Analyzing Apple’s iPhone market potential

“The iPhone is a fabulous slim, sleek and sexy device. Loaded with most of what you’d expect of a high end smartphone today, with most obviously an enormous bright high-resolution screen of 3.5 inches in size (for comparison my new Nokia N-93 that I was so happy about last week, has a screen of only 2.5″ in size,)” Tomi T. Ahonen blogs for Communities Dominate Blogs.

Ahonen writes, “The resolution of the screen is also impressive at 320 x 480. That is twice that of its typical music-playing rival smartphones from SonyEricsson, Motorola, Nokia, LG and Samsung. When combining video viewing, internet browsing and Apple’s smart touch-screen (they call it Multitouch), this screen size and resolution are both justified, and clearly differentiating from much of the competition.”

“The iPhone has the newest and best iPod features built in, so it is a true iPod phone, not like the sad Motorola Rokr was. No matter how much the industry has loved SonyEricsson’s Walkmans as “iPod killers” – we can safely trust that this iPhone will be the best of the bunch for music,” Ahonen writes. “And the rest of the phone features are pretty impressive too for a high-end smartphone, with quad-band GSM, meaning it works in every GSM network, meaning the most wide network coverage in the world, covering almost 80% of the phones in the world. It also has high speed cellular data, on the EDGE standard (what is often called 2.8G, just short of 3G) and WiFi and Bluetooth.”

Ahonen writes, “This is a serious flaw for the market outside of America, but not really a major flaw for the American market itself. Unfortunately adding 3G to the phone involves a complete additional radio unit, increasing weight, complexity, reducing battery life etc. So this is not an easy upgrade to the next iPhone. Adding 3G is a very complex and costly step, and it also requires “double” the amount of testing at all network operators before it is accepted into the supported handset portfolios of any operator. This may be part of the reason why Apple launches in America first (being the laggard market in mobile telecoms and in 3G) and Europe next, with Asia last (as South Korea and Japan are the industry leaders especially for handsets, mobile internet and music on mobile, as well as 3G).”

Ahonen writes, “Even if mobile phone sales grow only marginally in 2007, this means a target market for Apple of 120 million smartphones. And Steve Jobs talked (in his interview on CNBC right after the announcement at Macworld) about capturing 10 million of those, in its first year. 10 million is 1 percent of all phones, that is ‘reasonable’ but 10 million is 8% of the worldwide smartphone market – that is quite a tall order in its first year, and even more so with only two phone models.”

“Musicphone sales rocketed in 2006, more than doubling. It is fair to assume, even at very conservative rates, that musicphone sales will reach 400 million units in 2007. This of course includes most of the 120 million smartphones mentioned above,” Ahonen writes. “Now we are talking about a valid market opportunity for Apple. 10 million means only 2.5%, and that is quite do-able.”

Ahonen writes, “So back to America. If we again assume that the 7.5% of all musicphones are sold in America, it gives us a market of 30 million. If under half are on GSM, we’re at 14 million, and out of those, if Apple wants 4.7 million – that means 33.5%. A tall order, but it can be done.”

Much. much more in the full article, a very interesting analysis, here.

Related articles:
Apple iPhone tops Amazon’s bestselling electronics list in Germany – January 13, 2007
BusinessWeek explores ‘the real genius of Apple’s iPhone’ – January 12, 2007
Wired News: Steve Jobs’ iPhone shows the future – January 12, 2007
Cringely: Apple iPhone will suddenly go 3G, gain features, and be renamed ‘Apple Phone’ – January 12, 2007
Apple’s Phil Schiller gives CBS News hands-on tour of iPhone – January 12, 2007
20 unanswered questions about Apple’s iPhone – January 11, 2007
Report: iPhone could be upgraded to 3G with software update if Apple wishes – January 11, 2007
Report: Rogers Communications to offer Apple iPhone in Canada – January 11, 2007
David Pogue: hands on preview of Apple’s iPhone, ‘gorgeous and so packed with possibilities’ – January 11, 2007
PC Magazine hands-on test of Apple iPhone: multi-touch UI ‘takes the breath away’ – January 11, 2007
Mossberg’s initial take on Apple iPhone: ‘radical and gorgeous’ with ‘brilliant new user interface’ – January 11, 2007
NewsWeek’s Levy interviews Apple CEO Steve Jobs about iPhone – January 11, 2007
Why Apple’s iPhone doesn’t do high-speed mobile phone networks (yet) – January 11, 2007
RealMoney: Apple just blew up the whole damn mobile-phone supply chain with its new iPhone – January 11, 2007
ZDNet: Hands on with Apple’s iPhone: ‘elegant, ravishing, simple, sleek; impeccable & intuitive UI’ – January 11, 2007
Apple iPhone FUD campaign begins – January 10, 2007
Nine ways Apple changed the face of consumer electronics yesterday – January 10, 2007
Analysts and investors applaud arrival of Apple iPhone – January 10, 2007
Top 10 things to love and top 10 things to hate about the Apple iPhone – January 10, 2007
How Apple kept the iPhone top secret for 30 months – January 10, 2007
Hands-on with Apple’s iPhone – January 10, 2007
The only thing really wrong with Apple’s iPhone is its name – January 09, 2007
Is Apple building ‘The Device?’ [revisited] – January 09, 2007
Analyst Bajarin: Apple’s iPhone and Apple TV are industry game changers – January 09, 2007
Time: ‘iPhone could crush cell phone market pitilessly beneath the weight of its own superiority’ – January 09, 2007
Analyst: Apple iPhone should be given its own category – ‘brilliantphone’ – January 09, 2007
Cingular to use Synchronoss Technologies’ platform for Apple iPhone – January 09, 2007
iPhone photos from Apple’s Macworld Expo booth – January 09, 2007
Enderle: Apple’s iPhone is going to do very well – January 09, 2007
Apple debuts iPhone: touchscreen mobile phone + widescreen iPod + Internet communicator – January 09, 2007

