How Apple Grabs Largest Pie In Smartphone Market
Apple may have captured around just 18 percent of the global smartphone market in the first quarter, according to research firm IDC. Yet according to investment bank Canaccord Genuity, Apple grabbed nearly all of the smartphone profits that quarter.
Apple accounted for 92 percent of the total operating income from the world’s top 10 smartphone makers in the first quarter, up from 65 percent a year earlier, according to estimates from Canaccord Genuity MD Mike Walkley. Samsung grabbed 15 percent of the operating profits, according to the data first reported by The Wall Street Journal.
Apple and Samsung account for more than 100 percent of industry profits because other OEMs either broke even or lost money, based on Canaccord’s calculations, where other handsets makers have either failed to make a profit or actively lost money.
The journal states there are about 1,000 companies that make smartphones, and Apple has topped them all. So how does Apple make all the money without selling most of the phones? The Wired reports that Apple owns the premium end of the smartphone market. Apple sells its phones for higher prices, yielding wider profit margins, and consumers are willing to pay. Other brands don’t enjoy the same good fortune.
This is true enough as Samsung tried selling its high-end Android models in answer to the iPhone alongside its more budget-friendly models. However the world’s leading smartphone maker by units shipped finds itself squeezed at the top by Apple and at the bottom by inexpensive Android rivals such as Xiaomi.
According to IDC, Samsung shipped 82.4 million handsets in the first quarter of 2015, compared to 61.2 million units sold by Apple. Yet last week, Samsung reported, it expected a 4 percent decline in operating profit compared to the same period a year ago. For the smartphone maker, it would be a seventh quarter of year-over-year declines.
While its competitors continue to suffer, Apple owes its increasing dominance in large part to its growing success in China. In April, the company revealed that it had sold more phones in China than in the US for the first time. It also reported a 71 percent year-over-year increase in revenue from iPhone sales in the country, surpassing homegrown Xiaomi in the quarter.
However a Fortune report notes, the Canaccord data is incomplete, since it only looks at the eight biggest smartphone makers. There are hundreds of manufacturers of Android devices, many of which post profits. Still, many Android OEMs or ODMs do not make a profit and often make phones with razor-thin profit margins.
Canaccord’s data does not include privately held companies including Xiaomi and India’s Micromax. Walkley told the WSJ those companies’ profits are unlikely to alter the industrywide profit picture.
Strategy Analytics analysts note that many Android vendors are caught between low-cost, high-volume brands, unlike Apple’s high-end smartphones, which it has continued to sell at high margins. They also expec even better days ahead for Apple as the company is reportedly planning to build a record-breaking number of its next-generation iPhones - between 85 and 90 million units - by the end of this year.
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