older a device gets, the more competitors appear and prices drop. This was true for televisions, personal computers and portable music players.

This was supposed to happen with smartphones. But the iPhone defied gravity.

On Tuesday, Apple will unveil the 17th iteration of its flagship product. It’s remarkable that at a time when most consumer devices have lost some of their appeal among users, Apple has increased its share of smartphone sales compared to its cheaper competitors.

Over the past five years, the iPhone has increased its share of total smartphones sold worldwide while increasing its share of sales in four of the world’s largest regions: China, Japan, Europe and India.

In the United States, the iPhone’s largest market, the device now accounts for more than 50% of smartphones sold, up from 41% in 2018, according to Counterpoint Research, a technology company. These gains allowed it to claim around a fifth of global smartphone sales, up from 13% in 2019.

Apple expanded its smartphone empire while the industry as a whole faltered. Over the past two years, Android smartphone sales have fallen, but the iPhone has suffered only modest declines as it has gained new customers. It did this despite being the most expensive device in the industry.

Apple has overcome price sensitivity by creating a business not unlike U.S. car sales. Like a car, iPhones last for years and can be resold to offset the purchase of a new one. Wireless service providers, just like car dealerships, offer discounts and monthly payment plans that make buying the latest model more affordable. And customers, like brand-loyal car buyers, are more likely to buy another iPhone than upgrade to Google’s Android operating system.

Apple was also lucky. Two of its biggest challengers, Samsung and Huawei, have stumbled in recent years. Samsung faltered in 2016 when the batteries in its flagship smartphone spontaneously caught fire. Huawei, which was popular in China, failed in 2020 after the Trump administration blocked it from purchasing American technology.

The iPhone avoided wobbles thanks to a reliable model: Apple updates the iPhone’s simple but elegant design and reliable software every year, and makes it available to the general public with a working machine that assembles 200 million of flawless iPhones per year with military precision.

In the United States, the popularity of the iPhone is expected to increase in the coming years. Nearly 90% of teens own an iPhone, according to Piper Sandler, an investment bank.

For young people, iPhones mean inclusion. Many choose it over Android because Apple’s messaging service, iMessage, will change the color of messages from the default blue to green if a non-iPhone user is in a messaging group. The stigma associated with green texting is so pronounced that when Dave Storrs’ 14-year-old son got his first smartphone, the teen told his father whether he wanted an iPhone or not phone at all.

“It’s a status thing,” said Mr. Storrs, a retired Army veteran who lives in El Paso. “They don’t want to be treated differently.”

Mr. Storrs, aged 49, suffered the same pressures. For more than a decade, he prided himself on being what he called an “android renegade.” He owned a series of LG and Motorola phones, even as his son and other family members urged him to buy an iPhone. He gave in this year after his family gave him a pair of $99 Apple wireless AirPod headphones.

Every time he wanted to use the AirPods on his Android phone, he had to sync them manually. This laborious process prompted him to buy an iPhone 13, which instantly connects AirPods. After years of using a free Android phone, he now pays $11 a month for the iPhone. But he says he’ll never go back to Android because he loves being able to wear AirPods and take phone calls while walking his Catahoula leopard dog, Teddy.

“It’s just convenient,” he said.

New buyers like Mr. Storrs illustrate how Apple wins customers. The gap between the two major operating systems leans in Apple’s favor. About 94% of iPhone customers are likely to buy another iPhone, while 91% of Android customers are likely to buy another Android, according to Consumer Intelligence Research Partners, a technology research firm.

The migration from Android to Apple has accelerated as promotional discounts, financing plans and trade-in offers make higher iPhone prices less of an obstacle. Wireless carriers have been upgrading their offerings as they struggle to gain or retain customers following T-Mobile’s merger with Sprint in 2020. When the combined company, the new T-Mobile, offered the iPhone 12 for free with a 30-month contract, AT&T responded with a similar deal, said Cliff Maldonado of BayStreet Research, a smartphone research firm. This made the change painless.

Around the same time, Apple and wireless carriers began promoting monthly payment plans more aggressively. These plans reduced the cost of a new iPhone to less than $40 per month, from $800 to $1,200 that customers had to pay upfront. Prices are lower for people who trade in used devices. The old iPhones, which could cost as much as $640, have been sold at auction to Asian buyers, who are reselling them for a markup, Mr. Maldonado said.

“The phone market is like the real estate market,” he said. “You get equity and pay over time.”

In China, the second-most important country for Apple’s business, the iPhone has become the default choice for people wanting a high-end smartphone. Samsung was forced out of the market several years ago and Huawei was unable to make a phone with the latest wireless technology. The lack of competition has helped make the iPhone the country’s best-selling smartphone in recent quarters.

But new challenges threaten Apple’s lead. Last month, Huawei unveiled a new high-end smartphone, the Mate 60 Pro, the first to feature chips capable of operating on 5G cellular networks. Beijing also ordered employees of domestic government agencies not to use iPhones for work. Instead, they were encouraged to use national smartphone brands, raising the possibility that nationalist momentum could undermine future iPhone sales. The news was first reported by the Wall Street Journal.

Apple did not respond to requests for comment.

Apple could perhaps offset the decline in China with growth in India. The company now claims 5% of sales in the world’s fastest-growing smartphone country, up from 1% in 2019. Counterpoint Research predicts Apple could double its share to 10% next year.

The iPhone’s gains in India took years. In 2017, Apple began working with government officials to begin manufacturing iPhones locally, a move that improved affordability by avoiding import tariffs. It also opened stores in New Delhi and Mumbai.

The new flagship iPhones that Apple is set to unveil this week will feature faster processors, more sophisticated cameras and bodies made of titanium rather than stainless steel, according to supply chain analysts. The changes are expected to come with a price increase of $100 to $200, which would bring the cost of an iPhone Pro to $1,100 and the Pro Max to $1,200.

But analysts predict iPhone loyalists will ignore the higher prices. The increases would be less than $5 per month for people on monthly plans and even less for those trading in old iPhones.

“The economy is doing pretty well and everything is costing more,” said Michael Levin, co-founder of Consumer Intelligence Research Partners. “People are desensitized to the increases right now. »