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The smartphone market is not competitive. Whether Apple holds an anti-competitive monopoly is a matter for the courts to decide, but it is clear that the smartphone market is designed to lock buyers into his one brand, and that’s true for everyone. That’s a bad thing.
Take a look at the best mobile phone lists published on many technology websites. Like CNET. There is usually a best iPhone and a best Android smartphone, but the two never match.Our exclusive TechRadar list The best cell phones you can buy in America We’ve included some of the best phones overall, but you might not care about the top of the line for very long.
After all, if you currently have an iPhone and it’s on a list of the best phones, would you really consider switching to a Samsung phone just because I said it’s the best? ? Ditch your Apple Watch and Apple AirPods Pro and replace your iPhone 14 Pro Max with the Galaxy S24 Ultra? Probably not.?
Apple doesn’t expect anyone to switch, that’s for sure. If you want to buy a new Apple iPhone 15 Pro and trade in your old Samsung phone, the latest Samsung phone that Apple will include in the drop-down trade-in list is the Galaxy S22 Ultra 5G. That mobile phone is two years old. Apple hasn’t felt the need to update its trade-in list in two years. There are no Galaxy Z Fold or Galaxy Z Flip on Apple’s list, not even a Galaxy S23 Ultra.
Measuring competition in the US smartphone market
The market is here to stay. You could make a disclaimer about how Apple only controls a small portion of the world market, but the fact is that the way economists measure market competition, Apple is excruciatingly dominant.
When the U.S. government considers whether to authorize a corporate merger, it considers HHI.
When economists measure market competition, they start with a simple measure called the Herfindahl-Hirschman Index (HHI). HHI gives a score to every market. To find that score, take the market participants and square their market share. Then add them all up.
If there is only one company in a market, that company has 100% share of the market. 100% squared is 10,000, so a 10,000 HHI score is the absolute maximum.
If there are 10 companies and each company has an equal 10% market share, this means that each company adds 100 to the HHI and the total HHI for the market is 10 X 100 = 1,000 .
When the U.S. government considers whether to allow corporate mergers, it looks at HHI for competitive markets. If his HHI for a market is less than or equal to 1,500, the market is considered competitive. A market with equal shares held by 10 companies will be very competitive.
When the HHI reaches 2,500, the market is considered highly concentrated. In highly concentrated markets, the government is more likely to object to a corporate merger, especially if the merger changes his HHI score by more than 200 points.
Let’s look at the US car market. General Motors is in the top spot with 17% market share, while Volkswagen ranks near the bottom of the top 10 automakers with just under 4% market share. His HHI for the entire U.S. auto market is approximately 1,100, making it a highly competitive market.
US smartphone market? A completely different picture. Apple holds more than 60% of the market, while Samsung, the second-largest mobile phone maker, only has about 17%. If we calculate his HHI for smartphones in the US, we get an index of over 4,200. This is by no means a competitive market. Apple dominates the US smartphone market.
To be fair, Apple claims that its share of the global market is much more competitive, and this is absolutely true. Considering the world’s top 10 smartphone manufacturers, his HHI score for the entire market is around 1,700 points. The problem is that the list includes cell phone manufacturers such as Xiaomi, Oppo (with the exception of OnePlus), Realme, and Huawei, which do not sell their phones in the United States.
But more importantly, the U.S. Department of Justice is responsible for the U.S. market, not the global market.
Monopoly means power, not percentage
Is Apple a monopoly? This is a difficult question, but before we can answer it, we need to understand how the Department of Justice defines monopoly.
According to the Department of Justice, a company approaches monopoly status when it holds “substantial market power that is not temporary but permanent.” Market power means “the ability to make prices more profitable than prices in a competitive market.”
In other words, the Justice Department said that if a company is so powerful in a market that it can charge as much as it wants, knowing that the company will never leave and go to a competitor, it is a monopoly. I am. In a healthy market, competition exists. Newer things are better. Older items are cheaper.
As the Department of Justice states, “Competition encourages businesses to reduce costs, improve product quality, invent new products, educate consumers, and engage in a wide range of other activities that benefit consumer welfare.” says.
Looking at the current smartphone market, it’s hard to believe that all of this is happening. We don’t see any reduction in the cost of smartphones, even for older phones that are still being sold after new models are released. Prices aren’t going down as much as they should.
I don’t see any significant cost savings. If so, you can buy your old iPhone at a discount right now. In a normal market, a one-year-old phone should cost 10% less than a new phone, and a two-year-old phone should cost even less. If you’re buying a TV, car, or other major appliance, that’s when you save up for an older model that’s left over.
After two years of use, the remaining phone should cost 20% less than the new phone. But look at the iPhone. Apple will sell the iPhone 13, originally priced at $799 new, for $599 starting in 2021. That means Apple will be reducing prices by less than 8% each year. It’s not competitive. That is market control.
In a competitive market, not all phones copy the iPhone
If a phone deviates too much from the iPhone formula, it won’t find space on carrier store shelves.
There is no consumer education about new phone technology. When it comes to cars, people are starting to learn about hybrid and electric options. In home appliances, people are starting to learn about the differences between heat pumps and air conditioners. Where’s the education about phones? We don’t see the wide range of activity you’d expect in a mature market.
There are many different types of cars, ranging from the type of internal powertrain and fuel used, to the size and shape of the body, and even the level of luxury. In the mobile phone market, there are iPhones and phones that try to imitate the iPhone. If a phone deviates too much from the iPhone formula, it won’t find space on carrier store shelves. You won’t find any developers willing to support that platform.
Apple has confirmed that other phones don’t work well with iPhones, so it won’t be compatible with the phone that all your friends are using. Apple has a great safety check-in feature that lets my dad know I’m home from a long drive. However, my father has his Android smartphone, not his iPhone, so I can’t use it with him.
Apple has no obligation to support competitors or lose competitive advantage. Meanwhile, the U.S. government has a duty to recognize that markets are no longer competitive and that certain companies are using their advantages to stifle evolution. That’s not the way it’s supposed to be done. Companies don’t win by suppressing the market; they win by making their products better and more affordable.
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