Are high-priced smartphones the norm?

by Colin Berkshire

Apple is certainly on a roll. They seem to be steamrollering Android at this point.

I’m not surprised. Android is a mess. Most users don’t or can’t update. So there are security and compatibility issues galore. While Android costs much less, it seems to have a disproportionately short lifespan.

The one contender to Apple is Xiaomi. If you are in America you probably have never heard of them. But they are the third largest smartphone manufacturer after Samsung and Apple. They make great products for the Chinese market.

The Chinese market is key to Apple. Over half of Apple’s sales come from China. And, China is up for grabs as Xiaomi continues to grow even faster than Apple. Stated differently: Apple’s largest market (China) is highly competitive. Apple doesn’t have the monopoly in China that it does in the US.


Um, well, more like Oligopoly.

You see, Xiaomi can’t enter the US market because of patents. There are tens of thousands of patents owned by the Oligopolists here in the US and Xiaomi just can’t get through this barrier. So Apple has competition in China but prevents competition in the US.

The Oligopoly works like this: Apple has a bunch of patents. Google/Android have a bunch of patents. And Microsoft has a bunch of patents. These three oligopolists cross-license each other so any of them can compete. But if a really new, innovative, better, cheaper company (like Xiaomi) comes along, the patent lawyers crush the upstart like a little-tiny bug with patent litigation.

So your new word for the day is “OLIGOPOLY.’ That is a monopoly controlled by a small group of cozy competitors.

Because it is impossible for a new company to make smartphones and sell them in America it looks like we will be paying high prices for the next couple of decades. Don’t expect any big price reductions from Apple…why should they drop their price?

I think it plays out like this:

Apple owns the smartphone business and Android and Windows capture a small share to give the appearance of competition (even though there is not.)

Microsoft owns the desktop business and Apple and Linux capture a small share to give the appearance of competition (even though there is not.)

Google owns the search business and others capture a small share to give the appearance of competition (even though there is not.)

If all of this sounds to you a bit like WWF Professional Wrestling (which is melodramatic mock-fighting) then you have a good grasp of how this all plays out.

Poor Xiaomi…locked out of the USA. We’ll see if Apple can compete in China somehow. They need to. They cannot ignore a market twice the size of the US.