Total dominance: Apple iPhone takes 104% of smartphone industry profits

“BMO Capital Markets analyst Tim Long estimates that Apple accounted for 103.6% of smartphone industry operating profits in the third quarter,” Patrick Seitz reports for Investor’s Business Daily.

“Its share is over 100% because other vendors lost money in the business, resulting in Apple having more smartphone profit than the industry netted overall,” Seitz reports. “In the year-earlier period, Apple grabbed 90% of smartphone profits, Long said in a research report Thursday.”

“Apple was No. 1 by a mile in smartphone operating profit in Q3. Among major vendors, Samsung was No. 2 in smartphone profits with a tiny 0.9% share, he said,” Seitz reports. “Money-losers in the smartphone business last quarter included LG and HTC, Long said

iPhone 7 Plus
Apple’s flagship iPhone 7 Plus in Jet Black, the world’s most advanced pocket computer

 
Seitz reports, “Samsung had 21.7% of the smartphone market based on units sold in Q3, followed by Apple (13.2%) and Huawei (9.7%), BMO said.”

Read more in the full article here.

MacDailyNews Take: Total dominance.

This reminds us of a little story we first told years ago:

Little Mikey had a lemonade stand. Okay, it was a kiosk. He sold 100 (8 oz.) cups yesterday for 10-cents each. He spent 11-cents per cup for artificial lemon flavoring, corn syrup, and the paper cups. He used tap water because it was free. Threw it all together in a big plastic pail. He’s out a buck for all of his trouble. Boy, that was a lot of work for less than nothing!

Around the block, little Steve runs a lemonade stand, too. It’s all blonde wood and very clean. He sold 50 (24 oz.) glasses yesterday for 50-cents each. He spent 20-cents per glass on fresh-squeezed lemons, pure cane sugar, spring water (mixed with the utmost care), and some very nice glassware (he buys in bulk and gets a good price). He took home $15 yesterday. He’s currently building his newest stand right where Mikey’s used to be.MacDailyNews, April 23, 2009

SEE ALSO:
Apple’s iPhone can soon reap 100 percent of world’s smartphone profits – November 17, 2015
Apple’s iPhone owns 94% of smartphone industry’s profits – November 16, 2015

34 Comments

    1. Yeah, but Android took 90% of the market share. Don’t you know that is much more important. Those smartphone manufacturers can always make the loses up by shipping volume.

  1. Every phone manufacturer in the world: “Marketshare! Marketshare! Marketshare!”

    Remind me again how marketshare is working out for you Samsung and other manufacturers…

    1. One data point does not predict smooth sailing forever.

      We all agree that profits matter more — for the short term. But what should a company do with all that cash? Stash it in an overseas vault, or invest in product improvements and diversification of product offerings? Apple chooses the former, to its long term detriment. All those companies that show zero profit are doing exactly what any new market entrant needs to do to grab a foothold in the market place. Like practically any new business or home buyer or student, the first thing you do is take on debt to get started. You run in the red for years to expand and grow. And if it all works out, then you will recoup your investment with enough profit to make it all worthwhile. Intellectual honesty demands that Apple and its fans recognize that great new ideas come from upstarts who have the courage to do something new. As opposed to the courage of taking away audio jacks before deploying a good array of replacement solutions to ease the transition. Speculate away on whether anyone gets their Airpods for xmas this year. If Apple had released Lightning headphones and Airpods a year before replacing the conventional analog phone jack, nobody would be complaining. But I meet a lot of people who have iPhone 7 models with buyers remorse. They want their old 6S back because they underestimated how much they would rely on that old port that just worked. Nice that Apple is doing so well for now in the mature markets — how well is the iPhone going to fare in emerging markets tomorrow?

