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Smartphones Weak, iPhone Strong

Can Apple, specifically its iPhone, save an entire industry?

The iPhone - now ranked the second most popular smartphone - saw strong enough adoption in the quarter ending Sept. 30 to mask the sluggishness of the overall smartphone market this past summer, according to a report by Needham & Co. research analyst Charlie Wolf. The iPhone now accounts for 16.6 percent of the smartphone market share, second to Nokia globally and RIM in the U.S. And while the iPhone's growth of 28.6 percent was relatively flat, it was considered strong enough to generate some excitement in smartphones. From Wolf's report:

Apple's iPhone 3G, introduced in July, is the only reason smartphone growth did not slow in September. Apple shipped almost seven million iPhones in the quarter, accounting for all of the sequential shipment growth in the quarter and then some. However, two million iPhone sales represented carrier channel fill (which IDC reports as sales). In its absence, smartphone sales growth would undoubtedly have decelerated in September. We believe growth in the smartphone market will likely slow yet again in the December quarter despite the recent introduction of compelling new smartphones. Research In Motion has led the parade with three new models along with the TMobile G1 running on Google's Android operating system. However, the industry faces a major headwind in the form of a recession whose depth and duration is unknown.
smartphonesApple, like RIM, is positioned in a way that companies like Nokia, Microsoft, Symbian and even Google aren't. Apple and RIM maintain control over both the software - the operating system - and the hardware. Licensing the operating system to various device manufacturers, similar to the way Microsoft licensed Windows to PC makers - has not been as effective. And, with Google now offering Android as an open-source alternative operating system for mobile devices, some handset manufacturers might turn even further away from a Microsoft-like licensing model.

Still, it's too early to say what sort of impact Google's Android might have on the market. RIM, which was expected to step up as a strong contender to the iPhone with the launch of its Blackberry Storm, may have missed an opportunity, as well. A software issue and subsequent inventory problem created a backlog right out of the gate. That slowed sales and activations that could have been counted before RIM closed the books on its quarter last week.

With all of that said, there's no crystal ball to know in advance how the smartphone game will play out - especially with Android just hitting the scene. One thing is for sure, though. The economic recession could impact the overall upgrade cycle among cell phone owners who might have otherwise jumped up to a newer phone or smartphone - at least in countries where cell phone saturation is high. (I know that my plans to either switch to AT&T for the iPhone or upgrade to the Storm have been put on hold - at least until after the holidays and possibly into the Spring.) The iPhone won't be able to mask the smartphone's woes for the long term - but for now, it's definitely holding on to its place as a game-changer.

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Sam Diaz is a senior editor at ZDNet. See his full profile and disclosure of his industry affiliations.

Credit: ZDNet