Updating My Smartphone Market Analysis: The Market Is At A Strategic Inflection Point

NOTE: My original post, originally published in January 2013, continues to be one of the most viewed on the site.  Android and Apple have enjoyed an estimated 98% market share between the two, and many of my earlier projections regarding this market appear to have been borne out. However, the smartphone market has now matured to the point that it is at a strategic inflection point which has major implications for the future of this market and the major competitors. 

The Rapid Maturation of the Smartphone Market Should Have Been Foreseen

The signs of a dangerous strategic inflection point in the global smartphone market have been evident for some time: the rapid rise of domestic Chinese competition combined with the predictable end of the Western consumer fascination with “the next smartphone.” Five years ago, Samsung Electronics, the South Korean technology giant sat atop the Chinese market, selling nearly one of every five devices there. Today, Samsung is an also-ran, controlling less than 1% of the world’s largest smartphone market. Samsung has trimmed local staff and last month closed one of its two Chinese smartphone factories.  Surely, Apple must have been aware of this and the growing number of much lower cost domestic Chinese competitors that were already hammering Samsung.  Apple’s release of a lower cost iPhone, the XR, in Asia in October 2018 appears to have been a case of too little too late. Sales of the device have been disappointing in both Japan and China, and Apple has been relegated to offering “trade-ins” to camouflage slashing the price of the XR.  Apple had ample warning over at least a five year period.

Meanwhile, I sensed a very different kind of maturation of the smartphone market in North America and Europe. In what I like to call the smartphone market “Star Wars” phenomenon, each new generation of smartphones was greeted with a hysteria that was only paralleled by the Star Wars craze. This simply could not continue indefinitely.  Beginning in 2017 it was apparent the smartphone market as a whole was already shrinking, and there was significant anecdotal information in the media that smartphone hysteria was waning, if not publicly available hard data. I began having discussions about this with Tim Bajarin, one of the top Apple analysts.  As Apple moved to launch the iPhone X and broke the $1000 price point barrier it encountered clear if perhaps not overwhelming evidence that the smartphone market was softening: more people chose not to upgrade their phones. I like to say that the last major feature consumers seemed to want/need was water resistance, as so many had already experienced the disastrous “toilet drop.”  I view the Bluetooth earbud phenomenon as a distraction and perhaps a hint of the coming change. Samsung flirted with water resistance as early as the Samsung Galaxy S5, perhaps because water resistance had become a standard feature in the Japanese market. By 2018, water resistance was standardized, and the market began experimenting with “the next big thing” for phones, folding screens. WTF? It was clear to me that the smartphone market had run out of gas, and was undergoing rapid maturation, as phones were no longer fascinating and novel, but just simply commodity devices.

To my mind, and IMHO, this has been a case study in a classic “strategic inflection point” that was missed by both Samsung and Apple. Samsung might be forgiven for being the first to cross into the inflection point, while the media was still promoting “the next smartphone” hysteria, and not yet recognizing the sense of the market. Apple has no such excuse. The rapid maturation of the smartphone market should have been foreseen by Apple. Apple’s most disturbing move was the decision to increase pricing rather than delivering greater value, at exactly the wrong time. The crucial rhetorical question is what are the larger implications for Apple’s future business?

READ MORE:  Apple Beware: Samsung’s Fall in China Was Swift 

READ MORE: Samsung Profit Outlook Surprisingly Weak

 

Vendor Data Overview

Smartphone vendors shipped a total of 355.6 million units worldwide during the third quarter of 2018 (Q3 2018), resulting in a 5.9% decline when compared to the 377.8 million units shipped in the third quarter of 2017. The drop marks the fourth consecutive quarter of year-over-year declines for the global smartphone market. 

Quarter	2017Q1	2017Q2	2017Q3	2017Q4	2018Q1	2018Q2	2018Q3
Samsung	23,2%	22,9%	22,1%	18,9%	23,5%	21,0%	20,3%
Huawei	10,0%	11,0%	10,4%	10,7%	11,8%	15,9%	14,6%
Apple	14,7%	11,8%	12,4%	19,6%	15,7%	12,1%	13,2%
Xiaomi	4,3%	6,2%	7,5%	7,1%	8,4%	9,5%	9,5%
OPPO	7,5%	8,0%	8,1%	6,9%	7,4%	8,6%	8,4%
Others	40,2%	40,1%	39,6%	36,8%	33,2%	32,9%	33,9%
TOTAL	100,0%	100,0%	100,0%	100,0%	100,0%	100,0%	100,0%

 

 

 

2009 to 2012

In one of the most interesting high tech scenarios in years, the “smart mobile” OS (operating system) market is shaping up to be a classic Battle of the Titans. Key strategic issues, theories, speculation, and money, lots of it, are making this a great real-time strategy and marketing case study for management students of all ages (smile).  So as Dell prepares to fade into the sunset, get yourself a drink of your choice, and some popcorn, sit back and watch it all unfold.

