With Apple finally announcing its anticipated iPhone, the company is adding yet another market where it competes with familiar rival Microsoft. And, as in the PC market, the two companies have divergent strategies for success in the smartphone market.
During Steve Jobs’ keynote speech for the new iPhone, the Apple CEO cited a quote that stated people who are serious about software should make their own hardware.
In line with such thinking, the iPhone is a combination of software and hardware design – much like in the PC market, where Apple has always locked its software and hardware together, except for a brief period about 10 years ago when the company had a short-lived licensing program.
According to consulting firm Ovum, it would have been easier for Apple to enter the market with an established form factor (some of the early rumors focused on a slider phone), improvements to the UI and special music features. Apple has scored a major hit by not doing a me-too product, but by going for a very high degree of differentiation, Ovum stated. But as for manufacturing the product, earlier reports tabbed Foxconn Electronics (the registered trade name of Hon Hai Precision Industry) as the expected manufacturer, though that has not been confirmed.
Microsoft, on the other hand, thrived in the PC world under a clone system. The company extended that strategy to the smartphone market by providing software and reference platforms, while vendors and ODMs take care of hardware design and production themselves
This has led to a number of makers adopting the platform, especially vendors from Taiwan. When Microsoft Mobile 6.0-powered smartphones hit the market in the first half of this year, Taiwan-based handset makers including High Tech Computer (HTC), Asustek Computer, Gigabyte Technology, Eten Information Systems and Mitac International are expected to be among the first makers to launch products.However, Microsoft has not exactly thrived in the smartphone industry. According to Gartner, Microsoft had only about 5% of the smartphone market in the third quarter of 2006.
Still the smartphone market remains a huge opportunity, DigiTimes Research estimates that the smartphone market will reach 134 million units this year and Ovum pointed out that it is the fastest growing segment of the handset market.
Judging by the pricing and distribution method Apple has set for the iPhone, the company is not looking to grab the lion's share of the market just yet. The iPhone will be available in the US in June 2007 in a 4GB model for US$499 and an 8GB model for US$599. And the handset will only be sold in the US through Apple's retail and online stores, or directly through its service provider Cingular. However, Ovum pointed out that the fact remains that it is still far cheaper to buy a iPod Nano and a 3G phone separately - with the operator of your choice (Apple and Cingular reportedly have an exclusive deal until 2009 in the US).
Instead, Apple has positioned the iPhone as an upgrade to the iPod - many of the early buyers will be iPod users. Steve Jobs described it as 'the best iPod ever' and Ovum pointed out that the US is the weakest smartphone market, so the company's positioning makes sense.
So Apple, with its OSX, is approaching the smartphone market from the perspective of a music device provider, while Microsoft approaches the market from a PC perspective. And as for Symbian, the OS designed by handset makers, Symbian-based phones accounted for over 70% of the smartphone market in the third quarter of last year, according to Gartner.
Article edited by Michael McManus
