Apple captures 79 percent of global smartphone profits with 14.5 percent market share

[Midpack]

We have iPhones (not Google fans), but not sure what to think...

According to Flickr the iPhone is the most popular camera(s) in the world and even 10 years after the original model was launched, iPhone continues to generate enormous profits for Apple. According to research from Strategy Analytics, that was obtained by The Korea Herald, in 2016 the iPhone captured 79 percent of profits in the global smartphone market, at a market share of only 14.5 percent. In absolute numbers that is $44.9 billion out of a $53.7 billion total profit.

Apple's biggest rival Samsung leads the market share ranking in front of Apple at 20.7 percent but only grabs 14.6 percent of the profit, amounting to $8.3 billion. This is a similar picture to previous years when, thanks to very high margins, Apple was able to claim a much bigger proportion of smartphone profits than its market share would suggest.

Lots of links...

Hard to believe Samsung isn't the low cost producer with as much manufacturing experience as they have, but obviously they are not even close.

And there are multiple rumors that the next iPhone update will include models similar to the 7 & 7 Plus, and a third (10th anniversary edition?) with mo' better everything - at $1,000! Yipes!

 

[ERD50]

Hard to believe Samsung isn't the low cost producer with as much manufacturing experience as they have, but obviously they are not even close.

What in what you quoted makes you think that low cost production has anything to do with it, or that it is obvious?

The way I see it, from what you posted, Apple has much higher profit margin on much lower sales. That could be mostly, or entirely due to being able to attract a higher price for their products, right? Even if Apple's production costs were higher. Many factors go into "profits".

I recall something similar in Apple's dark days of computing. Even though they had slim market share, they supposedly had a very high % of the industry profits. Everyone else was competing on price, with very slim margins, and Apple had a loyal following who were willing to pay a premium.

-ERD50

 

[6miths]

Yes I assumed that it was the premium that people are willing to pay for Apple products that was the cause of the differences rather than cost of production.

 

[Midpack]

What in what you quoted makes you think that low cost production has anything to do with it, or that it is obvious?

The way I see it, from what you posted, Apple has much higher profit margin on much lower sales. That could be mostly, or entirely due to being able to attract a higher price for their products, right? Even if Apple's production costs were higher. Many factors go into "profits".

I recall something similar in Apple's dark days of computing. Even though they had slim market share, they supposedly had a very high % of the industry profits. Everyone else was competing on price, with very slim margins, and Apple had a loyal following who were willing to pay a premium.

• We're only talking about their smartphone segments.
• Apple and Samsung's flagship phones are comparably priced, and have been for years. Both sell lower cost/margin phones, Samsung has a bigger chunk of the low end (obviously)

Need more?

	Market Share	Profits %	Profits $B
Apple	14.5%	79%	$44.90
Samsung	20.7%	14.6%	$8.30
All Others	64.8%	6.4%	$3.64
Total			$56.84*

*doesn't quite match article?

 

[ERD50]

• We're only talking about their smartphone segments.
• Apple and Samsung's flagship phones are comparably priced, and have been for years. Both sell lower cost/margin phones, Samsung has a bigger chunk of the low end (obviously)

Need more?
...

In order to make sense of this, YES, we need more.

Like, what was the average price of a Samsung smartphone reflected in that list, versus the average price of an Apple smartphone?

As you say, Samsung has a bigger chunk of the low end. That's a very big factor. I wouldn't be surprised to see a 10:1 delta in profit $ on the high end phone segment versus the lower end segment.

-ERD50

 

[MooreBonds]

• We're only talking about their smartphone segments.
• Apple and Samsung's flagship phones are comparably priced, and have been for years. Both sell lower cost/margin phones, Samsung has a bigger chunk of the low end (obviously)

Need more?

	Market Share	Profits %	Profits $B
Apple	14.5%	79%	$44.90
Samsung	20.7%	14.6%	$8.30
All Others	64.8%	6.4%	$3.64
Total			$56.84*

*doesn't quite match article?

One other question: is that market share as % of revenue, or as % of # of units sold? Big difference...Also, are they comparing apples/oranges on profits? Is that purely revenue minus COGS? Any allocation for design/R&D/depreciation for manufacturing? If Samsung publishes $8.3B in profits but that has costs factored in for manufacturing equipment depreciation/R&D, but if Apples subs it out and has a strict $/unit profit, it's naturally going to be higher as well.

 

[6miths]

Samsung and Apple's top of the line phones may have similar retail prices but it has been my experience that it nearly impossible to get a significant discount on an iPhone while deeply discounted prices are usually very quickly available on new Samsung products. Could be a misconception on my part. Are production costs and device margins available?

