A delayed launch of Apple’s iPhone, which had been pushed back from the usual summer time frame to mid-October, affected slightly Apple’s earnings, but the effects were felt in the entire smartphone industry which experienced a lower-than-expected growth in the third quarter, research firm IDC reported yesterday. Vendors shipped 118.1 million smartphones during the September quarter, a 42.6 percent growth from the  82.8 million units a year ago. However, IDC’s forecast for the quarter was 49.1 percent and they attribute the difference to the iPhone launch delay:

Smartphone growth came in lower than expected due to the delayed launch of the updated Apple iPhone. In previous years, the introduction of a new iPhone resulted in a spike in shipment volumes during the third quarter. Western Europe and the United States, two key regions for the iPhone launch each year, still posted sizable year-over-year gains, but lower than anticipated.

“Broad and deep product portfolio” and “a welcome reception” of Bada-branded smartphones helped Samsung overtake Apple as the world’s leading smartphone maker in the third quarter, IDC said. But i’s bound to be a short-lived victory as “Apple’s fourth quarter launch of the iPhone 4S and lower pricing of older models will certainly boost volumes”, the research firm explained. But it’s when you drill Apple’s biz deeper when it really starts to come together. Read on…

Meanwhile, AllThingsD, a part of the Wall Street Journal network, noted that Apple with just 4.2 percent of the global handset market gulped up 52 percent of the handset industry’s operating profits last quarter, an annual increase by five percentage points. Go past the fold for a chart of quarterly operating profit value share by vendors.

Really, it’s incredible to think Apple has relied on the iPhone 4 for five quarters and the iPhone 3G S for nine quarter in such a fast-paced industry where phones couple months old are considered outdated. Apple is obviously a glaring exemption to this rule. Its phone line is streamlined, ranging from the free iPhone 3GS to the $99 iPhone 4 to the various subsidized models and all the way up to the $849 unlocked 64GB iPhone 4S.

Sterne Agee analyst Shawn Wu told Bloomberg today that the iPhone 3GS could account for up to one-fifth, or 20 percent, of iPhone sales this quarter. Of course, the phone is sold free (with a contract) to customers because carriers pay subsidies to Apple, recovering the upfront payment through lengthy service contracts.

And because Apple builds the 3GS using older, cheaper components, their profit margin on the more than two-year old iPhone 3GS is on par with the pricier iPhone 4S. Both the 3GS and 4S carry a margin of 56.1 percent (55 percent for the iPhone 4), Bloomberg claims. All told, the older the iPhone, the better the margin. Couple the profit margins that are the envy of the industry with the compelling product mix and Apple’s knack for supply chain efficiency (lasers, man) and you have a winner…


Source: IDC Worldwide Quarterly Mobile Phone Tracker, November 3, 2011

Bloomberg Industries analysts Jitendra Waral and Anand Srinivasan, carriers pay Apple about $381 per-phone subsidy.

While that’s well below the $620 it receives for the iPhone 4S, Apple spends much less to build an iPhone 3GS because of its older components. The analysts estimate that the camera in the 3GS costs $4, versus $19 for the 4S. And it has just $4 of RAM memory, compared with $25 in the 4S.

Sprint CEO Dan Hesse recently portrayed Apple’s iPhone as being “worth every penny”, even if carriers pay about $200 higher per-device subsidy on iPhones than the industry average. In fact, Apple’s iPhone is such a big cash drain for Sprint that the carrier is “going to have to go to the markets and borrow money” in order to recover from the reported $20 billion investment to buy 30.5 million iPhones from Apple.

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