      Secondly, market share _does_ matter to developers. Obviously iOS is fine for now in north america and western europe, but don’t poo-poo the importance of healthy market share. Look at the Mac: now more of a niche luxury product than a computer for everyone. Apple has completely walked away from the users that Jobs brought with the original iMac and the Mac Mini, when they were affordable and truly better user experience than Windows. Now the value proposition is gone. Same thing is starting to happen on the iPhone. Also on IBD, they see iOS headed the same route thanks largely to Apple’s current management: http://www.investors.com/news/technology/click/apples-iphone-appears-to-be-going-the-way-of-the-mac/ Lack of market share has doomed the Mac to having significantly more limited software options than Windows. That is why Bootcamp, Parallels, Fusion, Crossover, Wine, et al are absolutely necessary by the majority of Mac owners. I don’t know the current statistics, but a few years back it was reported that about 75% of Mac owners used virtualization to run Windows programs regularly. This is not a surprise to those of us use computers for productive work. As Apple neglects Mac updates or Apple pulls a move that turns off would be buyers or prices out new Mac converts, it limits the potential of the platform. Apple isn’t ever going to be successful courting the biggest and best software developers when running ~10% market share with the Mac. Hell, it even cancelled some of the best programs it had (Aperture, etc) because Apple decided they weren’t profitable enough. That’s short-term beancounter thinking that will prevent future success. If there was an area that needed a serious sustained cash investment for better hardware and software, this is it. TAKE LESS PROFIT TODAY TO MAKE THE MAC HEALTHY AGAIN, APPLE. Clueless Cook doesn’t seem to care. Has he given up? I don’t think he actually uses a Mac. It would be great if some interviewer would shove a Mac into his hands and ask him to demonstrate some typical task. My money says he wouldn’t be able to find the Terminal without an assistant pointing him the way.

      Finally, this 104% figure for phones is an temporary situation because of the Samsung fiasco. While of course MDN’s main purpose in life is to gloat, I’d rather see Apple celebrate with a new 4″ phone and additional free headphone (in addition to the one in the box) or USB-C adapter with every iPhone purchase. Apple can afford it, and it would increase market share for those who are about to be hit with the Apple Dongle Tax. This is the cheapest advertising money can buy, and another way to bring people into Apple Stores.

      1. Apple spends a ton on “product improvements and diversification of product offerings”.

        “All those companies that show zero profit are doing exactly what any new market entrant” Samsung, LG, HTC, etc are NOT “new market entrant”s.

        “Apple and its fans recognize that great new ideas come from upstarts who have the courage to do something new” who said they didn’t, or is this some strawman fallacy that you’ve got in your own mind?

        “As opposed to the courage of taking away audio jacks before deploying a good array of replacement solutions” there is a standard audio jack thru the Lightning port.

        “But I meet a lot of people who have iPhone 7 models with buyers remorse” Names please, cause I haven’t met a single one.

        “market share _does_ matter to developers” but the addressable audience is the one that PAYS.

        “Apple has completely walked away from the users that Jobs brought with the original iMac and the Mac Mini” and yet Mac marketshare is better than ever. Remember the 2% share in the mid 90s when the original iMac was around?

        “Apple isn’t ever going to be successful courting the biggest and best software developers when running ~10% market share with the Mac” and yet they have when their share was even lower.

        “it even cancelled some of the best programs it had (Aperture, etc) because Apple decided they weren’t profitable enough.” No, because the Adobe product was as good if not better.

        “That’s short-term beancounter thinking” no, that was long-term strategic planning since they could see Adobe with its integration with Photoshop was always going to be better.

        “Finally, this 104% figure for phones is an temporary situation because of the Samsung fiasco.” Or course, but Apple’s profitshare has always been able 65%.

        1. Apple spends many more tons on donut offices, architectural stores, and vaporware car projects. It’s Mac lineup is narrow and sales show it.

          Depending on where you are in the world, the competition is different. The three you mentioned are diversified electronics makers that can’t lose because they are primary suppliers to Apple and others. So profits in smartphones really isn’t the key strategy for Samsung or LG or HTC. They showcase their abilities on phones, losing money sometimes, and make money from the rest of their many product lines. Note also that the modern businessman, according to some of the wierdos on this site and others, uses billions of dollars of losses to shield himself from having to pay taxes. So by that logic HTC, LG, etc are run by geniuses.

          Oppo is a new market entrant. Google’s new Pixel is a new market entrant. Hon Hai is a new market entrant. Lots of new competition coming up in emerging markets.

