Tim Cook is right. Smartphones haven’t peaked

July 24, 2013
July 24, 2013

There’s been plenty of concern lately that the market Apple arguably created—high-end smartphones—is approaching the saturation point. Quartz has written a ton on the dynamic, whether it be the ongoing importance of lower-priced feature phones for social media or the recently leaked photos of what’s rumored to be a new “cheap” iPhone.

Goldman Sachs’ chief Apple watcher Bill Shope raised the issue with the man himself, Apple CEO Tim Cook, in the company’s after-earnings conference call yesterday. Here’s the exchange. (Highlights ours.)

Shope: Despite the fairly substantial iPhone upside this quarter, there’s been increasing concerns that the high end of the smartphone market is reaching saturation point and that growth may be harder to come by for really for all vendors. What’s your perspective on that and the current industry dynamics? And Tim, do you think there are new innovations and services in the pipeline that can reinvigorate the premium segment of the market, after what’s obviously been a bit of a tough 2013 for that segment for the industry?

Cook: From a growth point of view for Apple, our key catalyst will always will be new products and new services. And these are both in existing categories that we’re in and in new categories. In addition to this, we have opportunities in distribution from carrier relationships to expanding our retail stores, expanding our online store and continuing to expand the indirect channel. And we also have a market expansion opportunity.

Peter (Oppenheimer, Apple’s CFO) mentioned enterprise in his comments and the share positions that we have there, over 60% in both iPad and iPhone and I think we’re at the very front-end of that, and so I think we have lots of growth opportunities. And I don’t subscribe to the common view that the higher-end, if you will, the smartphone market has hit its peak. I don’t believe that, but we’ll see and we’ll report our results as we go along.

For the record, some argue that there could still plenty of iPhone growth to be had in the US. Wonky analyst Horace Dediu notes that the latest ComScore survey data shows some 98 million Americans older than 13 (that’s nearly a third of the country) don’t use smartphones as their primary phone. And he argues in this recent post that even with 60% smartphone penetration in the US, “the rate of adoption of smartphones is not slowing in any perceptible way.”

Correction: A previous version of this post spelled analyst Horace Dediu’s name incorrectly.

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