Identifying Apple’s Key Revenue asset in the Smartphone wars

As much as people grumbled about Steve Jobs’ decision to keep Apple’s iOS mobile operating system closed and proprietary, one can’t help but admire the late Apple head honcho for towing the line and not selling out to the Open Source crowd. Just how awesome was Steve Jobs’ decision? Well, let’s put it this way, hardware manufacturers who tried to create a distinct ‘brand’ based on the open source Android are having a tough go of it. First, HTC shone bright as the most promising Android hardware maker only to stumble and fade into the middle of the global smartphone manufacturer pack.

 

Then, Samsung wowed global audiences with its sleek designs, topnotch manufacturing quality, and heavy investment in quality. For a while there, it seemed that the global smartphone market was ready for a high-end permanent Android-based hardware brand.

 

No such luck. Samsung’s recent stumbles have shown the one truth many manufacturers have been trying to run away from-the Android end of the smartphone market is a pricing-based race to the bottom.

Apple is able to keep its prices high because it can position itself as a premium brand with its own premium OS. Try as Samsung might to benefit from brand premium, the Android market is fast shaping up to be just like the PC market. They seem to expect phone prices to drop lower and lower-unless, of course, the mobile unit you’re considering has an apple logo at the back. One key element to Apple’s branding cache is its app market. By keeping developers engaged and delivering a guaranteed and standardized pool of app customers, Apple not only keeps Android at bay, it also has a pretty fat cash cow.

As exciting as all this is, Apple might be the victim of its success. The wearable wireless revolution might usher in a sea change in consumers’ expectations of apps. As I wrote in an earlier post, if consumers start expecting apps to be distributed over a collection of cheap wearable wireless devices, the need for a smartphone might be reduced or outright eliminated. Apple should be concerned about this potential market trend.