The best metaphor I can apply to this might be a “destruction derby” featuring at least two players,  or perhaps a bizarre multidimensional Super Bowl or Rugby World Cup match, with four teams on one playing field with four goal posts at each cardinal point of the compass..  At the moment all four teams are tackling, passing, and running at each other in a confused pile. There are scrums, rucks and mauls in multiple locations. Two competitors, Google and Apple appear to be winning. The other two, Microsoft and Research in Motion, are pretty banged up, but still playing.

The two currently dominant competitors, Google Android with its acquisition of Motorola Mobility, and Apple IOS are rapidly consolidating and expanding their global market positions, via partnerships, vertical integration, and application development ecosystems. Microsoft has publicly committed to spending massively to make Windows 8 the third OS option, but a recent IDC mobile OS market forecast projects Microsoft with only a miniscule share in 2015.  Something tells me that Steve Ballmer will go on a rampage if that happens, rather like the video of him screaming and dancing on stage in my post “Extrovert or Introvert, Authentic Presentations Take Practice,” November 30th. http://mayo615.com/2012/11/30/introvert-or-extrovert-authentic-presentations-take-practice/

The key question is whether Microsoft or RIM, will be able to establish a third mobile OS to a survivable market position.  It is not at all clear that either can do so at this point.  The market is also speculating that mobile hardware market leader Samsung, is possibly considering making its own play by creating its own mobile OS ecosystem.  While this may seem far fetched, this kind of vertical integration seems to be making a resurgence as a strategic move, after having been discredited.  Then there is the perennial Nokia, who has seemed to be on death’s door, but may be coming back. As a strategic partner for Microsoft, Nokia’s fate may have a huge bearing on Microsoft’s strategy to reinvent itself as the PC goes into atrial fibrillation. Will Amazon enter the fray with its own smart phone entrant, and if so, with whose OS?  Will Research in Motion and the Blackberry be able to achieve a survivable market share, or is RIM already a walking zombie?

Finally, in a kind of death dance patent dispute reminiscent of the film, Gladiator, Nokia and RIM are now locked in new lawsuits and counter-lawsuits, as if to say, “If neither of us are going to survive, we might as well kill each other for the entertainment value.”

Here’s a more concise overview of the race to be the third mobile platform:

• The argument in favor of a third platform is straightforward and compelling: A new, robust competitor will prevent the dominant platforms from growing complacent or stifling innovation. Apple and Google are pretty happy with the status quo. Consumers are probably not consciously pining for a third mobile platform. Developers would happily get behind a third platform if it widened their revenue streams.
• Microsoft has a head start: It launched Windows Phone in 2010, and tablet-friendly Windows 8 this year. It is experienced in building developer communities. However, Windows Phone has so far only managed a paltry 3 percent platform market share.
• Amazon has the most potential to upend the market: A smartphone would be a natural extension of Amazon’s distribution empire, and its Kindle Fire tablet play. Unfortunately, the most recent E-reader forecasts show them in sharp decline as growth in full-functional tablets squeeze them out.  Amazon has 106 million unique visitors accessing its sites, many of them with credit cards on file. 
• Samsung is a dark horse: Its dependency on Android may become a liability and push the South Korean manufacturer into the platform business. Samsung’s strength is its hardware sales prowess — Samsung shipped over 56 million smartphones in the third quarter of 2012. 

Read more: http://www.businessinsider.com/bii-report-the-race-to-be-the-third-mobile-platform-2013-1#ixzz2IepLaaka

For Management students, this real time case study offers the opportunity to apply and ponder:

1. The time tested 1976 Boston Consulting Group (Bruce Henderson) “rule of three and four.”  In a stable mature market there can be no more than three surviving competitors, the largest of which can have no more than four times the share of the smallest of the three.   Here, the question is whether a third competitor can successfully emerge at all?

