When you look at how Apple is taking smartphone customers from Android vendors, it's striking how much product/service integration has helped. Apple's integration allows it to make a continuing series of cutting edge, meaningful product improvements, while its scale allows it to offer a competitively priced -- if still high end -- product.
Android vendors relying on undifferentiated, modular/standardized product elements -- like the Android OS or Qualcomm chips -- cannot seem to match the iterative improvement of Apple's products. These vendors are at the mercy of their modular suppliers, and these suppliers aren't keeping up with Apple: Qualcomm is having difficulty matching Apple's in-house chip design, while Google is having difficulty keeping Android updated and malware free. As a result Android vendors are forced to sell an inferior, commoditized product at an unprofitable price. Companies that do this long enough go out of business -- they run out of time and money to improve margins by moving up the product improvement trajectory. See Concepts page and discussion of Clayton Christensen.
You might expect a large group of modular suppliers to eventually catch up with Apple's in-house efforts, but it doesn't seem to be happening. If anything, Apple's profitability is making its in-house efforts even harder for modular suppliers to match, since Apple has the deep pockets needed to hire the very best talent.
The author owns stock shares of Apple.