You know the one about the iPhone 5c, how it flopped harder than Fosbury? Surely you've heard about what a disastrously embarrassing failure it has been to Apple. Tim Cook practically admitted it, right? If you've seen any press about the iPhone 5c, it has been something to that effect. Today, we no longer question the assertion. We may discuss why it faild, but not whether it failed. Indeed, that is a curious position to be in for the product that outsold all other competitors. Appleinsider has the story:
In fact, while the exact iPhone sales ratio is a closely held secret inside Apple, data from multiple sources, compiled by blogger J. M. Manness, indicates that about 12.8 million of the 51 million iPhones Apple sold in the winter quarter were iPhone 5c, while 6.4 million were iPhone 4S and 31.9 million were iPhone 5s. That number aligns with reports that the 5s outsold 5c by a ratio of around 2.5:1 overall.
That means iPhone 5c sold twice as many units as all Blackberry smartphone sales combined (6 million), more than all of Nokia's Windows Phone smartphone sales in the winter quarter (8.2 million), and in fact, all of Microsoft's Windows Phones sold globally in the winter quarter (slightly more than 8.2 million, as Nokia makes 90 percent of the world's Windows Phones).
Even Samsung's flagship Galaxy S4 reportedly sold just 9 million units in the winter quarter. If you do the math, that's less than 12.8 million.
LG's heavily marketed flagship G2 reportedly sold just 2.3 million units in the winter quarter. That indicates that Apple's mid tier iPhone 5c outsold Samsung's Galaxy S4 and LG's G2 put together.
It's certainly possible that the actual number of iPhone 5c units Apple sold could be less than estimated. Even if for argument's sake Apple sold many more higher-end 5s iPhones for every 5c than the app analytics firms are seeing, it would still mean that Apple's single iPhone 5c model was one of the top most successful smartphone designs created and sold in 2013.
A different definition of success
It is clear that even factoring a large margin of error, the iPhone 5c still outsold most, if not all competitors. I actually don't believe there is a large margin of error even though we do not have official numbers. The estimates are based, in part, on analytics from app developers. There are ways to tell what CPU is being used. Each of Apples iPhones have different signatures. Setting these numbers against a reasonably well-established mix ratio lands us within what I believe to be an acceptable margin of error.
Other manufacturers don't even provide us with sales numbers as a starting point. We have very few methods for ascertaining their sales mix for various handsets. The best we can do is get a general number of total handsets shipped. But it seems that knowing the exact numbers from each manufacturer still would not change the coverage of the industry. 13M iPhones for Apple is a failure. 13M of anything from anyone else would be an Apple-destroying success. These different measures of success cannot be reconciled.
In the holiday quarter, Apple sold over 51M iPhones. That is more smartphones than any other company has ever sold in a single quarter. That is quite possibly a record number of anything sold by any company from the tech sector in any quarter. The record sales were panned as a disappointment by most of the media. Compared to iPhone sales numbers, there was no second place. Yet the iPhone was perceived as having failed, while other smartphones were perceived as successes.
The biggest loser of Apple's failed quarter was the iPhone 5c. It sold less than half the units of the 5s. Apple expected more, and admitted as much. I'm not sure they expected more overall sales. They just expected the mix to be less lopsided. They made too many 5c models and too few 5s. Of the 5s models, they made too few of the gold. In all fairness to Apple, almost all analysts and pundits proclaimed that what Apple needed was a less expensive phone, and that the gold 5s was a stupid idea. Pundits!
But how does Apple measure success? Normally, they sell last year's model as the new mid-tier model. This time around, they built a new model to take the place of last year's mid-tier bracket. It costed Apple less to produce, and it was a better phone than the iPhone 5, but sold at the same price as the iPhone 5 would have. Apple has confirmed that the iPhone 5c sold more than last year's mid-tier range. That suggests that it sold even better than the iPhone 5 had that been the mid-tier offering. For the purpose Apple built it, the iPhone 5c was a resounding success. It was never intended to outsell the flagship 5s.
But what did it outsell? Well... everything! It outsold everything else on the market. It outsold all Windows Phones from all manufacturers worldwide, combined! It outsold all Blackberrys in all the corners of all the developing nations they are still selling! It outsold all Galaxy S4s despite Samsung spending a gazillion times more marketing dollars than Apple. Do we even need to mention also-rans like LG, HTC, Sony, and Motorola? No we don't! Remember, we are only talking about sales of the iPhone 5c: the failure, not all iPhones. If that phone can be considered a failure, by what measure can anything in the industry be a success?
To explain these different expectations, we have to go back to before the iPhone was introduced. Before the iPhone, it was believed that the smartphone industry was already a mature industry. It is revisionist history to say that the industry was in its infancy. It was not. The players were well-established, and they saw little room for new entrants. Calling the shots was Palm, RIM, Nokia, and Microsoft. These were the titans of the smartphone industry. They defined success. Smartphones may have been a niche, but they were a mature niche, and well regulated by the big boys. There was no room for upstarts.
Apple did two things that benefited the industry, and at the same time, destroyed it. Apple will never be forgiven for what they did. First, they redefined the smartphone market, and the smartphone. Before Apple, the smartphone was an expensive pocket computer for business people and posers. The only consumers interested in smartphones were those who wanted to look important. The only business people who wanted a smartphone were those who were important, or wanted to look important. This was at a time when a camera was a rare feature on a phone that the average consumer might own.
