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This is the risk for Apple this round.  If people feel that Apple is charging them a premium for a phone that is only worth half as much, one that has cheap components with unreliable underperforming connections they could flee the brand.  They probably all won’t flee to Essential but as a small phone maker Rubin’s new firm doesn’t need to take a bunch of share, but they could change Smartphone buyer perceptions.  This would result in a critical number of iPhone considering switching that otherwise would have bought the iPhone 8.

Making Apple Vulnerable

IBM was invulnerable until the late 1980s and then folks went from believing the firm was invulnerable to believing it couldn’t compete in a matter of months.  Microsoft in the 1990s was believed to be invulnerable until the US Department of Justice changed that image and everyone and their brother jumped into their business. What Essential could do is break the image that folks either have no choice or that Apple’s installed base isn’t vulnerable to attack.  It could, for a time, become the next phone people effectively line up to get and thousands of folks have, like folks did with the Tesla Model 3, signed up to be the first to get it (including me).   Assuming this new phone meets expectations, which often isn’t a good bet with a generation one phone, this could result in a shift of perceived status from the iPhone to the Essential phone.  This would make Apple suddenly look vulnerable. It is that vulnerability that could form the foundation of breaking Apple.  Given how aggressively Apple has been working behind the scenes to cripple the Essential phone they clearly see the potential risk.

Wrapping Up:

Apple dominates the high end of the market but they have been aggressively focused on costs of late suggesting people are paying a premium for an increasingly inferior product.  The most capable person to take advantage of this is Andy Rubin the father of Android and he has his Essential Phone coming.  This phone could showcase a huge chink in Apple’s armor and that chink could become the downfall for the firm’s Smartphone margin leadership. Apple clearly knows this so they are working massively to reduce hurt the Essential Phone’s launch but, if rarity results in status, the Essential Phone becomes a bigger risk.  This last is the interesting part because status often is conveyed through rarity, that is why a Diamond conveys more status than an Amethyst, but everyone and their brother has an iPhone, the Essential Phone will be far rarer and Andy Rubin is far more like Jobs than Tim Cook, Apple’s CEO is.  Then again Rubin is having a few issues getting the Phone to market and you can’t win a war if you can’t field an army.