TiPb.com vs. Angry Droids

Android is already the biggest iPhone competitor and if technology and emerging markets combine to create $100 off-contract Android phones, will Apple need an iPhone nano to keep both user and developer mindshare?

Seth Weintraub at Fortune kicked over this latest Android anthill with an article on how cheaper chipsets and Google strategy could align to make those $100 Android smartphones a reality, shoving the migration from feature phone to smartphone into overdrive. That's interesting in established markets like US and EU, where the idea of walking into a store, laying down very little cash, and walking out with a "good enough" handset, sans additional contract obligations, is a mainstream dream come true. In emerging markets in Asia and Africa, that's the gold mine. Forget a PC on every desk and in every home -- soon it will be a smartphone in every hand.

Nokia and RIM, falling further behind the smartphone software race to Apple and Google, have increasingly looked to emerging markets for their low-cost Symbian and BlackBerry handsets as a way to leverage old technology until their next-generation Meego and QNX-based handsets are finally ready to market.

Google has already got a next-generation OS, perhaps not as polished or usable as Apple's iOS, but "good enough" in the classic, market-dominating sense and ready to go on everything from the highest end geek phone to the cheapest budget handset.

Apple has iPhone 4, $650-$750ish off contract, and last year's iPhone 3GS, $550ish off contract. And that's it.

Given the heavily subsidized, long term contract market that dominates the US, that's been translated into $199-$299 for iPhone 4 and $99 for iPhone 3GS. Those prices were low enough to prevent any umbrella -- to stop any cheap alternatives from gaining traction. But if Android starts arriving at $100, maybe even $75 off-contract, on good-enough devices? That's one huge umbrella opening up underneath iPhone. It's a circus tent.

Jerry Hildenbrand at Android Central points out that while geeks might turn up their noses at cheapy $100 Android handsets the mainstream won't and the resulting sales will have a profound effect among one incredibly important group -- developers. Right now iOS' mind and marketshare means it still has the best apps and most passionate developers on the planet. If Android sales reach the billion unit level, that might change and Apple could quickly lose their developer advantage to Google.

In the MP3 space, where devices have never been subsidized, Apple quickly followed the original iPod (now iPod classic) up with the iPod Mini (now iPod nano) and even the super-cheap iPod shuffle. For years the iPod nano was the most popular iPod. More importantly for Apple, it prevented competitors from differentiating based on price. Who wanted the "good enough" (or even arguably better spec'ed) competition when you could get the Apple brand and everything that came with it for "cheap enough"?

MG Siegler over at TechCrunch thinks North American carriers may, by hook or by crook, prevent $100 or cheaper handsets from taking off so they don't threaten the lucrative contract model. Perhaps. For a time. Or they may switch to a non-Net-neutral model where they bill us per byte to access YouTube or Netflix unless we're on those traditional contracts (or even if we are). Or they may just fork Android, make their own proprietary carrier OS, and only sell first-party phones. The pipes will get paid.

Either way, Apple may have to contend with those cheap Android handsets the way they contended with Windows in 1990s, and netbooks and cheap MP3 players in the 2000s. None of those are perfect parallels for the smartphone market of the 2010s but together, differentiating on software quality, build quality, and not leaving an umbrella, could they provide a strategy? Could Apple go to an iPhone nano to stop the ultra-cheap Android invasion?

[Fortune, TechCrunch, Android Central]