Apple scores 92% of smartphone industry operating profits

amirm

Banned
Apr 2, 2010
15,813
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0
Seattle, WA
Everyday I wake up, thanking my lucky stars that I don't have to compete with Apple in mobile market :).

http://www.cnet.com/news/apple-scores-92-of-smartphone-industry-profits-analyst-says/

Apple scores 92% of smartphone industry operating profits, analyst says
The iPhone maker accounted for less than 20 percent of smartphones sold by the top vendors last quarter but ate up more than 90 percent of the total operating income.

Android device makers collectively may reign supreme in smartphone market share, but Apple is the one that takes home almost all of the profits.

In the first quarter of 2015, Apple scored a whopping 92 percent of the total operating income earned by the world's top eight smartphone makers, Canaccord Genuity managing director Mike Walkley said, according to the Wall Street Journal. Representing earnings before interest and taxes, that number is up from the 65 percent in industry income that Apple snagged in the first quarter of 2014.

The latest number is even more striking since Apple accounts for only 20 percent of all smartphones sold around the globe. In second place was Samsung, which grabbed 15 percent of all industry operating profits in the first quarter. But wait, 92 percent plus 15 percent equals 107 percent. How can that be? Yes, the Apple and Samsung juggernaut actually captured more than 100 percent of overall industry profits, according to Canaccord, because other smartphone makers either broke even or lost money in the first quarter.

How does Apple manage to achieve such a large share of the profits when it sells only a small slice of the industry's smartphones? One reason: higher prices.

In 2014, the iPhone's average selling price around the world was $624, compared with just $185 for Android smartphones, the Journal said, citing data from research firm Strategy Analytics. And the huge demand for the big-screened iPhone 6 and iPhone 6 Plus pushed profits even higher. For its second fiscal quarter of 2015, ended March 28, Apple sold 43 percent more iPhones than it had a year earlier, and at a higher price -- during that period the average price for an iPhone climbed by more than $60 to $659, courtesy of the iPhone 6 lineup.

Another reason? Apple's product line is unique compared with those of Android vendors. Though it offers different models, Apple sells just one smartphone -- the iPhone. In contrast, Android phone makers sell a variety of phones from low-cost models to premium products. Putting aside the debate over which platform is "better" -- iOS or Android, Apple can command a higher price because its phone differentiates itself from the cavalcade of Android devices on the market.

Apple is also grabbing more profits at a time when rival smartphone players are straining to make more money. Samsung has seen both its sales and market share drop in the face of competition from Apple on the high end and Chinese vendors such as Xiaomi and Huawei on the low end. In June, the Korean phone maker said that it expects its seventh straight decline in profits in the second quarter.

Also in June, HTC revealed that its anticipates a downturn in second-quarter revenues as well as a net loss, following a string of four profitable quarters. Even Chinese smartphone vendors are feeling a pinch -- earlier this month, Xiaomi reported that it had sold 35 million smartphones in the first half of the year, likely missing its forecast to sell 100 million units by the end of the year.

Apple does now face the challenge of how to top last year's iPhone 6 lineup, which offered consumers big-screened iPhones for the first time ever. But at least one person believes the company will continue to dominate when it comes to its share of industry profits.

"The dominance of Apple is something that is very hard to overcome," Denny Strigl, former chief operating officer of Verizon Communications, told the Journal. "Apple has to stumble somehow or another, and I don't think that's going to happen."
 

JonFo

Well-Known Member
Jun 11, 2010
322
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Big Canoe, GA
www.jonathanfoulkes.com
This has been the 'Apple Way' for more than 15 years, their market share is small relative to the industry, but per-unit profit has always been tops. With the notable exception of the iPod line, they've never 'dominated' a segment, yet they take the majority of the profits.

Focused design and a tight ecosystem keep them in that position.

This total dominance in phone profits will likely translate into further leadership position in terms of advanced features that continue to allow them to command a premium. For instance, touch-ID is now a very reliable fingerprint scanner, and I'd never buy a phone/tablet without this feature. Yes, some androids have one as well, but they just don't work reliably .
 

amirm

Banned
Apr 2, 2010
15,813
37
0
Seattle, WA
Focused design and a tight ecosystem keep them in that position.
I think they enjoy more benefits than this, specifically in components. If you are an electronic supplier, nothing improves your resume more than saying so and so part is used in an iPhone. As a result, I am confident that many sell components to Apple at or below cost and then try to make it up by selling the same part at much higher profit elsewhere. And thereby making it harder for those companies to be as profitable.

It might seem that companies like Samsung which are "vertically integrated" have such an advantage and then some but in my experience, it is the other way around in these Asian companies. Each division is structured separately and one division does not cut is profits to help another. To wit, when I was working at Sony, we had the #1 share of CRT computer monitors in 1980s. We went to the monitor division and asked for pricing on color monitors. They said it was something like $4,000. We could buy them cheaper in the local store! We asked them how much they were selling them to their #1 customer and our competitor and they said $2,300!!! We asked why we could not get the same price. They said that large customer would get upset if they found out another entity got such a low price and they could risk losing them.

So it is entirely possible that when Samsung sources flash memory for their phones, their "internal transfer price" is higher than Apple buying the same from their flash memory division who is a dog fight with Toshiba and Intel/Micron to fund multi-billion dollar fabrication and R&D.
 

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