2. Barriers to market entry. Former Intel Marketing VP, Bill Davidow‘s book, Marketing High Technology, An Insider’s View, still considered the standard on the topic, suggested his own metric for a barrier to a new market entrant, or even a competitor just struggling to survive the market shakeout. The market entry barrier rule of thumb in dollars is three-quarters the most recent annual revenue of the market leader. In this case, that is a very big B number…  Microsoft has the bucks, but is it just too late?

3. Vertical integration. Rumors of Samsung introducing its own mobile OS seem implausible, but hey Nvidia just announced its own gaming console to compete with Microsoft, Nintendo, and Sony.

4. Resources and capabilities. It is necessary to consider the respective resources and capabilities of each of the many direct players, and those playing in related markets that bear on the mobile OS market.

5. Related markets, new markets, peripherally involved competitors and products which all could play a role in the eventual outcome of this. The integrated Internet HDTV market is only one example. Featuring Apple, Microsoft, Google, and Samsung, and the HDTV manufacturers, it could influence things.  What if Amazon were to vertically integrate and introduce its own smart phone?

This is the hairball of this Century so far.  Are you all still with me, here?

Immigrants Will Think Twice About Coming to Silicon Valley

Since I joined the high-tech industry years ago, Silicon Valley has had a fundamental need for highly educated engineers and scientists that could not be filled by American graduates. This reality has been bemoaned by Congressional politicians for decades now, who have essentially done nothing to increase the emphasis on STEM education (science, technology, engineering, and math) for resident Americans, and who instead chose to provide the H1-B Visa enabling Silicon Valley high-tech companies to employ immigrants to fill these crucial positions, and has enabled the high-tech industry to thrive.  In my own group at Intel years ago, one of my closest colleagues was a Canadian math graduate from McGill and a Harvard MBA with an H1-B visa. Today, Silicon Valley is now notable for its multicultural diversity.  The election of Donald Trump has raised very real fears in Silicon Valley. His platform is almost completely devoid of any acknowledgment of the crucial importance of high-tech innovation to U.S. productivity and economic growth, the need for H1-B immigrants and the parallel need for greater investment in STEM education. But then Trump is on record calling computers “a mixed bag” and thinks people should wean themselves off the internet. Trump is also said not to have basic computer skills, beyond the use of his Twitter account. 

Supporters of Trump prior to the election were few and far between. Peter Thiel, a venture capitalist, former founder of PayPal, and a gay man, is perhaps the single most visible Trump supporter in the Valley. Tim Cook, CEO of Apple, did hold a private Silicon Valley fundraiser for Paul Ryan during the election, but otherwise, his support has been publicly tepid at best, as Trump has lashed out vigorously at Apple’s overseas manufacturing. Meg Whitman, CEO of Hewlett-Packard and a host of other Silicon Valley luminaries were outspoken supporters of Hilary Clinton. There are indications of a tenuous thaw from some in Silicon Valley but where will it lead?

What Will Happen to the H1-B Visa and Investment In STEM?

Source: Silicon Valley Reels After Trump’s Election – The New York Times

 STATE OF THE ART THE NEW YORK TIMES, NOV. 9, 2016

Farhad Manjoo

Silicon Valley Reels After Trump’s Election

Silicon Valley’s luminaries woke up Wednesday morning to a darkened new global order, one that the ceaseless optimism of their tech-powered visions seemed suddenly unable to conquer.

Across the technology industry, the reaction to Donald J. Trump’s election to the presidency was beyond grim. There was a sense that the industry had missed something fundamental about the fears and motivations of the people who use its products and that the miscalculation would cost the industry, and the world, greatly.

“The horror, the horror,” said Shervin Pishevar, a venture capitalist at the firm Sherpa Capital who, like just about every leading light in tech, had strongly supported Hillary Clinton’s candidacy. “We didn’t do enough,” he added. “There were too many people in the tech industry who were complacent. They waited and waited and waited to get engaged in this election. And now we have this nightmare.”

Others were more succinct in their devastation. “I’m heartbroken,” said Stewart Butterfield, co-founder of the corporate messaging service Slack.

 For some, buried in the visceral reaction was also a realization that the tech industry’s relationship with government — not to mention the public — looks bound to shift in a fundamental way.

During the Obama years, Silicon Valley came to see itself as the economic and social engine of a new digital century. Smartphones and social networks became as important to world business as oil and the automobile, and Amazon, Apple, Facebook, Google and Microsoft rose to become some of the most prosperous and valuable companies on the planet.

Mr. Obama, who rode many of these digital tools to the presidency, was accommodative of their rise; his administration broadly deferred to the tech industry in a way that bordered on coziness, and many of his former lieutenants have decamped to positions in tech.

