Consumer technology analyst Ben Bajarin recently made waves when he predicted that Samsung (SSNLF) will be out of the smartphone business within five years. His dire prognosis may not be far off the mark: After a decade of exponential growth, the smartphone industry has become a decelerating, lopsided sector with only one truly profitable vendor: Apple (AAPL). To earn a profit in this hyper-competitive industry, smartphone vendors can either cater to low-income consumers in countries with little market saturation, or they can pitch high-end products to existing smartphone owners. The ultimate winner, however, will be a vendor on the bleeding edge of the tech revolution, one that creates a new type of device for young consumers who want a single point of access into the digital realm.

The smartphone industry got its start in the early 1990s. IBM’s Simon Personal Communicator, equipped with e-mail and fax functionality, came to market in 1992 with a whopping $899 price tag ($1,099 sans contract). Then in 1996, Nokia released its own device capable of Web browsing and word processing. But Apple’s 2007 release of the iPhone (and its iOS interface) brought the consumer smartphone into the main­stream: In the fourth quarter of fiscal year 2008, Apple sold more iPhones—6.9 million—than in the previous three quarters combined. In 2010, Google released its own operating system, An­droid, used by nearly every vendor not named Apple: Together, smartphones running on iOS and Android account for 96 percent of all devices shipped today.

On the surface, the industry appears to be flourishing. Earlier this year, Samsung reported $17.8 billion in second-quarter smartphone revenue. Apple executives say the company sold 48 million iPhones in the fiscal fourth quarter, fueling its $51.5 billion quart­erly revenue. These two compan­ies are ahead of the pack, accounting for 24 per­cent and 14 percent, respective­ly, of all smartphones shipped. Third-place Hua­wei is closing in on Apple with a robust 61 percent year-over-year ship­ment growth rate. And thanks to its boom­ing smartphone busi­ness, Xiaomi has grown from a mere software startup into Chi­na’s third-largest e-commerce firm in just five years.

But these promising numbers mask signs of weakness. For one, the worldwide smartphone shipment growth rate has been slashed from 27.5 per­cent last year to 10.4 percent this year. Furthermore, upon closer examination, it’s evident that Apple is the industry’s only winner.Apple alone maintains a staggering92 percent of the industry’s worldwide operating profits, with Sam­sung grabbing a further 15 percent. In other words, two companies maintain over 100 percent of the smartphone industry’s profits, meaning that every vendor other than Apple and Samsung is running at a net loss.

Why the huge distance between Apple and the rest of the pack? One reason is simply its higher price point. According to market researcher Strategy Analytics, the average iPhone sold for a global average of $624 last year, far above the $185 for smartphones running Android.

Another tally in Apple’s favor is its reputation as a respected luxury brand. Higher price works in Apple’s favor: Read­­Write contributor Dan Lyons argues that Android has been (unfairly) ma­ligned as a cheap iOS knockoff because of the comparative affordability of devices running the operating system. In addition, though Samsung, not Apple, invests the most in smartphone research and development, Apple’s list of once-in-a-generation flagships—from the iPod to the iPhone—gives the company a celebrity unmatched by any other smartphone vendor.

A further boon for Apple is its role as both vendor and software developer. While tech expert Paul Hochman famously predicted in 2011 that Apple’s closed system would be the death of the company, his forecast ignores the advantages of Apple’s dual role. The company can better implement quick software updates and marketing campaigns than Android competitors dependent upon Google’s periodic updates(which may or may not align with their own release dates).

Going forward, smartphone vendors have two distinct strategies to choose from. The first is to establish a presence in underserved markets. According to BI Intelligence data, global smartphone penetration per capita is just 22 percent. Moreover, in many de­veloping countries such as Tanzania, Uganda, Bangladesh, and Pakistan, the smartphone ownership rate is in the single digits.

Best equipped for this route are low-cost vendors. Samsung, despite its (largely disappointing) experiments with high-priced gadgets, remains a budget brand and has a strong foothold in emerging markets. But smaller vendors have the greatest growth po­tential: According to Gartner, during the first quarter of 2015, local brands and Chinese vendors (like Huawei and Xiaomi) recorded an average smartphone sales growth of 73 percent in young markets such as emerging Asia, the Middle East, and Africa. Such vendors alreadyconduct nearly all of their business outside the United States, encroaching upon Samsung’s market share in developing countries. Smartphones for these regions feature basic apps and Internet connectivity, along with talking and texting, and can be bought for as little as $25.

The second option is to pitch new products to high-income markets already ap­proaching saturation. Fueled by Millennials, the United States has become a smartphone hotbed: According to Pew, since 2011, U.S. smartphone ownership at large has nearly doubled from 35 percent to 68 percent—and today a full 86 percent of U.S. 18- to 29-year-olds own a smartphone. In China, extreme saturation has cut its smartphone shipment growth rate from 19.7 percent in 2014 to a paltry 1.2 percent this year—with some ana­lysts blaming the country for the decline of the worldwide rate.

Best poised to thrive in developed markets is Apple, which already dominates luxury smartphone sales. To its benefit, Apple can count on sustained demand from loyal customers, meaning it can afford to eschew “innovation” for “iteration” of previous products. This strategy, however, will not be viable forever. Criticism is mounting: Just look at this Samsung ad slamming Apple devotees, one of whom eagerly awaits a new iPhone where “the headphone jack is going to be on the bottom.” It’s not just Apple, though. In 2013, IDC analyst Ramon Llamas had harsh words for Samsung’s premium Galaxy S5: “They said to check it out because it was waterproof and that was one of the big things Samsung touted. OK—waterproof, huh? Right.”

A better course of action for premium vendors would be to create a new category of device entirely. As far back as 2013, IDC noted that vendors should use smartphones as the “center of innovation to other devices and not necessarily…as the end itself.” Today, the maturation of the Internet of Things, Big Data, and consumer wearables means that we’re closer than ever to an “ambient intelligence” that can keep track of us wherever we go. (See: “The Age of Artificial Intelligence.”) It’s likely up to the premium leader—Apple—to create a single piece of hardware that connects our myriad digital platforms to each other.