Look at the sales figures for the last quarter – the second quarter of the year (2Q09) in a recessionary year, and you see that the sale of smart phones is growing like a rampant weed. Sales grew from 32,272,700 in the previous year (2Q09) to 40,962,800. That’s just under 27% growth when the market for other electronic products is in decline, or even steep decline.

The iPhone Phenomenon

The driver of the market is surely the iPhone, which exhibited extraordinary growth. A year ago when the iPhone was already a phenomenon, Apple sold a mere 892,000 units in the quarter, for 2.8% market share. Admittedly Apple had not yet laid down carrier deals in many markets and so those figures depended mostly on the US and one or two countries in Europe.

Apple still has not colored in every country on the world map and is only just finalizing in China, which will be a huge market. And despite that it sold 5,434,700 units, giving it a growth rate of 609% and vaulting it into 3rd position in the global market with a 13.3% share compared to RIM’s 18.7% share and Nokia’s 45% share.

A Thing Apart

We shouldn’t forget that Apple’s competitors are playing catch-up. It’s no longer just about the phone. It’s now also about the applications, and right now, Apple has such a lead over the competition that you almost feel as though someone should stop the fight. There are two vectors to this. The first is that Apple had the got web browsing on the iPhone right, partly because it invested in a high resolution screen from the get go, making the screen larger in practice than it appears, but also it enabled a whole set of geographical applications that link from maps to apps on the device. Secondly Apple got the developer ecosystem working so that now the vast majority of mobile app developers are pointed at the iPhone and use development software that it Apple oriented.

This will take a lot of catching up, and to make matters worse, a whole new generation of geographical applications are starting to hit the market which can overlay the physical view of a scene with information so you can actually see where the ATM or restaurant is just by looking through the viewfinder of the iPhone camera. While its competitors are still trying to get their application stores active Apple already has over 70,000 software products to offer iPhone users (at last count).

Counting just the handset sales, Apple’s iPhone now accounts for 8% of all mobile phone revenue, but – and here’s the kicker – a huge 32% of the industry’s handset profits. That’s according to figures published by Bernstein Research and based on handset sales in the first half of 2009 – when Apple earned an estimated $5 billion revenue and took its place as the fifth largest player by revenue – behind Nokia, Samsung, RIM, and LG, none of whom have a PC business or a Media business or a software business.

It’s the End-to-end Sales Model

Pleasant though smartphone are the only reason to own one is to run applications and view media. If making calls or sending text is what you’re after you can pick-up a phone that does that for almost nothing. Apple is the only player in the game that has a true end-to-end sales model for music, video and applications. It has the content and application ecosystem sewn up and everyone else is a bit player.

It is also innovating at a rate of knots. It will not be at all surprising to see Apple launching a tablet device that is, well, a platform for playing content and running iPhone apps. There is no other vendor that is even thinking of doing that, and they’ll all start quaking in their shoes when Apple does.

In the iPhone market, Apple is a company that is in desperate need of a strong competitor. Right now there is no sign of one. Microsoft looks like a busted flush in this market, Google is only just getting started and RIM and Nokia are clear also-rans. The only thing stopping Apple from accidentally acquiring a monopoly is the exclusive carrier deals it is tied up with.

Apple will not continue to grow at 600% in this market – mathematics forbids it – but it won’t be long before it displaces Nokia. Maybe a year, maybe two.