Mr. Trump’s win promises to rip apart that relationship. The incoming president had few kind words for tech giants during the interminable campaign that led to his victory. Mr. Trump promised to initiate antitrust actions against Amazon, repeatedly vowed to force Apple to make its products in the United States, and then called for a boycott of the company when it challenged the government’s order to unlock a terrorist’s iPhone. Mr. Trump’s immigration plans are anathema to just about every company in tech.

Amazon, Apple, Facebook, Google and Microsoft offered no immediate comment about Mr. Trump’s win, or how the new administration’s stated policy goals would affect their businesses.

But it seems clear that a shift is in the offing. Leaders of these behemoths have long spoken in ambitious, gauzy sentimentalities about a broadly progressive future. Their goals weren’t simply financial but, they said, philosophical and democratic — they wanted to make money, sure, but they also wanted to make the world a better place, to offer a kind of social justice through code. Theirs was a tomorrow powered by software instead of factories, and offering a kind of radical connectivity that they promised would lead to widespread peace and prosperity.

Last year, Sundar Pichai, Google’s chief executive, published a broad rebuke of Mr. Trump’s plan to ban Muslims from immigrating to the United States. Mark Zuckerberg, Facebook’s co-founder and chief executive, told an audience of developers in April that “instead of building walls, we can help people build bridges.”

 Peter Thiel, former founder of PayPal, and perhaps the most visible and lonely Trump supporter in Silicon Valley

In private, during the campaign, many tech leaders were positive that their vision would prevail over Mr. Trump’s. When asked about whether they were preparing in any way for a Trump victory, bigwigs at many of the industry’s leading tech and financial firms were bemused by the notion. They thought it would never happen.

The deeper worry is that tech is out of step with the national and global mood, and failed to recognize the social and economic anxieties roiling the nation — many of them hastened by the products the industry devises.

Among techies, there is now widespread concern that Facebook and Twitter have hastened the decline of journalism and the irrelevance of facts. Social networks seem also to have contributed to a rise in the kind of trolling, racism and misogyny that characterized so much of Mr. Trump’s campaign.

And then you get to the economic problems. Unlike previous economic miracles, the tech boom has not led to widespread employment. Much of the wealth generated by the five biggest American tech companies flows to young liberals in California and the Pacific Northwest, exactly the sort of “global elites” Mr. Trump railed against in his campaign.

It’s not clear that most Americans see technological progress as the unalloyed good that it is considered in Silicon Valley. Technology has pushed so deeply into people’s lives, changing how they work and go to school and raise their children, that it could well raise more fears than hopes. A new smartphone is nice, but perhaps not if it means that your trucking job will be replaced by a big rig that drives itself.

“We need to figure out how to connect more Americans to the economic engine of technology,” said John Lilly, a partner at the venture capital firm Greylock Partners.

On Wednesday, some in Silicon Valley worried about their disconnection from the mass of voters who chose Mr. Trump.

“In tech, we need scale, so we look at the world through the lens of aggregate metrics like page views, active users and even revenue,” Danielle Morrill, the chief executive of a start-up called Mattermark, wrote in an email. “But that doesn’t mean we understand the people on the other side of the screen as individuals. That’s the danger and the opportunity.”

Still, some people in tech said that despite their heartache over the outcome, they felt renewed inspiration to take bolder action to realize their progressive visions. Some made very big, idealistic proposals — this being, after all, the land of disruption. On Twitter, for instance, Mr. Pishevar said he would fund a campaign to get California to secede from the nation.

Others weren’t as high-flying but were nevertheless resolute.

Aaron Levie, the chief executive of Box, an online document storage company, suggested that the tech industry promote specific policy issues.

“To shift to an economy driven by innovation from tech-enabled businesses, we need to get ahead on the issues we’ve been talking about in Silicon Valley for years, like education, patent reform and immigration reform,” he said. “By and large, minus taxes and some tax repatriation issues, much about Trump’s rhetoric has been antithetical to most of the big businesses that are driving the economy.”

Mark Suster, a venture capitalist at Upfront Ventures, echoed the idea.

“Tech needs to take a deep breath, and then reflect on how this happened,” he said. “And have policy proposals that can realistically address the inequality in our country.”

Apple €13 Billion Tax Bill Really A Fight Over Who Gets the Money: EU or US?

