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Comment by ryandvm | Hacker News Reader

So this is going to play out just like Windows vs Mac.

Except that Windows vs Mac was something like 95% to 5% in favor of Windows, while the smartphone market is likely to end up more like 60% to 30% in favor of Android. The situation is different qualitatively.

The data consistently shows that iPhone share is growing, just not as fast as Android.

When a market is growing, it allows everyone to grow... for a while. Check out the Commodore 64 in this graph:

http://jeremyreimer.com/totalshare5.gif

Yep--low margin but ubiquitous commodity provider vs. high margin but low market share premium offering.

One thing I don't get though is that Android phones aren't very low margin. Their retail price is just as high as an iPhone (or at least close). Even feature phones aren't cheap.

So do non-iPhone phones not get subsidized at full retail pricing (or generally much more substantially than the iPhone)?

With the exception of my gadget geek friends ponying big money for the latest 4G-whatever, everyone I know who has an Android phone got it on a two-for-one special or nearly free discount. These huge Android growth numbers aren't being driven by the $300 mega phones.

Cost of the handset is fraction of the overall 2 yr contract price with data plans that are must for these devices. I know people are eager to label Android as "cheap" and "commodity" but the reality is that there are hugely popular Android handsets in both premium and low cost segments and it isn't clear at all that all of the sales are from low end handsets.

Similarly Apple sells $49 3GS - so does Apple now become a commodity/cheap brand?

My anecdotal experience would suggest otherwise...

Nobody ever posts facts to back that up. They just assume it would be true. But HTC and Samsung are making a lot of profit on their Android phones, much more than they ever did with other mobile OS.

The issue is that Android can be used on any hardware product whatsoever, so inevitably there will be both premium and more commodity type products that cover all market segments. Virgin Mobile already has non contract Android smart phones that retail (no rebate) for $150, far cheaper than an iPhone.

"One thing I don't get though is that Android phones aren't very low margin."

http://www.verizonwireless.com/b2c/store/controller?item=pho...

$80 android phone right there. I assume that's lower margin than, say, the $200-300 iphones that Verizon sells with a 2 year contract.

Apple is culturally stuck to high margins. Google cares only about making sure Apple doesn't win and the other handset makers are used to pretty lean margins...

Androids will keep getting cheaper-- there'll be free/near-free ones out there soon.

For some reason that link doesn't work for me.

But my point isn't the price the customer pays. But rather the price the carrier pays to HTC/Samsung. That's the money that the actual OEM makes. Those prices, if they're equal to the non-contract price, aren't that far off of the iPhone. Even feature phones are routinely $150 or so.

iPhones get a much bigger subsidy from the carriers. This can be deduced from the ASP that Apple, HTC, RIM etc report. iPhone ASP has always been $600+, while HTC, RIM have ASPs around $300-400 (Samsung smartphone ASP is even lower). This can also be seen by looking at contract prices outside the US. For example, in the UK all phones can be had free on contract, but the monthly amount you pay for an iPhone is much larger than for a top of the line Android (see the O2 or Vodafone UK sites).

The reason this is not reflected in the contract-less prices is because US carriers have a very strong incentive to inflate them to force you to choose contracts.

Perfect response. Thanks. That explains a lot of it.

This isn't the case.

The high-end Android phones start out roughly the same price as the iPhone, but drop quicker (because new high end models replace them quicker).

Here are the Australian unlocked prices (Android reseller chosen because it was the top result in Google):

iPhone4, prices $719-$999: http://store.apple.com/au/browse/home/shop_iphone/family/iph...

Samsung Galaxy S2, price $749: http://www.mobicity.com.au/samsung-galaxy-s2.html

Samsung Galaxy S (ie, old model similar age to iPhone4, which started out priced similar to iPhone 4), price $549: http://www.mobicity.com.au/samsung-i9000-galaxy-s-8gb-nextg....

Actually, in your link above, iPhone 4 prices start from $859. $719 is the price of the 3GS.