Apple flipped the tables by repackaging the smartphone concept as something for the rest of us, with no consideration for the business and poser market. The iPhone was the first consumer smartphone. Businesses hated it. Why it didn't even have copy/paste. What self-respecting poser would want a phone without copy/paste? It took a while for the industry to realize that Apple was targeting a different market with the iPhone. Before the iPhone, the general market showed no interest in paying that kind of money for a cell phone. Apple was the first to sell a lot of smartphones to consumers at a premium price. People lined up to get it. That was also new to the industry. No one ever lined up for a Palm anything.
The second thing Apple did was blow the roof off sales expectations. Before Apple entered the market, smartphone sales was a well-appointed, one story building. Apple turned it into a high-rise. The whole industry grew faster than the industry could define the growth. A smartphone maker might have been considered successful if they were selling a few hundred thousand a quarter. In a blink, Apple was selling iPhones by the millions. Before Apple, the industry measured success with a yardstick. Apple introduced mile markers as the new unit of measure. Suddenly, the established companies couldn't keep up.
Almost overnight, hundreds of thousands of sales and millions of dollars was nothing in the face of Apple's millions of sales and billions of dollars. The four horsemen never fully transitioned to the new reality Apple forced onto the world. Belatedly, RIM: now Blackberry, transitioned to a consumer focus, failed, and is returning to a business focus in an effort to relive the glory days when the industry was a small but comfortable niche. Microsoft and Nokia have joined forces to scrape out a living in the undeveloped parts of the world where clean water is considered a luxury. And Palm is thrice dead. Their spirit now haunts TV sets from LG.
The new players haven't done that much better. LG is busy aping their betters in an attempt to be noticed. HTC is desperately in search of even a dollar's worth of profit. So far, the search does not go well. Motorola gave up searching for profit through commerce, and started seeking it in the courts. Their master stroke was to threaten to sue everyone in the Android alliance, forcing Google to buy them for a ridiculous sum. Google: no specialist in finding profits via commerce, quickly sold them for pennies on the dollar to a Chinese manufacturer looking to break into the smartphone market.
Samsung robbed and cheated its way into success. To date, they are the only ones who have experienced success on the Apple scale. To be clear, they are still not rivaling Apple. They have just made it to the scale, not to the level. Apple still sold more of their failed model than Samsung did of its most successful model. Apple will be forever penalized by the new expectations they loosed onto the industry. Since Apple is the only one who plays at that level, the industry plays fast and loose with definitions. They can arbitrarily declare anything Apple does to be a failure, even though Apple controls 80% of the industry profits. All other companies are measured by the old yardstick of success, as if they were still living in a time when smartphones were a comfortable niche for business people and posers.
Different market segments
Before the iPhone, the smartphone industry was considered mature with well-defined winners. Now that Apple takes in the lion's share of the profits, the smartphone industry is considered infantile with no defined winners. This bit of revisionism aside, there is a real difference in the market most tend to ignore. The smartphone industry is the only mature industry with no defined segments. A few of us have been pushing for clearer segment definitions. Rene Ritchie at iMore also champions this idea.
Apple does not sell a phone to the general market for under $400. The average selling price of the iPhone hovers around $635. The ASP of Apple's competitors is between $200 - $300. Its not even close. When ASP diverges by that much, it is a good indication that the companies should never be compared in any way. In its segment, Apple stands alone as a smartphone manufacturer. Only phones costing around $550 should ever be compared to an iPhone. They are substantially different products. Their sales are not comparable.
The market cannot stand this reality either. They do not want to admit that the Apple iPhone is in a class all by itself: a class in which they are unable to compete. This rhetorical victory will never be acknowledged. Therefore, they have to pretend that their $100 offering is somehow equivalent to Apple's premium offerings of $550 and up. They have to pretend that budget phones in the third-world belong on the same spreadsheet as premium items sold in the first-world. They don't!
The reason this obvious farce is permitted by the press is that if only high-end smartphones sales were compared to iPhone sales, the massacre would be even harder to ignore. Worldwide, Apple would not only be #1, but probably beat all others combined. That is if we compared apples to apples in the appropriate market segments. For that reason, the market acknowledges no market segments. It is a lie they are allowed to tell so that the press can have a competitive story to tell.
The artificial competitive story is what drives industry reporting. To perpetuate the myth that Apple has real competition, they have to manufacture failures and disappointments for Apple. It is both arbitrary and transparent. The industry's biggest quarter in history was labeled a disappointment because it was Apple who produced it. And the best-seller of the holiday quarter was immediately labeled a flop for the same reason. When Superman is too powerful, we have to invent stupid things to give him an arch-rival.
By refusing to acknowledge obvious market segments and calling the iPhone 5c a failure, the industry can go on pretending that Apple is on their level, and the playing field is even. They're not, and it's not. This fictional competition makes more interesting reading than the truth. But it bears no resemblance to reality. The iPhone 5c is one of the greatest successes of all time. It has already served its purpose. I can't wait to see Apple's next big flop.