Is Mobile Phone Market Bifurcating?

One feature of market structure in many highly-competitive markets is a bifurcated distribution of firms, measured by size (revenue, typically).

What one has tended to see in retailing and communications is a concentration of firms that are very large, a squeezing of the number of phones in the middle ranges, and then relatively lots of firms that are small.

Analysts at Deutsche Bank think that is happening in the mobile phone business as well, favoring devices that are high-end smartphones or low end devices.

In part, the new competitive pressures are the result of Apple's entry into the market, Deutsche Bank says.

"Hardware has become a commodity with heavy pressure on margins" while "software is the only way for vendors to differentiate their products." At the moment, that is favoring Apple and Android. 

The result is that the best software platforms at the high end are taking share from smartphones. The other trend is that "feature phones" in the middle are losing share to smartphones. The result might be called a barbell, with high volumes at the low end of the market and high end, but little in between.

One might also note a Pareto distribution, where a few market-leading firms are able to get the majority of share or profits. Deutsche Bank analysts note that Apple and RIM sell 10 percent of devices, but get 66 percent of the profit.

Apple and RIM Still Sucking Profits from the Smartphone Industry