Published in Mobiles

Apple still makes most of the smartphone profit

by on24 November 2016

As if that is a good thing

The Tame Apple Press is running a story patting  its favourite toy maker on the back for making the most profits.

Beancounters at Strategy Analytics said that Apple has captured a record share of profits in the global smartphone industry in the third quarter.

Third-quarter smartphone operating profit reached $9 billion globally of which Apple took 91 percent of the share. This amounts to $8.19 billion for the US technology giant.

The information is being cited as proof that Apple is doing well despite the fact that its iPhone cash cow is getting rather long in the tooth and might be heading to the meatworks.

“Apple has the highest profit margins in the smartphone industry thanks to a loyal brand following and the ability to price its iPhones at a premium,” enthused one hack. Apple reported an operating income of $11.76 billion overall and its gross margin was 38 percent.

Linda Sui, director at Strategy Analytics, said in the report that Jobs’ Mob’s ability to maximize pricing and minimise production cost is hugely impressive and the iPhone continues to generate monster profits.

Its nearest rival in the “profitability” measure is China’s Huawei which has a 2.4 percent of global operating profit share in the smartphone market, accounting for $200 million.

Huawei's third-quarter smartphone shipments rose 63 percent year-on-year, official figures from the company showed in October. The Chinese technology giant is now the world's third-largest smartphone maker behind Samsung and Apple. It has been focusing on selling high-end devices to challenge its larger rivals and boost margins with the company aggressively expanding its marketing efforts.

Chinese start-up brands Vivo and OPPO are in third and fourth place, both capturing 2.2 percent of global smartphone profit each. Both firms have managed to grow rapidly through a strategy of selling low-cost but high-spec phones.

But the Strategy Analytics report fails to mention Samsung, which given the fact it is the number two is rather strange. It also focuses on a perception issue amongst analysts that making the most profit from a single unit is an indication of a company’s success as a product maker.

It is based on the fallacy that you can have your product in every home in the world, and be loved by all your users, but you will still be a “failure” if your company makes less mark up. Samsung cleans Apple’s clock as a smartphone maker with more phones sporting its brand than Apple could dream of. Its average mark-up might be less, but that does not hide the fact that it has 22.8 percent of the market compared to Apple’s 11.7 percent.

Last modified on 24 November 2016
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