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CNET
Android device makers collectively may reign supreme in smartphone market share, but Apple is the one that takes home almost all of the profits.
In the first quarter of 2015, Apple scored a whopping 92 percent of the total operating income earned by the world’s top eight smartphone makers, Canaccord Genuity managing director Mike Walkley said, according to the Wall Street Journal. Representing earnings before interest and taxes, that number is up from the 65 percent in industry income that Apple snagged in the first quarter of 2014.
The latest number is even more striking since Apple accounts for only 20 percent of all smartphones sold around the globe. In second place was Samsung, which grabbed 15 percent of all industry operating profits in the first quarter. But wait, 92 percent plus 15 percent equals 107 percent. How can that be? Yes, the Apple and Samsung juggernaut actually captured more than 100 percent of overall industry profits, according to Canaccord, because other smartphone makers either broke even or lost money in the first quarter.
How does Apple manage to achieve such a large share of the profits when it sells only a small slice of the industry’s smartphones? One reason: higher prices.
In 2014, the iPhone’s average selling price around the world was $624, compared with just $185 for Android smartphones, the Journal said, citing data from research firm Strategy Analytics. And the huge demand for the big-screened iPhone 6 and iPhone 6 Plus pushed profits even higher. For its second fiscal quarter of 2015, ended March 28, Apple sold 43 percent more iPhones than it had a year earlier, and at a higher price — during that period the average price for an iPhone climbed by more than $60 to $659, courtesy of the iPhone 6 lineup.
Another reason? Apple’s product line is unique compared with those of Android vendors. Though it offers different models, Apple sells just one smartphone — the iPhone. In contrast, Android phone makers sell a variety of phones from low-cost models to premium products. Putting aside the debate over which platform is “better” — iOS or Android, Apple can command a higher price because its phone differentiates itself from the cavalcade of Android devices on the market.
Apple is also grabbing more profits at a time when rival smartphone players are straining to make more money. Samsung has seen both its sales and market share drop in the face of competition from Apple on the high end and Chinese vendors such as Xiaomi and Huawei on the low end. In June, the Korean phone maker said that it expects its seventh straight decline in profits in the second quarter.
Also in June, HTC revealed that its anticipates a downturn in second-quarter revenues as well as a net loss, following a string of four profitable quarters. Even Chinese smartphone vendors are feeling a pinch — earlier this month, Xiaomi reported that it had sold 35 million smartphones in the first half of the year, likely missing its forecast to sell 100 million units by the end of the year.
Apple does now face the challenge of how to top last year’s iPhone 6 lineup, which offered consumers big-screened iPhones for the first time ever. But at least one person believes the company will continue to dominate when it comes to its share of industry profits.
“The dominance of Apple is something that is very hard to overcome,” Denny Strigl, former chief operating officer of Verizon Communications, told the Journal. “Apple has to stumble somehow or another, and I don’t think that’s going to happen.”
