Android may have the market share, but it’s an entirely different story when it comes to profit share: the latest estimates from Canaccord Genuity indicate that Apple takes 92% of the profits for the entire smartphone industry despite accounting for only 20% of sales.
Or, as the WSJ puts it:
Roughly 1,000 companies make smartphones. Just one reaps nearly all the profits.
Samsung took a further 15% of the profits – and if you were wondering how that rather odd math works, it’s because most of the other players make a loss, so the two companies make more profit between them than the smartphone industry as whole …
Canaccord CEO Mike Walkley said that at the time Apple first entered the smartphone market in 2007, Nokia was taking around two-thirds of the profits (a far cry from today). By 2012, the profit split was around 50:50 between Apple and Samsung. Since then, he said, the “high-end tier has really shifted away from Samsung to Apple.”
Apple’s share of smartphone profits is up from 65% a year ago, though very slightly down on its 93% share in the holiday season. It has been reported that Apple plans to produce a record number of iPhone 6S handsets this year, aiming to top 90M units by the end of the year.
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Competitors still don’t get it. But Apple’s winning formula is simple.
1. Laser Focus on One single Smartphone–> The iPhone.
2. Tight Integration of Hardware and Software.
3. Common Sense. Like No BS 4K Display, etc
Yeah! Bs like a larger screen, or NFC antenna! Theres no future in those!
I think the point is, there was no point introducing those things before they could be used. There was no point in introducing Apple Pay before all the back end infrastructure was set up, or large screens when the display quality wasn’t there for a great experience. Apple’s skill isn’t necessarily in introducing technology first (in fast they rarely do) it’s introducing it at the right time, when it will have the biggest impact.
8-core smart phones with 3 or 4GB of RAM is just absurd, when the software and apps are so crap, they can’t make the most of it.
They implement it when they’re ready and when they’ve nearly perfected it.
But I’m answering a drive-by shitpost. Slow day.
There is a future in it but make sure that you don’t just bolt it on as a gimmick. Like the 3D screens (burned the batteries!), or pause when looking away from the screen. Currently there is an ad for the Samsung 6 Edge. If you go into the store looking for those features you need to make sure you remember that it is the Edge and not the Galaxy 6 or the Galaxy 6 Active. And all that matters to the employee at the store is to get you out of the store with the phone that provides them with the highest return.
One other item I forget is that by introducing NFC ASAP Android had a flaw that allowed root level access to the hacker just by sitting next to someone.
Isn’t Retina Apple’s marketing name for 4k?
No. Retina is Apple’s marketing name for a display resolution high enough that the human eye cannot distinguish individual pixels at an ordinary viewing distance.
iPhone 6 – 1334×750 or just higher than 720p HD, definitely NOT 4K
iPhone 6 Plus – 1920×1080 or exactly 1080p HD, also NOT 4K
Even the iPad isn’t a 4K display because, at ordinary viewing distances, there’s no point in having that level of pixel density. It just burns up battery and adds cost to the screen. 4K on a small screen is a marketing gimmick, nothing more.
Some people create their own storms then get upset when it rains. And brother it is pouring in Android Land.
Insane. Makes you question the sustainability of Apple’s position, as competition is catching up for much lower prices, Apple’s brand and ecosystem is the only thing keeping the iPhone so strong at this point.
Makes no sense to compete on price as all you do is cheapen your brand, Samsung will never be high end as they also flood the market with cheap stuff. BMW, Rolls Royce, Burberry and the like will all tell you to preserve the brand you keep it exclusive. So I think Apple is very well aware that price competition alone just accelerates a race to the bottom, and the article clearly states everyone else making phones is doing so at a loss. Business doesnt last long at a loss.
Apple needs to become more open as in flexible, is no longer 2001. That is the only reason I still have Android Devices besides better prices.
Android needs more focus on quality rather than quantity and also manage complexity. Latest Android OS still has Latency Issues and Carriers Overlords still Control what is on your Phone.
Microsoft is coming back, but is taking too long.
Steve Jobs era had more common sense than Tim’s. (iPhone vs Watch)
Not sure if iPhone prices will be sustainable long term.