Apple is facing a major corporate crisis as public opinion is focused on corporate greed

Ireland operating like a “rogue state”

Today’s long-expected announcement that the European Union has assessed that Apple owes €13 Billion ($14.5 Billion) in back taxes to Ireland and the EU, is only one part of a much larger story of multinational corporations global tax jurisdiction and tax avoidance, and a looming fight between the EU and US over which one gets the €13 Billion. There is not much disagreement whether Apple actually owes the money. It also reopens the as yet unresolved matter of multinational corporate taxation, most recently exposed by Pfizer’s announcement that it would move its HQ to Ireland to avoid U.S. taxation, which was later blocked by the U.S. government.

In 1991, Apple struck a tax deal with Ireland that was aboveboard and legal. The Irish government provided Apple with a “comfort letter” that said the company would pay very low rates of tax if it based its European operations in Ireland. In the 25 years since that time, Apple has created thousands of jobs in Ireland. By 2015, it had 5,000 employees in the country. Another 1,000 jobs are planned for the headquarters in the Irish city of Cork. This year, Apple will open its site near the town of Athenry, with another 200 jobs in the making.The result of the deal between Apple and Ireland, intended or not, was pretty clear: Give us low taxes, and we will give you jobs.

The problem with this is that Ireland has become a focal point for global corporate tax evasion by numerous foreign corporations. Ireland has suffered through a cycle of boom and bust, culminating in the 2008 global financial meltdown, which left Ireland’s economy in shambles. The upshot is that since that time, Ireland has become the poster child for tax evasion schemes, which has led to numerous EU investigations of Ireland’s tax laws. Ironically, it also led KPMG Canada to establish its own similar scheme in The Isle of Man, now under investigation by the CRA.

The bottom line is that this could not be happening at a worse time for Apple. The company is very likely facing a major corporate black-eye, at a time when public opinion is focused on corporate greed, income inequality and the decline of the middle class.

The opening salvo in a much larger global issue

“U.S. companies are the grand-masters of tax avoidance. I see it (U.S. objections to the EU ruling) as the United States digging in its heels, that it is protecting its corporate champions when in fact it’s claim jumping on what is really European income,” said Edward D. Kleinbard, professor at the Gould School of Law at the University of Southern California and a former chief of staff to the congressional Joint Committee on Taxation.

Margrethe Vestager, European Union Commissioner on Competition

The EU charges against Apple:

• Apple’s effective European tax rate was 1% on sales of 16 billion euros or more per year.
• It sank as low as 0.005% in 2014.
• Apple created a head office that did not exist: “This ‘head office’ had no operating capacity to handle and manage the distribution business, or any other substantive business for that matter … The ‘head office’ did not have any employees or own premises.”
• The pact deprived other European countries of billions of euros in unpaid taxes.

 

Reblogged from The New York Times:

Apple Must Pay Billions for Tax Breaks in Ireland, E.U. Orders

By JAMES KANTER and MARK SCOTTAUG. 30, 2016

Europe’s antitrust enforcer ordered Ireland to collect billions in back taxes from Apple, a move that will ramp up trans-Atlantic tensions over what global companies pay in the countries where they do business.

The decision, part of a broader crackdown on tax avoidance by the European Union commissioner for competition, slammed Ireland for providing illegal incentives that allowed Apple to cut its tax bill in the region to virtually nothing some years. The clawback of taxes — 13 billion euros, or about $14.5 billion, plus interest — is a record penalty by the union for such activities.

The ruling adds to a strained relationship between the United States and the European Union over who has the right to regulate tax payments by some of the world’s largest companies.

The European Commission, under the leadership of Margrethe Vestager, the competition chief, has aggressively sought to stamp out sweetheart tax deals that countries strike with multinational companies. Along with Apple, the campaign has also ensnared Starbucks in the Netherlands, Amazon in Luxembourg and Anheuser-Busch InBev in Belgium.

But American officials have warned that the commission is overstepping its power given that taxes are typically left to national governments to oversee and that European officials should not retroactively issue penalties in past tax rulings. They also emphasized that such cases undermine continuing efforts to overhaul global policies and create measures to curtail tax avoidance.

“U.S. companies are the grandmasters of tax avoidance,” said Edward D. Kleinbard, professor at the Gould School of Law at the University of Southern California and a former chief of staff to the congressional Joint Committee on Taxation.

“Nevertheless, because of the nature of U.S. politics,” he said, the Apple case “will be framed by the U.S. as Europe overreaching and discriminating against ‘our team.’ ”

Since early this year, Ms. Vestager and Jacob J. Lew, the United States Treasury secretary, and their teams have met regularly to discuss Europe’s state-aid tax investigations. Mr. Lew visited Brussels in July to put forward the American perspective.