I don't know how it is in Australia, but the contract price discrepancy between Android phones and iPhones is well known in England. For example, O2 sells the Galaxy S2 for free with a 24 month £42 plan, while the 16GB iPhone 4 is free on a 24 month £67 plan.

http://shop.o2.co.uk/mobile_phone/pay_monthly/init/Samsung/G... http://shop.o2.co.uk/mobile_phone/pay_monthly/init/Apple/iPh...

Sorry, you are right about that price being for the 3GS. I missed that.

Here, plans are pretty comparable.

Galaxy S2, $5/month on $59 plan: http://www.optus.com.au/store/phone/galaxysii?sid=MobAFeat1:...

iPhone 4 16GB, $7/month on $59 plan: http://www.optus.com.au/store/iphone/plans

The Galaxy S2 plan gives you a bit more data, and you do have more flexibility with Galaxy S2 plans - you can choose to pay more for the phone and less for the plan for example. (Of course, you also have a big choice of cheaper Android phones too).

I'm not sure that's right. I think it's better to characterize it as high margin low market share premium offering vs everything (high, low, middle). Android's strength is exactly that it doesn't target anything and caters to every single demographic.

It's easy to make a program for windows run ok on XP and brilliantly on 7 (I assume, never tried, that you do something like target net 3 or something else M$ have backported). It sounds like you can't be so successful with the old android phones, even if you tried.

Not necessarily. iOS already surpasses Android in mobile OS market share, and Android isn't making any inroads into tablets and other mobile computing devices, which will probably be the bigger market than smartphones.

It won't be a bigger market than smartphones, not even close. There are 5 billion phone subscriptions in the world right now. They will all be replaced by smartphones.

EDIT: Also iOS growth is slower than Android growth, still, so it's just a matter of time before even iOS numbers get beaten, with or without Android tablets.

"There are 5 billion phone subscriptions in the world right now. They will all be replaced by smartphones."

Not saying I disagree but I am saying you have to be careful with blanket statements like this. I recall Olympus stating that phones were simply incapable of competing with digital cameras, regardless of market. However the market has shown that phones eat into the low end market and the SLRs are pushing down from the top putting a lot of pressure on the mid-range market.

I could imagine that the 'phone' function as an adjunct to all tablets. All you need is a headset and voice dialing and your tablet can go VOIP/Cellular as the channel availability demands. Services like Gvoice making the endpoints number vanish by overlaying it with a 'logical' phone number.

Its not a huge step to cannibalization of the smartphone market by the tablet market.

A tablet doesn't fit in your pocket. I carry my phone everywhere I go. Though I would love to have a tablet, I can't imagine doing the same with one.

It's a very person to person thing. I carry both a smartphone and a tablet with me everywhere and I find myself never using the phone unless someone actually....phones.

Depends on your definition of "everywhere". I don't even walk the dog without throwing my phone in my pocket first. Would you always walk your dog with your iPad?

That's a good point, although in fairness I actually have walked my dog with my iPad, I was reading the Economist. However to the point, it requires a 'different' holding. It certainly isn't something you put in a pocket but if you tend to carry a bag around it's light enough to throw in there, around the house generally the tablet is 'near by' but my phone is always on my person.

It will be an interesting evolution.

Given the rather horrible options for data here in Canada, saying that smartphones will replace phones isn't quite true. I'm disinclined to get a smartphone w/o a dataplan, and I'm not sure they would sell me such. This might change, but it sucks today...

Just look at Virgin Mobile: $25/month for unlimited data and SMS and 300 talk minutes. And $150 Android phones, no contract.

That is awfully competitive even if you have a dumb phone and just a voice plan now. And is a market where iPhone can't even get close.

I'll grant you that most will eventually end up with smartphones, if for no other reason than the phone manufacturers will simply stop making "dumb" ones. I personally prefer a "dumb" phone but I can see the writing on the wall.

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