So, if I have this correct, you just read that Apple is making more money on smartphones that ALL of the other manufacturers combined and your first thought is to give Apple advice on how they should do it differently?
By the way, Steve has been gone for almost 4 years and the only thing Tim has to show for it is a company with double the value. I sure hope he knows what he’s doing…
Android is a very bad OS. I wanted to make a funny photo of me the other day on my friend’s Android phone when he wasn’t paying attention and set it as wallpaper. Then I did it on 2 other Android phones. EACH WAS DIFFERENT!! That is so bad! How can you work with that? It took me ages to figure it out on each of them and believe me, I know how to take a photo and set is as a wallpaper since I did it on Android before as well. Even my dead, who by the way is not into smartphones what so ever, told me that iOS is much easier to understand and use. I told him, yes, it is because it’s meant to be used with no nerves and it works every time you need it. The worst comment sound like ‘I can change whatever I want on my Android and you can not do that on your iOS’. What? No, that’s not true at all. There’s been (and is) many features iOS has built-in and Android needs extension, headache and lost time to get them.
Then there’s your Microsoft stuff. No, they don’t know what are they doing. Can’t you see that?
Microsoft is dropping the phone business – they just took a bigger write down than what they paid for Nokia.
Apple doesn’t want to erode their own profit margins to get more sales. They have a cap on production levels and by the time their sales flatten, they get ready to release the next yearly refresh. They also don’t go after the low end market. Apple has to appease the investment community and they expect 20%+ Net Profits to Gross Sales, otherwise Cook & Co. would be looking for a new job. Apple doesn’t mind the position they are in, they have good sales that’s increasing at a comfortable rate and they are still trying to get more production capabilities. Will Apple lower prices? I’m sure that might eventually happen, but it’s not going to be huge price drops. I can see maybe lower the MSRP by $100, but that might not happen for a few more years, but they would have to have a much increased unit sales to offset the price drop.
The problem is that the Android mfg simply have to compete on price because they are going after market share first and profits second and that’s what si going to eventually destroy their own company just like it did when IBM and Compaq couldn’t retain decent profits by selling PCs.
89p13 have you somehow missed all the Windows Phone 10 stuff? Microsoft are going to be pushing Windows Phone more than ever this year. What on earth gave you that idea?
@LukeGreene @PixelburstHD I think @89p13 is referring to this article? http://9to5mac.com/2015/07/08/microsoft-job-cuts-write-off/
Steve Jobs has been dead a long time and he’s never coming back. At least I don’t think he is. I’m afraid choices are going to have to be made without his input unless he left some sort of a long-term plan to be followed. Maybe Steve Jobs left behind a computer program that future Apple CEO’s can input data and it puts out possible solutions to keep the company profitable.
Is iPhone pricing sustainable long-term? How many years is long-term? Are we talking 2 years or 20 years? Only time can answer that question.
There will always be a need for cheaper products that Android and provide because there are plenty of poor people in this world who can’t afford better things. There are still poor people who strive for better things and don’t settle for less. As many iPhones that are being sold in China there must be plenty of people who give up other things to afford Apple products. All the analysts said Apple would never sell a lot of iPhones in China because people can’t afford them, but Apple seems to be doing very well, indeed, by selling a lot of iPhones to those who can afford them.
@macnificentseven48 Well we are 8 years in and they seems to be doing fine. In fact, the 3rd world markets are doing well with the older units which is way you can sell them for a higher percentage than other electronic equipment (DSLR, TVs, Computers, etc…)
“as competition is catching up for much lower prices”
Competition is catching up to last years’s iPhone at the same price, 2 years old iPhone, at much lower prices…
Apple can certainly afford to stay ahead of iPhone competition if it really wants to. What components can’t Apple afford to put in its iPhones to stay ahead of the competition? I think Apple’s closest competition would be Samsung and if Samsung is struggling to keep up with high-end smartphone sales, then other companies must really be out of the running. Samsung at least has a lot of other divisions to keep them flush with cash, but there are other smartphone-making companies that don’t have that luxury. How can lesser companies keep taking losses, quarter after quarter and not be harmed by that?