 

EUROPE By E.B.S. VIA ASSOCIATED PRESS 1:01

Apple to Pay $14.5 Billion in Back Taxes

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Apple to Pay $14.5 Billion in Back Taxes

On Tuesday, Europe’s antitrust enforcer ordered Ireland to claw back billions from Apple over illegal tax breaks.

By E.B.S. VIA ASSOCIATED PRESS on Publish DateAugust 30, 2016.Photo by Andrew Testa for The New York Times. Watch in Times Video »

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Just last week, the Treasury Department released a report criticizing any efforts to claw back taxes from American companies. The document repeatedly claimed that the European Commission did not have the right to undertake the clawbacks and that they could harm America’s efforts to collect taxes from domestic companies with vast international operations.

“That outcome is deeply troubling as it would effectively constitute a transfer of revenue to the E.U. from the U.S. government and its taxpayers,” Robert B. Stack, a senior Treasury official, said in the report.

The European Commission denies these claims, saying that it is relying on a history of using state-aid rules related to corporate tax issues. The Brussels-based agency also says that it has the right to act when certain companies are provided with an unfair advantage — either through tax breaks or other incentives — and that Apple’s operations are based in Ireland, therefore falling under its jurisdiction.

“No rules have been changed — not one rule,” Ms. Vestager said at a news conference in Brussels on Tuesday. “This is a question of paying unpaid taxes.”

In the Apple case, the antitrust commission said that the deals with Ireland allowed the company to allocate profits from two Irish subsidiaries to a “head office,” but that it could not have generated such profits since it had few operations and little distribution or substantive business.

By doing so, the commission said that Apple could effectively lower its tax rate on European profit to just 0.005 percent in 2014. Ms. Vestager said at a news conference on Tuesday that amounted to roughly €50 for every €1 million in Apple’s European profit.

“The so-called head office had no employees, no premises, no real activities,” Ms. Vestager said.

Apple defends its tax practices, saying it follows the law and pays all of its taxes.

“The commission’s case is not about how much Apple pays in taxes, it’s about which government collects the money,” the company said in a statement. “It will have a profound and harmful effect on investment and job creation in Europe.”

Ireland has broadly faced scrutiny for its tax strategies to attract large multinationals.

Its corporate tax rate, at 12.5 percent, is one of the lowest in the developed world. Other incentives and breaks allow companies to cut their bill even further. While it is phasing out some of the more contentious loopholes, Ireland just introduced a new break for revenues on intellectual property, a potentially huge benefit to large technology companies with troves of patents.

How Europe Is Going After Apple, Google and Other U.S. Tech Giants

The biggest American tech companies face intensifying scrutiny by European regulators, with — pressure that could potentially curb their sizable profits in the region and affect how they operate around the world.

The United States has a complicated view on Apple’s dealings in Ireland. The European inquiry was spurred in 2013 when a United States Senate committee said that Apple had negotiated a special corporate tax rate of 2 percent or less in Ireland.

The Treasury has also taken steps to curtail so-called inversions, in which an American company buys an overseas counterpart and shifts its headquarters overseas to lower its taxes. Ireland, with its low corporate tax rate, has been an especially big beneficiary of such deals, which helpedplump up the country’s economy last year.

Ireland stands by its approach to taxes, saying it did not give preferential treatment to Apple or other companies. The country’s Finance Ministry, in a statement, said that the commission’s decision would undermine continuing global tax overhaul and create uncertainty for business in Europe.

The finance minister, Michael Noonan, said he would move to appeal the Apple decision, adding it was “necessary to defend the integrity of our tax system.”

“It is important that we send a strong message that Ireland remains an attractive and stable location of choice for substantive investment,” he said.

Apple also said it would look to overturn the decision, although any appeals process could take years.

“The European Commission has launched an effort to rewrite Apple’s history in Europe, ignore Ireland’s tax laws and upend the international tax system in the process,” the company said in a statement.

The commission said the amount due in Ireland could be lowered if the American authorities decided that Apple should have paid more tax in the United States.

The commission also said that other countries in the European Union could take a share of the money if Apple conducted more taxable business in those nations than the company had previously declared. That could reduce the amount Ireland collects and give additional revenue to other countries.

Apple is also expected to have to pay interest on the €13 billion, but the commission did not disclose how much that would be.