Tech Hardware Supply Chain - Gazhoo

Bhavin Shah
(852) 2800-8538
bhavin.a.shah@jpmorgan.com
Table 45: Apple vs. HTC operator penetration
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Asia Pacific Equity Research
20 April 2009
one device/operating system and making sure it works for other models and so on.
This simplicity of the business model is quite powerful.
Lack of flexibility on hardware specifications
Glancing through the product reviews, we note a few common critiques on Apple’s
iPhone: (1) no physical QWERTY keypad; (2) lack of stereo Bluetooth and video
recording; (3) poor camera quality; and (4) poor 3G signal reception in certain
countries.
While we still view Apple’s iPhone as one of the best phones in the market, these
issues might prompt some mobile users to go for other phones. Can Apple fix all
these hardware specifications? Theoretically, it could, but based on its track record in
iPod and Macbook, we note that it usually makes major hardware changes only once
a year at best. Apple is also scrupulous about sticking with certain concepts
for e.g., “button-less” has been one usual controversy for earlier products such as PC
mouse, but Apple was still stuck to this concept until 2003. Refusal to offer a keypad
option like other handset brands might prompt some users to go for other brands.
Table 44: Apple—iPod family launch dates
Model 1G launch Refresh model launch
Classic Oct 2001 Jul 2002, Apr 2003, Jul 2004, Oct 2004, Oct 2005, Sep 2007, Sep 2008
Mini/ Nano Jan 2004 Feb 2005, Sep 2005, Sep 2006, Sep 2007, Sep 2008
Shuffle Jan 2005 Sep 2006
Touch Sep 2007 Sep 2008
Source: Company reports.
We like iPhones, but several issues leave plenty of market share on the table
Still single-operator strategy for many key countries for high-end phones
Among the six countries with the largest subscriber base in the US and Western
Europe, Apple is still adopting a single strategy among five of them, with Italy the
only exception. Apple signed an exclusive revenue sharing scheme with operators in
the US, the UK, France and Germany in 2007, which might have impeded it from
rolling out a multi-operator strategy to these countries in the medium term.
In Table 45, we outline the four leading developed North American and European
countries, where 3G iPhone is still available with a single operator. Despite the fact
that the operator is the leading one in the country, iPhone ends up targeting only a
smaller portion of the customer base.
US Mkt share iPhone HTC France Mkt share iPhone HTC
AT&T Wireless 28% √ √ Orange 46% √ √
Verizon Wireless 26% √ SFR 36% √
Sprint 19% √ Bouygues Telecom 17% √
T-Mobile 11% √ Digicel 1%
Alltel 5% Outremer Telecom 0%
Others 10%
UK Mkt share iPhone HTC Germany Mkt share iPhone HTC
O2 25% √ √ T-Mobile 37% √ √
Vodafone 25% √ Vodafone 35% √
T-Mobile 23% √ E-Plus 15% √
Orange 21% √ O2 13% √
3 UK
Source: Company data, J.P. Morgan.
5%