          Last week replaced daughter’s iPhone 5s. She decided to get the iPhone 7 after a LOT of hemming and hawing. Hates it now and wants to return it for a model with a headphone jack. The salesman at the store actually advised that the iPhone 7 is not as convenient if you use a lot of 3.5mm accessories.

          Mac market share is not better than ever. it declined over the last year.

          So you think Apple should just cede software leadership to Adobe and others? It can’t compete? Wow.

          1. “Apple spends many more tons on donut offices”
            Uhm, no. Apple’s R&D spend in the last 12 months was more than $10B. The “donut” cost half that.

            “architectural stores” and what exactly is wrong with showcase stores?

            “It’s Mac lineup is narrow and sales show it.” There is no correlation between sales and the “narrow”ness of Apple’s product line. When Apple had tons of product lines, before Steve Jobs’ return, sales were terrible. Steve cut the product lines into 4 segments, and sales recovered. Now there are more than 4 segments, and many think it needs to be consolidated, not further diluted.

            “So profits in smartphones really isn’t the key strategy for Samsung or LG or HTC. They showcase their abilities”
            So “showcase”ing is good when it’s Samsung or LG or HTC, but when Apple builds “showcase” stores, it’s bad. Got it.

            When profits in smartphones has been the biggest driver of profits at Samsung, the notion that you believe profits is NOT the “key strategy” is laughable. HTC, has showcased their ability so well, they’ve had to become a contract manufacturer to Google.

            So, since you think HTC is a “diversified electronics maker” pray tell us what other major product lines they have?

            “Note also that the modern businessman, according to some of the wierdos on this site and others, uses billions of dollars of losses to shield himself from having to pay taxes.” You know, that’s a straw man argument, if you can’t point to a specific person stating that position because I’ve never heard that position stated here.

            As for competition, there’s ALWAYS been that. I have an Oppo DVD player from 10 yrs ago. Google has had a Nexus line for years and years, hardly new. Hon Hai is Apple’s contract manufacturer, as it is for many brands.

            “a lot of 3.5mm accessories”?!? What other accessories are there besides headphones? The iPhone 7 comes with an adapter, did she not look in the box? It’s hard to believe you when your comment is nonsensical.

            Software leadership? Adobe has always been the leader in imaging software, Apple was never the leader.

  2. It’s amusing to note that Samsung’s profits of 0.9% amounted to little more than a rounding error for the sector as a whole.

    This report concerns the third quarter, but doesn’t specify the exact dates involved. Samsung’s problems only really kicked off in the middle of September, so I wonder how much of Samsung’s appalling performance can truly be attributed to the Note 7 debacle?

    1. … and how the hell they will find the money to pay out for all the damage it has done so as to rectify. No wonder they are at least initially refusing to compensate people at present, a couple would wipe out their total profit.

      One slight oddity I will add mind is how do these companies even get close to Apple with their phones with so little profit to play with.

  3. Just wait for the spin merchants claiming that there is a different type of monopolistic profile, where it is unfair for one company to bleed a whole industry dry, even though they only have around a 12% global market share.

    Guess what, plenty of room for the iPhone to grow and grow and grow …. 88% headroom to be exact!!

    1. “We are dedicated to increasing market share dominance. Our credibility in this endeavor should be enhanced by our company’s willingness to sacrifice profits indefinitely to attain our target market share. We have demonstrated that we’ll do what ever it takes to gain market share, including aggressively pushing to market phone designs as quickly as possible even before safety and reliability testing is complete. We’re Samsung and we’re in this for the long haul.”

    2. That’s exactly what was being spun on the news yesterday. Apple has a paltry 13% of the smartphone market while Android has an amazing 87% of the market. Apple is doomed!!!

  4. Frankly I consider this poor news for Apple.

    One it makes it easier to suggest a monopoly. Second it does nothing for Apple to work in a competitive or forward thinking way. Sure there are changes and upgrades but when you sit at the top it’s difficult to focus on what makes you great incontrast to focusing on what keeps you at the top. We will experience frustration as we see future lag.

