iPhone is number 1

I’ve talked before about just how amazing Apple’s performance in the cell-phone (and laptop) market is. Last quarter, only two years after entering the cell-phone market, Apple became #1, at least if you measure by how much money they made rather than how many phones they shipped.

Apple shipped 7.4 million iPhones for $4.5 billion but they made more profit on them than Nokia made on the 108.5 million phones they shipped for $10.36 billion. Strategy Analytics estimated (since Apple doesn’t tell) that Apple made a profit of $1.6 billion whereas Nokia made only $1.1 billion.

I had a slide from Morgan Stanley at the ICCAD meeting last week that showed that iPhone is the fastest ever adoption of a consumer electronics technology. Actually, that’s not really fair since Apple waited until the market already existed unlike, say, RIM (blackberry) who had to create the market for smart-phones. But Apple has executed flawlessly so far.

Of course there is a big patent battle going on since it is impossible to build a cell-phone without infringing lots of patents held by lots of different parties. Indeed, when I was at VLSI I got involved in patents that we might be infringing. Patents were divided by the industry into essential and non-essential. An essential patent was one that you had to infringe to build a conforming GSM handset. For example, Philips owned a patent on the specific parameters used in the voice compression algorithm GSM adopted and they wanted, I think, $1 per phone license fee. Unsurprisingly Nokia owns lots of patents on cell-phone technology so thinks that Apple should pay them a license fee on all those iPhones as, I’m sure, do dozens of other people (the iPhone is GSM technology, although a universal iPhone that also supports CDMA is rumored to be coming).

The Motorola Droid came out this week too. I’ve not used one so I don’t have much to say but one thing that it has (free) that iPhone does not is turn-by-turn directions when driving. I hadn’t realized that Google had built up their own turn-by-turn database because they didn’t want to pay high royalties for map data. Then they said sayonara to Navteq (acquired by Nokia for $8.1 billion) and Tele Atlas (acquired by Tom Tom for $2.7 billion). Apple doesn’t have their own map database and if you want turn-by-turn directions on the iPhone then “there’s an app for that” and Tom Tom will sell you one for $99.99. It will be interesting to see how this particular little corner of cell-phone space plays out.

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