Apple's iPhone Commands 92% Of Smartphone Profits - InformationWeek

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7/13/2015
01:15 PM
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Apple's iPhone Commands 92% Of Smartphone Profits

Despite the dominance of the Android platform, Apple's iPhone still commands an overwhelming lead when it comes to smartphone profit share.

iPhone 6s And 7 Other Smartphones To Watch In 2015
iPhone 6s And 7 Other Smartphones To Watch In 2015
(Click image for larger view and slideshow.)

The world may be awash in smartphone manufacturers -- the total number of companies making them tops 1,000 -- but one company commands an overwhelming share of smartphone profits -- Apple, manufacturer of the iPhone.

According to a report from financial analyst firm Canaccord Genuity that was obtained by The Wall Street Journal, the consumer electronics giant reaped an astounding 92% of smartphone profits, despite holding just 20% of the worldwide marketshare for the devices.

Apple's archrival Samsung, which sells smartphones running Google's open source Android operating system, boasts 15% of smartphone profits, which means the two companies hold more than 100% of the overall marketshare, which is possible due to the number of smartphone makers just breaking even or losing money, the Canaccord report noted.

Apple is able to command such a disproportionate share of smartphone profits due to the premium pricing structure for its iPhones, which are far more expensive than most Android-based devices.

(Image: Ellica_S/iStockphoto)

(Image: Ellica_S/iStockphoto)

The report also notes that because of Apple's premium status in the market, and the uniformity and anonymity of Android-based devices, major manufacturers like Motorola, HTC, and Samsung have to compete on price, which drives down the overall sale point for Android smartphones.

The report follows a February study from Strategy Analytics, which found that global smartphone operating profit reached $21 billion in the fourth quarter of 2014.

At that time, the Android operating system captured a record-low 11% global smartphone profit share during the quarter, while Apple took a then record-high 89% profit share.

The Canaccord report indicates that Apple is pulling even further ahead of its rivals, even though the company is the purveyor of the minority smartphone platform.

"Apple iOS continues to tighten its grip on the smartphone industry. Apple's strategy of premium products and lean logistics is proving hugely profitable," Neil Mawston, executive director at Strategy Analytics, noted in a press statement in February. "Android's weak profitability for its hardware partners will worry Google."

Mawston noted that if major smartphone manufacturers cannot make decent profits from the Android ecosystem, in the future they could be tempted to look at alternative platforms such as Tizen or Firefox.

[Read about the new features of iOS 9.]

In anticipation of demand for the company's latest iteration of the iPhone, which is rumored to hit the market later this year, Apple is asking its manufacturing partners to make 85 million to 90 million of the devices by the end of the year -- a new record.

Apple typically releases a major upgrade to the iPhone every two years, with a model offering minor upgrades, signified by the "s" moniker, every year.

This year's iPhone 6s model is rumored to feature Apple's Force Touch technology, which would make Apple's smartphones better able to respond to user input. It could open up a new dynamic for interacting with smartphones.

However, leaked photos of the casing that surfaced earlier this month suggest the changes to the latest iPhone will be minimal, dashing hopes of improvements to the device's camera.

Nathan Eddy is a freelance writer for InformationWeek. He has written for Popular Mechanics, Sales & Marketing Management Magazine, FierceMarkets, and CRN, among others. In 2012 he made his first documentary film, The Absent Column. He currently lives in Berlin. View Full Bio

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kstaron
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kstaron,
User Rank: Ninja
7/28/2015 | 12:09:31 PM
kool-aid
I'm not sure what's in the kool-aid over at Apple. I sometimes think they could market gravel rocks and as long as it had the Apple logo, people would buy it for hundreds of dollars. THe marketing side of me is impressed, the consumer side of me is outraged.
Whoopty
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Whoopty,
User Rank: Ninja
7/14/2015 | 6:54:45 AM
Re: Phone wars ---consumers are losing
Indeed. This should be a strong indicator that iPhone users are being ripped off with their purchases and should demand lower pricing when other companies are making much more cost effective cut backs to try and remain competitive. The fact that Apple is somehow immune to that shows how good its marketing is. 
impactnow
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impactnow,
User Rank: Author
7/13/2015 | 4:05:30 PM
Phone wars ---consumers are losing

 

It does demonstrate their firs mover advantage however I still have a droid phone and just upgraded to droid when offered an iPhone the cost is still significant in the decision making process. I actually got a phone that is not Apple or Samsung and I am very happy with it. It will be interesting to see how long the economy can sustain phones that in many cases cost more than a laptop.

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