    I know Apple is spending tons in R&D – but, is it focused or wasteful?

    I can’t get Xerox out of my mind – we can tell this to Apple all we want, but internal culture will not be able to process this.

    1. The iPhone is the Trojan horse that brings people around the world into the Apple inc. ecosystem, thereby getting them to purchase other devices, services etc. So in addition to the 103% profit in mobile, Apple inc. also take most of the profits in PC’s, tablets (otherwise known as the iPad market) and now wearables with the Watch, so no issues for Apple inc., except of course whether they can make their various devices quick enough to satisfy demand!!

      1. Works both ways, if the user is not invested in future Apple purchases and has a large investment in other tech that is compatible with each other, the iPhone may instead become a nuisance. This is further aggravated by the perceived higher up front cost of buying ‘in’ further to Apple’s ecosystem compared to what the user already owns and can afford to purchase.

    2. monopoly is about marketshare and control of distribution, etc., not profits

      Apple’s R&D is ALWAYS focused — hence, why their product line is far more limited than everyone else’s. In fact, that is a large part of profitability — making fewer products that they get “right” so that many people continue to buy them at stable price for a couple of years. And to keep the ASP as stable as they do, does require focus on what makes them great.

      Though there has been news on Apple spending more and more on R&D, they actually spend a lot LESS as a percentage of revenue than most others. Usually, R&D is measured as a percent of revenue, and Apple has notoriously had a very low figure (can’t remember what, but something like 10% vs the 25% of everyone else, for example; and now they are approaching like 20%, say). Their R&D is extremely focused.

      1. Quite right about ‘monopoly’, also depends on what scope you’re talking about. For example compared to Google’s marketshare of Apps for Android vs Apple’s marketshare of Apps for iOS it’s quite clear by your definition Apple is the ‘monopoly’.

        I don’t quite understand how R&D focus applies to keeping the ASP stable which should be either the Accounting or Marketing department’s job.

        Focus is good, but if you don’t listen to your customers once in a while you’ll go off in a ‘bad’ direction and end up with some really angry ones as evidenced by the recent discontent over PRO line products.

    3. The DoJ should fine Apple and force them to slash their prices for a monopoly on profits. Then when Apple gain too much marketshare, the DoJ should then fine them for a monopoly on marketshare and predatory pricing.

  5. And in the “Related” link at the end of this IBD article, the next story trumpets, “Google’s Android operating system captured its highest smartphone market share yet last quarter, while Apple’s (AAPL) iPhone continued to lose ground, research firm Strategy Analytics reported Wednesday.

    Alphabet’s (GOOGL) open-source Android operating system captured a record 87.5% market share in global smartphone shipments in the third quarter, up from 84.1% in the year-earlier period.”

    Yup. Downright tragic news for Apple.

    1. However, it needs to keep being said that such organizations as Strategy Analytics keep counting as ‘smartphones’ every single phone that has Android installed on it, whether it is a smartphone or not, including dumb flip phones which only make phone calls and have limited functions or feature phones that have some apps but cannot add apps except those the carrier permits. These are NOT by definition ‘smartphones’ in the definition that would compete against the high-end iPhones.

      Some Android makers don’t even manufacture a phone in the category that would compete against Apple because they could not compete against the leaders in the Android market. Instead, they compete in the low-end Feature phone and dumb-phone markets, the white box, under $40 phone market. A good 40% of the Android phones are in these category if not higher.

  6. Sadly not enough to move the needle up in the AAPL sphere.

    If Gaagle or Amazune was ripping profits like Apple does, their stock would sky rocket. Since it is Apple, it is normal. Remember, Apple will decline someday… Apple is doomed… Someday… Right?

    Geesh, we live in a crocked world where laws of the market don’t apply anymore… What a weird time to be alive. Apple should fake a transitionnal CEO to see if the needle would moves up or down…

    1. Apple should divide into two divisions which are services and hardwares. With two different CEOs. Perhaps then the stock will move the needle. Obviously, Wall Street dislikes Tim Cook regardless how well Tim’s running the company.

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