Apple (AAPL +2.08%) used to dominate the tech headlines, creating new categories of products like smartphones and tablets. But Google (GOOG +0.66%) and Samsung have seemingly taken its place as the best innovators, and have taken a major bite out of Apple's market share in the process. Even fellow Fool and Apple expert Evan Niu has his concerns about Apple losing its position to competitors.
What Google has done incredibly well is offer virtually free software to any device manufacturer that wants it in an effort to spread all things Google. This has resulted in a 51.9% market share in smartphones according to Comscore, rising from absolutely nothing when Android products launched in 2008. Google is hoping to take that success even further by breaking into PCs, automobiles, and tablets, competing with the iPad's tablet dominance by using open source software.
But let's not mistake Google's success with failure for Apple. It's never been Apple's strategy to have the largest market share of any product line it makes. Instead, it focuses on pleasing the high end of its consumers and making a tidy profit in the process. By that measure, Apple is doing quite well.
Apple has mastered creating value in electronics
Google has garnered a lot of attention for jumping from no market share in smartphones a few years ago to 51.9%. But that number doesn't tell the whole story of smartphones.
Like previous generations of cell phones, the smartphone began with early adopters who were willing to pay hundreds of dollars for the right to buy an early iPhone. Soon, more options became available and eventually low cost smartphones from Samsung, HTC, and others began flooding the market. It's many of these lower end, lower-margin phones that stole market share from Apple, but they have yet to take so much share that Apple's sales decline. As you can see below, every full-year period has seen a rise in iPhone sales.
Source: Company earnings releases.
In high-end markets like the U.S., Apple is still the dominant player, and that's where Apple wants to be. Competitors like Samsung have closed the gap, but unless they can gain enough share to cause iPhone sales to fall Apple is doing fine.
Apple might not be the only game in town, but it's still selling millions of smartphones to high-end consumers that cheaper phones won't steal away.
Translating success into new markets
In Evan's observations at CES, he noted that while Apple wants to connect devices with automobiles Google wants to power the car itself. That's a noble vision, but we can see more about the difference between Google and Apple's strategies in the partners they've chosen. Google is working with Audi, General Motors, Honda, and Hyundai, mass market auto companies.
Apple, on the other hand, has BMW and Mercedes-Benz adding features like Eyes Free Siri. Mercedes-Benz will be the first to offer built-in Siri, and BMW was an early adopter of iOS integration. They're not letting iOS run the car, but the fact that high end automakers see value in adding features for the high end smartphone maker isn't a coincidence.
An Apple product launch still draws lines of eager customers.
It's more in line with Google's strategy to make products for all automakers or any other device maker it can attract with open source. Apple has always been more concerned with making a seamless product for a smaller audience than pleasing everyone. So it should be no surprise that these two will have different strategies in new markets.
Is Apple's innovation really dead?
There's also a major difference between Google and Apple when it comes to new products. Google talks about what it's doing, sees what people think, and accepts that it may or may not be successful at the end of the day. Apple keeps its ideas and innovations in-house until they're finally revealed to the world.
Google's Cromecast hasn't been the smash hit the company hoped.
When the iPad was first released it was already a more refined product than most Android-powered devices we see today. The same can be said for ChromeCast or Google TV, which were both announced with much fanfare but still don't operate as smoothly as an Apple TV I purchased nearly two years ago.
If there's a revolutionary TV or automotive product Apple is working on we won't hear about it until it's launched. So, while Google is busy talking, I'm waiting to see these ballyhooed products become a reality.
Apple is still the cash king
When it seems like Google is out-innovating Apple, just look around you at how many people are on Apple devices and then look at who is the cash king between these two.
AAPL Free Cash Flow (TTM) data by YCharts
If Apple is falling behind you wouldn't know it by its bank account. The company is still piling up cash hand over fist, and it's doing so by focusing on pleasing the consumers it knows will pay top dollar for its products. Google can have the rest, for all Apple is concerned.
