Phone makers also insist on adding their own software to the stock Android operating system. They kid themselves they are adding value, mostly it has the opposite effect. This is an expensive waste of money.
There are two versions of Android. An open source version and a proprietary version. Some phone makers choose the open source version and build their own frameworks on top. Most premium Android smartphone makers use the proprietary version.
Proprietary Android includes Google’s apps like Chrome as part of the deal. Unlike the bare-bones open source version it includes all the services modern phone makers need: location services; Google Maps; The Play Store; mechanisms for in-app purchases and so on.
Although Google doesn’t charge phone makers for proprietary Android, the deal is that they leave Google’s services intact. This is so Google can track user activity and use that information to target advertising.
That’s where the real money is in Android phones: the phone makers deliver up users for Google to milk. Most phone makers and their customers seem happy with this.
Open source Android
Phone makers could choose the open source version of Android, but they’d have to build all those services and the supporting infrastructure or find partners who can deliver them. There aren’t many alternative service providers out there.
Which brings us back to the question at the top of the story. Why are phone makers, or their shareholders, pouring money into delivering their customers to Google’s advertising machine?
If you ask them, you get mixed answers. Some phone makers, Huawei is one, think they’ll be left standing after the inevitable market shake out and there will be money-making opportunities later.
That’s plausible, but it requires the kind of deep pockets other phone makers don’t have.
Nor are wrist devices, smart watches and other wearables going to repair balance sheets. And anyway, Android doesn’t seem well-suited to the wearable format.
It speaks volumes that Samsung’s latest smart watches use the company’s own Tizen software in place of Android.
Companies aiming at the high-end of the Android market are between a rock and a hard place. Apple is the rock. None of them can capture the public’s imagination the way Apple does, nor do they come remotely close to Apple’s margins.
Another problem facing Android phone makers is that the market appears to have peaked. While the market was growing there was always potential for rewards. Smartphone sales ticked up 10 percent in 2015 compared with 2014, Apple captured all the growth and then some. Android sales fell a little.
Market share matters little when the market isn’t profitable. What matters is who is making money? The simple answer is Apple, Samsung and, at second-hand, Google. For everyone else it’s either a long-term bet or a profitless abyss.
Shipments are similar, but not the same as sales. A phone is shipped when it leaves the factory for the distributor or retailer. Think of it as the number of phones the phone maker hopes to sell. ?
It must cost Samsung a pretty penny to market four premium phone lines. ?