Analysis Today's long overdue update to Apple's iPhone line - which had been moribund for years - look set to squeeze some rival manufacturers to death. New iPhones at last means that Android, Google's smartphone middleware, will soon look attractive only for budget vendors selling into fast-growing emerging markets.
The problem, in a nutshell, is this. Why should you continue to make something at all if you lose money doing so?
The answer some big names will shortly come to is: "Sorry, we can't - we're bailing out." Because it's all about margins.
Back in 2008, Google made the consumer electronics industry an offer it couldn't refuse. We'll give you a operating-system platform that lets you make an almost-as-good-as-an-iPhone, so you can make profit margins almost-as-good-as-Apple's. Android was modern and it was "free", and manufacturers could tailor it. Neither Microsoft nor Symbian could compete, while RIM/BlackBerry milked its ancient platform for too long, until it too dropped out of contention.
From a technical point of view, Google has kept its side of the bargain. Android has matured faster than anyone anticipated. It's excellent value, and fulfills all that the mass market wants today. A range of devices from smart and full spec'd, like the HTC One M8, to excellent value, like Motorola's Moto G, all access a rich app and services market. But making Android devices in a mature market is now a mug's game. Once you look at the numbers, there's a compelling case for dumping it altogether.
So who blinks first?
Sony, which makes beautiful gadgets, this week forecast a $1.2bn loss from its all-Android smartphone business. Fanbois have begged it not to exit the market. But money doesn't grow on trees, and the Android Black Hole is more than half of the group's losses; it's rational that the axe falls on the 'droids. Already it's been decided that 1,100 jobs will go from Sony's 7,100 mobile division.
HTC makes even more beautiful gadgets than Sony, and its sales are lower than last year, when it struggled to break even. HTC doesn't have the deep pockets of Sony or a Korean chaebol.
Yes, Samsung makes money from Android - the only manufacturer to consistently do so - but at a huge cost. Samsung buys its success with $14bn a year marketing budget, allowing it to put out saturation advertising, pay sales staff to push its products at retail, and hype indifferent offerings in emerging markets. But as with Sony, the Android business is threatening to hurt the rest of the group. Android remains viable for Samsung, which made a $6.1bn (£3.6bn) profit from smartphones, and that's enough to cover the marketing. But the trend is ominous: marketing goes up and profits come down - and eventually, at some point, the two lines converge.
So what gives?
We've found a profitable Android manufacturer! You won't have heard of them...
Well, currently the companies making money from Android are indigenous Chinese manufacturers like Huawei - which famously doesn't borrow to spend on marketing - and ZTE. Lenovo is acquiring the Motorola team and brand, and TCL owns the Alcatel brand.
They can make money because China is an emerging market - it's still growing. They're converting feature phone users and first-time users. As spending power increases, that growth should continue for some time. But in G20 economies, everyone who wants a smartphone has already got one.
It's likely that as the big brands retreat, these names and ones we haven't heard from much - like India's MicroMax - will fill the void. And we're likely to see more from the mobile operators, as with EE's £99 4G Kestrel, a re-branded mid-range Huawei device that's excellent value.
The problem is that all markets become saturated eventually, China and India and the other BRICS just haven't become saturated yet.
Google can see the writing on the wall as well as anyone, and its Silver program anticipates the day when big name brands like Sony, HTC and maybe even Samsung have retreated completely, and devices are made by Foxconn and rebadged.
But Silver on its own isn't enough - it doesn't deal with the lopsided economics of an over-saturated smartphone industry. Google was born in the old dot.com days when startups gave away $1 bills for 90 cents. Today Google loses billions on Android - the justification being that if it's to be the dominant consumer data processing company, it must put its data collection software everywhere it can*. However, Google is also dumping losses it would make as a manufacturer onto third parties, and this isn't a sustainable business plan in the long run.
What Google might have to do is the unthinkable - and give something back. Today it resembles a parasite that's so successful it's killing its host. In its own digitial homeland, Google doesn't appear to feel under any pressure to give something back to the content producers and others it ruthlessly deals with today. But physical hardware - a world Google isn't comfortable in - is different. If nobody can make money making Android data collection hardware, it doesn't get made. ®
*Once Google has a monopoly on consumer data, it can start to replace humans, becoming the Standard Oil of "things-that-humans-once-did, but that can now be automated". But you knew that already, didn't you?