Bloomberg writer: Apple iPhone won’t make long-term mark; will only appeal to a few gadget freaks – January 15, 2007
Dvorak on Apple iPhone: ‘I think Apple can do wrong and I think this is it’ – January 13, 2007
USA Today writer: Apple iPhone is an ‘ordinary, average product’ at heart – January 12, 2007
FUD Alert: Analyst – I am pretty skeptical Apple’s iPhone can succeed – January 11, 2007
The Register’s Ray: Apple ‘iPhone’ will fail – December 26, 2006
Analyst: Apple iPhone economics aren’t that compelling – December 08, 2006
CNET editor Kanellos: ‘Apple iPhone will largely fail’ – December 07, 2006
Palm CEO laughs off Apple ‘iPhone’ threat – November 20, 2006


  1. Just thought of this. Since 70% of all cars now sold in US have iPod connectors, won’t adding full hands free iPhone capabilities be the obvious next step?

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  2. I’m not currently in the smartphone market but that’s because they’re overcomplicated and are more hassle than they’re worth for my minimal requirements. If a product like the iPhone works and is simple enough, I see a lot of people upgrading – if they make it a fashion accessory they make an entirely new market.

  3. ” . . . won’t adding full hands free iPhone capabilities be the obvious next step?”

    Sounds good. And after that, I hope iPhone will take the wheel and drive so I can pass out in the back seat. “Hey iPhone. I want you and Google to get me home. And no stopping at one of those networking parties this time.”

  4. Lets get one thing clear. Steve said:

    “Ten million phones in 2008”

    So we will not know the results until January 2009. I say this because people have been saying “…in the first year” i.e. from June ’07 to June ’08.

  5. I’m not in the market for a “Smartphone” cause it might end up smarter than me and to carry something smarter than you are in your pocket is not a smart thing to do. I also don’t need an iPod, I have three iPods already thank you very much. And I have a Macbook and a Nikon D70 with extra lenses and such. Sooo….

    I’m gonna get the iPhone. Because I am in the market for an Internet communications device that just happens to have a built in camera and a built in iPod, and oh, yeah, a phone if I ever need it. But mostly I want to take the net with me wherever I go, and I want to do some work without having to lug a laptop around. The phone won’t drive my purchase, having the internet in my shirt pocket will.

    “The internet in my shirt pocket” will sell more iPhones than these experts think.

  6. I don’t want one. But so what?
    Want depends on factors like:
    need a cell phone (i don’t)
    want to be able to use the features of what’s on the market but can’t remember instructions manual,
    Can afford the latest and greatest and are mobile a lot, have business need.
    Want all three of the features of the iPhone. So:
    iPhone is going to create an entirely new market as well as it’s going to capture a chunk of the RIM etc. market. It will leave MOT and NOK in the dust too in the easy to use category, but their prices will be lower than Apple’s so they won’t be threatened all that much. Apple, however, will sell so many that its stock will reflect this.

  7. Cringley said it best “Apple did not enter the cell phone market to be a player, they came to dominate.”

    This is Apple’s interenal goal. “If we enter a market, we are entering to win. Period.” It sets the bar so high, they are highly likely to deliver superior products vs. the competition who are in the market to make incremental changes, play the game and be a player and hopefully slowly win a few % points of the market.

    Apple eats these companies for lunch, and is why the cell phone industry looks so attractive to Apple. A market of fairly stagenet innovation, driven by carriers low-entry cell phone prices and lock-in two year plans.

    This is all ripe for Apple to change the game.

  8. M.X.N.T.4.1,

    that was my first thought on reading an otherwise good article. The author looked at established market segments:- smartphone segment, music-phone segment etc., and forgot the probable creation of an iPhone segment which combines the other segments with the additional functions and the cool-factor of the iPhone.

    The iPhone could well become a ‘useful’ fashion accessory.

  9. The main point is lossed on all the analyses I’ve read.

    Apple’s iPhone is a NEW market. It is NOT a smartphone. It is simple to use and will be attractive for all but a few geeky ‘smartphone’ users who like buttons and programming and fiddling and crashing. Bit like preferring Windows to Mac OS X really.

    I will put money on Apple selling 10m iPhones by the end of 2007. 20m in 2008.

    No-one appreciates what effect having this phone in your hand is going to have on peoples purchasing decisions. They are going to go mad for it.

  10. Steve left it ambiguous enough so that 2008 could be Apple’s FY2008 thus ending on Sep 30 2008, or CY2008 thus ending on Dec 31 2008.

    In any case, it’s more than 1 year from the expected launch date in June 2007.

    Assuming they’ll be upgraded model in Oct-Nov 2007 (possibly with more flash memory, or with 3G for Europe), I have no doubt they’ll make 10 million by Dec 2008.

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