Average selling prices for mobile driven by new technology
The economic principle of price times volume equaling revenue applies to all companies, even in the mobile device industry. Outside of the sheer number of mobile handsets sold (with 3Q 2012 unit volumes highlighted in our article “All Important Blackberry 10 Launch Coming for RIMM“), the other side of the revenue formula for the industry is driven by Average Selling Prices (ASPs) of mobile units.
Not all units are created equally and we estimate that consumer demand for various handsets is driven by the incremental technology within new handset units versus the older generations of phones that are already on the market. Now it is no secret that since the 2007 launch of the iPhone that Apple (AAPL) revolutionized the handset industry with touch screen technology and thousands of applications that run on its iOS operating system (OS). In fact 5 years later, the iOS system still boasts the highest average selling prices of all handsets by operating system, due in large part to continued new generations of iPhones. As seen in the chart below based on 9/30/2012 data, Apple’s iOS still commands the highest prices amongst handsets on other operating systems including Google’s (GOOG) Android, Blackberry’s (RIMM) OS, and the fledging effort by Microsoft (MSFT) to develop its Windows mobile OS.
Now while nothing grows to the sky and Apple’s first mover advantage with its new advanced handsets running on its robust OS has given the company a leading position in the industry (Apple commands industry leading ASPs and is #2 in smart phone market share behind Samsung), newer generations of competing phones are threatening to whittle down Apple’s dominance. A recent generation of Samsung’s phone the Galaxy S III recently became the most sold smart phone unit ever with 18 million units shipped which surpassed the popularity of Apple’s iPhone 4S (which shipped just over 16 million units). While Apple has a new horse in the race with the recent introduction of iPhone 5 late in 2012, pricing trends by operating system bear watching.
Apple’s year-over-year decline in ASP insulated by new technology has dropped just 4% versus other handset makers that have missed product cycles and had substantial declines in ASPs as highlighted by Blackberry below. The January 30th launch of Blackberry’s 10 handset, on its own operating system, will be a case study to see if new products can influence average selling prices (ASPs).
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