If Apple is really taking 92% of the profits, then the remaining 8% of the profits has to be shared among dozens of other Android smartphone manufacturers. That’s just slivers and crumbs left on the pie plate. I’m hoping at some point, Apple takes 95% of the profits and that should be enough for Android smartphone companies to give up and start doing something else to make money.
So, if Apple is taking 92% of the profits, how is it that Apple can justify the Samsung award it received? It would appear Samsung was correct to contest the award amount.
What does one have to do with the other?
Someone confused?
A judgement is based on losses incurred. According to this article Samsung profits were grouped in the 20% and Apple was 92%. Do the math – I don’t see where Apple lost much.
9to5 commentors be like “Slice Analytics Apple Watch numbers are bogus, who can trust them!” and then like “Canaccord Genuity nailed those profit numbers”…..for the record I trust both
Slice doesn’t count most of Europe and Asia. That is Europe, which has a bigger watch market than the US, and China. Those are really big markets that they aren’t counting. Not to mention that Slice didn’t/doesn’t count first-day sales. That is, first day of preorders. On top of which, even if you believe the 90% slowdown, the Watch has outsold every other competitor /combined/ by a huge margin.
I have said 1000 times “out selling failures doesn’t make you a success”, especially when tens if not hundreds of millions of dollars when into your R&D.
Apple will have the advantage for a long time to come, simply because they control the hardware and software for their devices. While the competition may make their device, but depend on a third party for the software. Software that has to be compatible with hardware from many different manufacturers.
So when Apple want’s to launch a new feature/function, all they have to consider is their own hardware, while the software provider for the competition must consider the wants/needs and compatibility with devices from various other manufacturers.
This is also why the Mac is a better overall personal computer than a Windows base PC. And once a consumer goes Mac, they don’t go back to Windows.
Then there is device quality. Aluminum and glass. This makes me wonder with the 5 not having the ability for Apple Pay, and the upcoming 6S and 6S Plus coming, would the plastic backed 5C iPhone be discontinued. Keeping it would give Apple 6 phones to produce. My expectation is that the 5C will be dropped and maintain the aluminum and glass 5S(price dropping to $99 from $199) and discontinue that phone next year. By then we will have a 7($199), 7 Plus($299), 6S($99) and 6S Plus($199)….all with the compatibility with Apple Pay.
Can somebody explain the fuzzy math here? I can’t figure how 92 +15 = 100. Saying that other companies operating at a loss doesn’t explain it.
92+15+(-7) = 100
Yep, it’s a slightly strange way of presenting the data, but that’s how they always do it.
The biggest problem is that Wall Street is believes market share is the most important metric. Apple’s valuation will remain low as long as they’re market share stays low. Both Microsoft and Google have high market share and their P/Es are much higher than Apple’s P/E. Wall Street still believes Android is a much better platform than iOS because it has such high market share. Apple iOS may be making the money but it’s Android that gets all of Wall Street’s respect. Profit share simply doesn’t count for very much as far as Wall Street is concerned. That’s something that only matters to Apple and all us Apple shareholders will have to be satisfied with that.
Apple is a shining example of corporate greed. This article paints a picture of a company that over charges its own customers for a device that is little different from others. This also paints a picture of how ridiculous America has become as everyone seems to care about possessions and money more than each other. As for those of you that can’t figure out how 92%+15%=100%, then go re-read the article, it explains that other manufactures are at a loss, therefore Apple and Samsung take that portion from them and its the extra 7%.
Apple spends a lot of money on it’s own operating system which is the biggest difference between the devices. Then you have the added services via iTunes, App Store and iCloud. My OS is updated as soon as I want to regardless of the carrier. Sure I can root the Android device to do that as well but that is just another step that the majority of users (These are the ones just going in and buying any smartphone, the ones that are really up’ing Android’s market share) will not do. Also 2 to 3 years from now when I am ready to upgrade I will get more for my iPhone than any 2 or 3 year old Samsung device.
“It’s impressive however you slice it.” Oh, I don’t know. I’m sure there’s some people on MacRumours who will break it down in a way which spells doom and gloom for Apple.