Why Android will dominate the iPhone and grab half the smartphone market

The remarkable growth of Android in the past year is no mere temporary surge, and will accelerate, giving Android half of the smartphone market, leaving the iPhone in the dust. So concludes a Piper Jaffray report, which says that the iPhone will be left with from 20% to 30% of the market versus more than 50% for Android.

The report concludes that Google's strategy of working with multiple device makers and service providers is what will put it over the top. By the end of 2010, Android will be just barely behind the iPhone --- 14.9% to the iPhone's 15.9%, the report concludes. But by 2012 Android will be well ahead of the iPhone, 23.2% to the iPhone's 17.6%.

After that, it's all Android. ZDNet's Larry Dignan quotes the report as saying:

Ultimately, we believe Android is likely to control over half of the smartphone market in the next five years. Apple's essentially two phone focus (low price 3GS and higher price 4) will likely limit how much of the market Apple can control and we believe ultimately Apple's smartphone market share tops out between 20-30%.

Apple, though, will still generate significant revenue, with more than half the profits in the smartphone industry. Also, keep in mind that Google gets no revenue from sales of Android devices, because it gives away Android for free. Its money comes from advertising and services. By 2012, Google will get more than $1.35 billion annually in revenue from Android, though, so it will be a big money-maker.

As for Nokia and RIM, the report says that they'll be left to fight for a small percent of the market. The report also says that ultimately, one or both of them may give up its own proprietary software, and instead turn to a third-party --- either to Android or Windows Phone.

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