Apple Earns 94% of Smartphone Industry Profit

Apple had approximately 14 percent of the worldwide smartphone market in terms of unit sales in the third quarter of 2015, yet the company took home an astounding 94 percent of the smartphone industry profits. Most of the other smartphone makers are either making very little money or are losing money.  According to Business Insider, Samsung is taking home 11 percent of the profit. (The reason that adds up to over 100 percent is because of the companies that are losing money on their phones.)

The graph below, from CMLViz.com, gives you a good feeling for the numbers. The green bar on the left represents Apple's profits compared to the rest of the industry. The green bar at right represents Apple's unit sales relative to other manufacturers. 

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What accounts for Apple's ability to be so profitable? Other manufacturers compete on price, and end up with thin margins. And, as the article notes, some phone makers in China are even deliberately losing money on their phones in order to garner market share. Apple, of course, doesn't mind selling pricier phones because consumers are happy to pay the higher price in order to get better quality. The average selling price of the iPhone in the third quarter was $670 while the average selling price of a Samsung phone was $180.

In addition, Apple is able to keep manufacturing costs low because of its huge volume and the deals it negotiates with suppliers. The result is a healthy profit margin.

While some market analysts feel that Apple's heady days of huge profits will inevitably come to an end, CEO Tim Cook begs to differ. He expects the iPhone to do even better in the current quarter. He cites the unmet demand for the new iPhone 6s at the end of the third quarter, indicating there would still be a lot of momentum for the new model going into the Christmas quarter. Plus, he noted that 30 percent of those purchasing an iPhone in the most recent quarter were switching from Android, and he expects to see a lot more switchers. Also, he expects that a significant percentage of people who are currently using an iPhone will upgrade to the iPhone 6s.

Okay, so Apple is doing well and will likely continue to rake in cash. What does that mean for you? Fortunately, the company continues to use its profit to develop new products and services, most recently the Apple Watch and the new Apple TV. And now there's a lot of evidence that Apple is developing a car. I'm happy to see Apple making money if it means a steady stream of new products that people love.

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Author Details

Jim Karpen's picture

Author Details

Jim Karpen

Jim Karpen holds a Ph.D. in literature and writing, and has a love of gizmos. His doctoral dissertation focused on the revolutionary consequences of digital technologies and anticipated some of the developments taking place in the industry today. Jim has been writing about the Internet and technology since 1994 and has been using Apple's visionary products for decades.