imageSooner than later, there's going to be some serious fallout in the mobile phone industry.  At this moment, Apple commands approximately 7% of the global mobile phone market.  This includes non-smart phones or 'end & send' phones.  The crisis brewing is not that Apple has 7% market share, but that it now rakes in 57% of the mobile phone industry's profit. We're on the verge of mobile phone manufacturers shutting their doors just as iPod competitors did over the past ten years.

In fact, Apple's share of the phone industry's profit has increased from 47% this time last year to 57%.  So think about it this way: 93% of phone market has to fight over 43% of the profit left over from Apple.

I wrote in one of my past blog posts about how this scenario will have drastic consequences on the mobile phone industry.  To paraphrase my earlier assessment: No company can survive on unit sales.  If you're not profitable, life in business is short.

More troubling than Apple owning 57% of the phone industry's profit is that they're doing it with premium devices.  The iPhone costs between $99 and $299, yet competes well against phones costing as low as $0 with a contract.  People who pay good money for phones are the same people who pay good money for apps, music, movies, TV shows and books.  So not only is Apple more profitable by an order of magnitude than its competitors - Apple retains the customers it wins by way of its massive eco-system.  Developers continue to gravitate to the App Store because they're making money.  The eco-system in turn drives device sales. This is something Apple's competitors still haven't figured out.

I have no doubt that before 2011 is out, several phone manufacturers will bow out of the market and that even the biggest ones (read: Nokia) will be sliding into oblivion.  This scenario is exactly the same as what Apple managed to pull off with the iPod, yet companies like RIM, Nokia, HTC and Motorola don't seem to understand that they're finding themselves in Creative and Microsoft's shoes from the last decade.  Those companies didn't react to Apple and its business model fast enough and ultimately canceled their iPod-competing products.  With phones, it's only a matter of time before R&D stops, and even the best efforts of sales people and marketers fail to compete with Apple.  We're almost there.

Expect to hear some stark news coming from the likes of Nokia, RIM, HTC and Motorola in the coming months.  The gravy train is about to pull into the station because it's out of fuel.  At the end of the day, no company can operate without making money and this has been happening for well over a year now.  Apple's share of the market continues to increase where even a single percentage point eats a lot of someone else's lunch.

Chris Marriott