A billionaire tycoon with a taste for publicity hardly needs more support, but the inescapable truth is Carl Icahn is right about the iPhone.

In a widely anticipated open letter to Apple CEO Tim Cook posted Thursday, the so-called "activist investor" argued Apple's current share price significantly undervalues a company poised to capture the next great wave of smartphone profits. Not only will Apple continue holding on to current iPhone users, Icahn argues, but the company has with the iPhone 6 and 6 Plus undermined the last good reason to stick with hardware running Android: larger screen size.

"Now that Apple is offering larger phones with roughly the same size screen as competitors' offerings … we expect Apple to take significant market share," Icahn wrote. "As users roll off their existing wireless carrier contracts, they can choose a superior product at a comparable price."

The validity of Icahn's argument hinges on a development we observed earlier this week as Apple's chief rival, Samsung, warned of a steep dip in profits. As major differences between phones—screen size, battery life, durability— continue to narrow, software becomes the key distinction setting one handset apart from another. And in the software game, Apple has a competitive advantage Android can never cop. It's not that iOS is necessarily superior to Android. What matters is Apple is the only company to have both software and hardware totally under its control.

Design That Has Reach

Make no mistake: Icahn's motives for puffing up Apple are purely selfish. He wants Apple to spend some of Mt. Cash buying back shares to decrease the supply and increase the price. In his letter, Icahn pledged not to sell his 53 million Apple shares after the price rose, an effort to preempt criticism that he simply wants a payday. No, really, he says, Apple shares will retain their buyback-stoked increase on the merits—specifically, on the merits of the business model for the iPhone.

Whatever happens to Apple's share price, the benefits of that model compared to the approach taken by Apple's rivals is clear. Yes, users have more freedom to customize Android, and handset makers have more freedom to fork it. But the tight integration of Apple's software and hardware make the iPhone the only mobile platform on which innovation is universally consistent.

Carl Icahn on July 16, 2014. Heidi Gutman/CNBC/NBCU Photo Bank via Getty

"Apple is able to offer its users the most up to date software and service experience, while Android can’t because it's hindered by relatively high fragmentation among its operating system versions," Icahn writes.

When the company that makes the operating system doesn't make the phone, it can't take full advantage of its scale. Android may run on far more smartphones worldwide, but the people using that OS on so many different devices can't be confident about what cool new features will reach them, or when. Google can't announce a big new advance and guarantee every Android user on every phone will have it. Apple can.

New Temptations

And because Apple can offer that assurance, it has much greater leverage in attempting to lure Android users to cross the great divide to iOS than the other way around.

Take Apple Pay. A few years ago, Google offered its own wallet app compatible with NFC, so phones with the chip could be scanned in place of a credit card. Few NFC-enabled phones ever came to market, though, because handset makers weren't convinced brick-and-mortar merchants would ever adopt the technology. Apple, on the other hand, unilaterally decided that in 2014, the time had come to turn the iPhone into a way to pay at stores. What's more, it made sure to get merchants on board before the release. With one decisive stroke, Apple was able to say, "Here's a significant new feature that every new phone will have and that you can actually use."

Because it controls both the hardware and software, Apple has a way to regularly, consistently, relentlessly innovate on its user experience not just to retain existing users by keeping the experience of using an iPhone fresh, but by constantly giving Android users new temptations to cross the mobile divide.

More iPhones in the Mix

In recent quarters, many Apple shareholders have dinged the company for failing to come through with innovations deemed significant enough to goose declining growth in iPhone sales. After multiple years of surging growth as consumers embraced smartphones for the first time, Apple saw its still-astronomical sales numbers start to level off. The market, the argument went, especially for the kind of premium devices sold by Apple, was saturated.

But if the premium market is saturated for Apple, it may also be saturated for everyone else. While Samsung's market share is eroding in part due to more rivals at the low end of the market, the company placed blame for the decline in its profits on a lower proportion of higher-margin premium phones in its sales mix. It's doubtful smartphone makers have really found the edges of the premium market. But if they have, the game becomes not reaching new users, but poaching the existing ones.

In Icahn's estimation, that's a game Apple wins. "We expect Apple will take premium market share, while at the same time maintaining its prices and gross margins, proving the concept of commoditization is nothing more than a myth with regards to Apple," he wrote. And the beauty from Apple's perspective is that it doesn't have to be all that innovative to set itself apart. Because it controls the entire mobile experience, the iPhone's new features don't even really have to be all that new. Apple's advantage is that it's better than anyone else at getting those features to everyone.