Reality Check: Why Apple doesn’t need MacWorld Expo anymore: Apple’s very tight relationship with CE vendors

Editor’s Note: Welcome to our weekly Reality Check column. We’ve gathered a group of visionaries and veterans in the mobile industry to give their insights into the marketplace.
This year, like last year, they might as well have renamed CES the “iPhone and iPhone Accessories Show.” From automotive, mobile apps, home control, radio control toys control, home sound and stereo, portable boom boxes and accessories, the iPhone was everywhere – even if Apple was not. It was in every booth’s demo, and integrated into hundreds of consumer electronic equipment, both from a software and a hardware/docking perspective.
I was thinking that the iPhone’s free ride might end, with the plethora of Android devices and the momentum undeniably growing along with the Droid and Nexus One. But the reality is a ‘plethora’ is not what CE manufacturers want. They want a single device and form factor that they can integrate into their products, and nothing is even close to replacing the 3-year-old iPhone.
While we in the telecom sector tend to focus on quarterly handset vendor shipments, or annual operating system shipments, the CE vendors are much more concerned with platform stability and installed base.
But notice that “iPhone killer” handsets have come and gone via a revolving door, with none remaining the main contender for long: Nokia’s N95, N96, N97, N97 Mini, E71, N900; Samsung’s Instinct and Omnia; Sony Ericsson’s Experia X1 and X2; Palm’s Pre and Pixi; RIM’s BlackBerry Storm, Storm 2 and Bold; HTC’s Touch Pro 2, Eris, and Nexus; Motorola’s Droid, etc, etc. Each of these iPhone killers has failed to kill, but more importantly, is part of a fragmented allied assault on Apple, while the iPhone is able to mount its defense with no significant architecture or industrial design changes. And as time goes by, the installed base of the iPhone continues to grow.
Beyond device wars, we also tend to talk about the “mobile OS” wars, and in that regard, we discuss iPhone vs. Android, or WinMo, Symbian, etc. And in that competition, once again, Apple looks less significant than the global leader Symbian or the segment winner BlackBerry OS. But the other OS tallies, too, are comprised of many phone models. The net result is that no single form factor of Android actually comes close to iPhone’s sales. The “OS” centric way of looking at the market makes iPhone look relatively weak, but it’s one phone that’s holding battle with a bunch of competitors.
Just as an example, according to Canalys, in 3Q09 Nokia was the worldwide smartphone leader, with a 40% share, RIM was second with 21%, Apple climbed to 18% up from 14% in Q2, and HTC retained its No. 4 position with 5% share. Now, HTC makes some great phones, but I’d like to note that they reached their 5% on the backs of some 34 different handset models, while apple got 18% on basically one. These are the quarterly numbers that telecom analysts tend to consider, but CE makers aren’t interested in the best selling hit that’s just a flavor-of-the-month.
For CE equipment makers, it’s time to stop talking about sales, and talk about installed base. In Apple’s 3Q09 Investor Call, COO Tim Cook said the iPhone/Touch devices have reached over 45 million sales worldwide. Each one sold to an affluent consumer with money to burn on good consumer electronic devices. You can actually build in margin on products targeting an iPhone customer, and style and design tends to matter. So that’s why, at a trade show shunned by Apple (as are they all), the iPhone dominated the displays on the show floor.
In fact, many of you reading this have probably bought a product with an iPhone dock, whether you own an iPhone or not! Many cars now are sold iPhone compatible. Stayed at a hotel recently? Notice a familiar interface port on top of the clock radio? If you use a Creative Zen, like me, then the answer is probably no – but you’re welcome to dock and charge your iPhone there. Because of CE, it’s getting frustrating not to use Apple.
We telecom people often talk about the value the app store brings to the iPhone, and how the new apps enhance and modernize the older Cupertino design. That’s very true, but CES has helped me see that it’s not just software that supports a powerful iPhone ecosystem: it’s also hardware. The de facto standard in the CE industry pushes customers towards iPhones purchases, and increased the overall value of Apple products.
Apple offers CE makers a stable platform and an attractive market segment. CE makers offer Apple increased value in their devices. No formal relationship exists, but this ecosystem thrives. The CES exhibitors are in love with iPhone, and this is one advantage that the more fragmented Android can’t match.