 

[jimbee]

• We're only talking about their smartphone segments.
• Apple and Samsung's flagship phones are comparably priced, and have been for years. Both sell lower cost/margin phones, Samsung has a bigger chunk of the low end (obviously)

Need more?

	Market Share	Profits %	Profits $B
Apple	14.5%	79%	$44.90
Samsung	20.7%	14.6%	$8.30
All Others	64.8%	6.4%	$3.64
Total			$56.84*

*doesn't quite match article?

Flagship phones are comparably priced, but Samsung also makes cheap phones, Apple does not.

 

[Midpack]

In order to make sense of this, YES, we need more.

Like, what was the average price of a Samsung smartphone reflected in that list, versus the average price of an Apple smartphone?

As you say, Samsung has a bigger chunk of the low end. That's a very big factor. I wouldn't be surprised to see a 10:1 delta in profit $ on the high end phone segment versus the lower end segment.

-ERD50

Do you feel better now?

 

[Midpack]

This is NOT the article I read first, but it answers some questions, and one factor I didn't remember/consider - Samsung is still reeling from the global recall of the Galaxy Note 7 smartphone, which was discontinued in October last year over safety concerns. That had to cost them dearly.

Re: low cost producer. I would have guessed Samsung would have a huge production cost advantage with all their manufacturing experience/resources. Apple clearly chose a very competitive sub/toll producer (Foxconn IIRC).

Apple captures 79% of global smartphone profits last year

I'm amazed at how profitable Apple is, guess some aren't...

 

[ERD50]

Do you feel better now?

 

[Midpack]

Flagship phones are comparably priced, but Samsung also makes cheap phones, Apple does not.

I noted Samsung has lower end phones. In addition to the 7 & 7 Plus, Apple still offers the 6S and SE today.

 

[ERD50]

I noted Samsung has lower end phones. In addition to the 7 & 7 Plus, Apple still offers the 6S and SE today.

Yes, you did note it. But what I think, ummm, everyone is saying is, that without a lot more info, like the product mix of each company, it can't really be determined if the profit difference is due to being the low cost producer. Let alone it being obvious.

I'm amazed at how profitable Apple is, guess some aren't...

No, not particularly amazed. As I said, this was seen in their computer business as well. Though it is impressive, very impressive.

-ERD50

 

[audreyh1]

I just think it goes to show that you don't have to go to teeny margins to be a profitable company. There is much more to business than squeezing margins.

No, I'm not amazed at how profitable Apple is, although I do continue to be impressed. They have created an amazing infrastructure which attracts customers and keep them loyal, and they don't undercut themselves by trying to max out marketshare and minimize margins. They've done this since the beginning. It's their modus operandi. Some people won't buy their products on principle because they don't sell them for as cheap as possible. But that's their choice as a company, and they've shown again and again that can work if you produce quality products.

 

[Midpack]

Yes, you did note it. But what I think, ummm, everyone is saying is, that without a lot more info, like the product mix of each company, it can't really be determined if the profit difference is due to being the low cost producer. Let alone it being obvious.

Everyone? I restated what I meant in post you quoted, but I guess you chose to leave that out. Again:

Re: low cost producer. I would have guessed Samsung would have a huge production cost advantage with all their manufacturing experience/resources. Apple clearly chose a very competitive sub/toll producer (Foxconn IIRC).

440% more $ profits on significantly lower market share (revenue or units?) is amazing to me.

 

[audreyh1]

I think for a long while Samsung was losing money on their phone business. So it's probably just as much a reflection of Samsung's business model as it is Apple's.

 

[jimbee]

I noted Samsung has lower end phones. In addition to the 7 & 7 Plus, Apple still offers the 6S and SE today.

The 6S and SE are not cheap phones.

 

[jimbee]

Everyone? I restated what I meant in post you quoted, but I guess you chose to leave that out. Again:
440% more $ profits on significantly lower market share (revenue or units?) is amazing to me.

Apple made high profits with lower market share with their personal computers too, most of the time.

 

[ERD50]

...
440% more $ profits on significantly lower market share (revenue or units?) is amazing to me.

You've never seen a financial report where a company with significant market share has had losses for the year? That means that any of their competitors who managed to squeak out a profit, any profit, even a single $1.00, have infinitely more profit. 440% is a 'pffffft!' compared to 'infinity and beyond!'.

As I said in the first reply, it takes more numbers and analysis to really understand what it means. But then again, sometimes amazement comes from a lack of understanding.

