Apple is somewhat contrarian when it comes to margins, witness what they’ve done with desktops and portables. I look for Android to grow at the expense of other OS more than Apple, due to the change costs associated with existing apps. Since the hardware platform cost is roughly comparable, if it comes down to iOS vs. Android, there’s not a lot of reason to cut margins just to keep/gain share. Since Apple makes the hardware, owns the OS and makes money selling the apps, they could turn loose of some margin and still be highly profitable. But I don’t think they’ll even need to do that, just ride the technology curve.
In the computer market, Apple can demand the additional margin. Their products work due to the tight integration between their hardware and software.
The additional factor of their competition is that Microsoft isn’t a hardware company and the hardware companies for commodity PC’s are perfectly happy in a race to the bottom of a barrel filled with poop.
So Apple can demand high(er) margins for their laptops and desktops and people will happily pay them. The relationship is between Apple and their consumer.
In the phone market, however, there’s a third party at the table: the wireless carriers. When the carriers are offering handsets with a “X year contract,” there’s some margin being surrendered by the handset company to the carrier in order for the “X year contract” to make sense to the carrier. The Android handset guys are in a cutthroat contest just within the Android marketplace, and they’re going to ramp features at the same time they offer more software features against everything else in the market.
That’s where the margin erosion is going to come from.