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No One Can Beat The iPhone

The best part about Apple's blowout earnings report Tuesday was how the iPhone business continues to counteract every theory Apple doubters have had over the years.

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At first, those doubters said Apple was doomed because it refused to make a "cheap" iPhone to compete with all those budget-friendly Android phones that eventually helped Google snap up a good 80% or more of the global smartphone market.

german man buying new iphone at german apple store
AP

The theory went that unless Apple made a cheaper phone, Google would take over the world and developers would flock to the platform and start making the best apps for Android instead of iPhone.

Wrong.

Developers still make more money on iOS than they do on Android, even though Android runs on millions more devices than iOS. And the best, new apps still tend to launch on iPhone first. Android, despite its massive market share, is still an afterthought for most developers. Plus, iPhone sales continued to grow even after Apple released the iPhone 5C, which many thought was too expensive at $549 and spelled certain doom for the company.

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Now the prevailing theory is that Apple is hosed in emerging markets where manufacturers like Xiaomi have figured out how to make Android phones just as beautiful and powerful as the iPhone, but cost half as much. The new theory goes that Apple will take a hit in emerging markets like China because people will prefer to buy those high-quality, cheaper phones instead of the pricey iPhones.

Wrong again.

Digging into Apple's record 74.5 million iPhone sales last quarter, it appears that a lot of that growth came from China. And according to research firm Canalys, Apple beat Xiaomi, Samsung, Huawei, and Lenovo to become the top smartphone vendor in China last quarter.

That means people passed up the cheap, attractive Xiaomi phones in favor of the iPhone, which can cost at least $400 more than a comparable Xiaomi device.

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What the Apple doubters don't seem to realize is that even though some Android phones are getting really good, they don't offer a unique experience. Xiaomi, Samsung, LG, Motorola — phones from those companies can do all the same stuff. The only difference between them are price and design. And if someone wants an Android phone, they go for the cheapest model with the best specs. Lately, Xiaomi has been the only company to fit that mold.

But Apple is different. The iPhone continues to be a roaring success because it offers unique experiences you simply can't get from the dozens (100+?) of Android devices that launch each year.

A lot of people like to scoff at the so-called "incremental" innovations Apple adds to the iPhone each year, but over time, those tiny innovations add up to big things. At first, Touch ID only let you unlock your phone with a fingerprint. Now, it lets you log into apps and make payments with Apple Pay.

Apple Pay is in its infancy, but we're already seeing it being adopted much quicker than any other rival mobile payments platform. Plus, the NFC chip in the iPhone 6 that makes Apple Pay possible can eventually be opened up to let you do stuff like enter your hotel room with a wave of your phone or enter the subway with a tap.

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And so on...

Android phone makers haven't been able to nail the kind of innovation that sticks like Apple has. Google Wallet was a bust. NFC is still a gimmick on most Android phones. The apps are simply worse than their iOS counterparts. And there are lots of wild hardware concepts like curved screens and bodies that are guaranteed to never really take off.

If anyone is in trouble in these emerging markets, it's companies like Samsung that still rely on expensive Android phones for a good chunk of their profits. There's very little difference between what you get from a Samsung phone versus a Xiaomi phone, and Samsung still hasn't proven it can develop unique experiences for its devices to justify the greater cost like Apple can.

The iPhone may have had its best quarter ever, but there's still plenty of room for it to grow.

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