-ERD50

 

[Midpack]

You've never seen a financial report where a company with significant market share has had losses for the year? That means that any of their competitors who managed to squeak out a profit, any profit, even a single $1.00, have infinitely more profit. 440% is a 'pffffft!' compared to 'infinity and beyond!'.

As I said in the first reply, it takes more numbers and analysis to really understand what it means. But then again, sometimes amazement comes from a lack of understanding.

-ERD50

From post #1, Samsung had smartphone profits of $8.3B if that's squeaking out a profit. You're right, I'm amazed...

I am assuming Samsung sells about as many of their flagship phones as Apple and profits on the latest Apple and Samsung flagship phones would be roughly comparable. But maybe that's a bad assumption, I can't find those stats. And again, it's inconceivable to me that Apple would have lower production costs than Samsung on flagship phones. So Samsung would have to be losing a lot on their cheaper phones to net such a big difference in profits, and/or exploding battery costs. But I'll stop digging...

 

[ERD50]

From post #1, Samsung had smartphone profits of $8.3B if that's squeaking out a profit. You're right, I'm amazed...

I was giving an example of how those numbers can work. I never said that $8.3B was squeaking out a profit.

I am assuming Samsung sells about as many of their flagship phones as Apple and profits on the latest Apple and Samsung flagship phones would be roughly comparable. But maybe that's a bad assumption, I can't find those stats. And again, it's inconceivable to me that Apple would have lower production costs than Samsung on flagship phones. So Samsung would have to be losing a lot on their cheaper phones to net such a big difference in profits, and/or exploding battery costs. But I'll stop digging...

You are making several assumptions there. That was my original, and follow up, point.

-ERD50

 

[Midpack]

I was giving an example of how those numbers can work. I never said that $8.3B was squeaking out a profit. You are making several assumptions there. That was my original, and follow up, point.

-ERD50

Feel better?

 

[Totoro]

I am assuming Samsung sells about as many of their flagship phones as Apple and profits on the latest Apple and Samsung flagship phones would be roughly comparable. But maybe that's a bad assumption, I can't find those stats. And again, it's inconceivable to me that Apple would have lower production costs than Samsung on flagship phones. So Samsung would have to be losing a lot on their cheaper phones to net such a big difference in profits, and/or exploding battery costs. But I'll stop digging...

What used to be true a few years back, not sure about now:

• Apple has fewer models, makes stuff cheaper
• They locked up the cheap sources of certain components years ahead, so others have a structural disadvantage
• No discount programs
• Higher retail prices, $70 - $100
• Lots of insane margins on accessories
• Own app store (Android is google play) - is that counted?
• Apple product mix is more expensive. Samsung has really cheap low-end models.

.. and obviously the Samsung recall doesn't help.


You mention roughly same prices. Keep in mind that a $75 higher price on a $500 device isn't 15% more profit, but actually something like double the profit.



Last but not least: Samsung and Apple together 35.2% marketshare by volume, and 93.6% by value. This basically means that everyone else is making a loss, and only Samsung can compete. 200 million IPhones sold in 2016 implies ~$225 USD profit (!) per IPhone sold.


To continue that thought: If Apple indeed makes $225 USD profit, Samsung will make about 1/6th of that to make the numbers square roughly. That's about $40. Margin difference is $225 - $40 = $185. Sounds about right considering the above factors.

 

[Midpack]

What used to be true a few years back, not sure about now:

• Apple has fewer models, makes stuff cheaper
• They locked up the cheap sources of certain components years ahead, so others have a structural disadvantage
• No discount programs
• Higher retail prices, $70 - $100
• Lots of insane margins on accessories
• Own app store (Android is google play) - is that counted?
• Apple product mix is more expensive. Samsung has really cheap low-end models.

.. and obviously the Samsung recall doesn't help.


You mention roughly same prices. Keep in mind that a $75 higher price on a $500 device isn't 15% more profit, but actually something like double the profit.



Last but not least: Samsung and Apple together 35.2% marketshare by volume, and 93.6% by value. This basically means that everyone else is making a loss, and only Samsung can compete. 200 million IPhones sold in 2016 implies ~$225 USD profit (!) per IPhone sold.


To continue that thought: If Apple indeed makes $225 USD profit, Samsung will make about 1/6th of that to make the numbers square roughly. That's about $40. Margin difference is $225 - $40 = $185. Sounds about right consider the above factors.

Thanks, I appreciate the specific insights.

 

[Koolau]

I still have one more question. What is a smartphone? My phone cost $15. That sounded pretty smart to me, but I may have missed something. It "talks" and texts (sort of - if you are very patient and your thumbs still work - big assumption at my age.) That's all I need. Naturally, YMMV.