In the second quarter of 2023, Apple dominated global smartphone operating profit with an all-time record June-quarter share of 85% as global smartphone revenues declined by 8% YoY and 15% QoQ to well under $90 billion in Q2 2023 and global smartphone operating profit fell to below $13 billion, declining by 3% YoY and 27% QoQ. With 85% share, Apple was, by far, the single-largest contributor to profitability, up from 84% last quarter and 81% in the same quarter last year.
Global smartphone market revenues declined by 8% YoY and 15% QoQ to significantly under $90 billion in Q2 2023, the lowest Q2 figure since 2020 during the height of the global pandemic-related lockdowns. The corresponding operating profit declines were 3% and 27% according to research from Counterpoint’s Market Monitor Service.
Commenting on Apple’s performance, Research Director Jeff Fieldhack said in a statement, “Apple’s shipments declined by 3% YoY while the smartphone market declined by 9% in the same period. At the same time, its ASP increased thanks to a growing contribution of the Pro series, declining contribution of the SE series and the replacement of the Mini in iPhone 13 with a Plus in iPhone 14. As a result, while Apple’s iPhone revenue declined by 2% annually, its revenue share grew, reaching a second-quarter record of 45%. This is up by almost 3% since the same quarter of last year. Its share of global operating profits also grew by 4% since Q2 2022, reaching 85%, another second quarter record for Apple.”
The revenue decline in the overall market was caused by a shipment decline of 9% YoY combined with an ASP growth of only 1% in the same period.
Commenting on overall market dynamics, Research Director Tarun Pathak said in a statement, “The low ASP growth is mainly due to seasonality as, for instance, the second quarter is equidistant from peak iPhone demand and new iPhone launch, and sees neither of Samsung’s ultra-premium S or Z-series launches. The annual revenue decline also translated into operating profit losses for the overall market. The sequential operating profit decline suffered additionally from a changing shipment-mix, especially as the shipment share of Apple, the single-biggest contributor to total operating profit, went down by almost 4% QoQ.”
Despite ASP growth stagnating in the quarter, the premiumisation trend is likely to continue as emerging markets drive the next chapter of its growth and mid-tier brands target the premium segment and premium brands aim to sell more of their highest-priced models. Consequently, both global smartphone revenues and operating profits will see a recovery starting in H2 2023. This will support the smartphone market in the period when it struggles with lower shipments.
MacDailyNews Take: There’s only one iPhone, so there’s only one smartphone with strong, sustainable margins.
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Not good enough for investors. Apple needs to go for at least 90% smartphone profit share, but that might not even be enough to satisfy investors. Investors want larger numbers of units being sold and I think the only way that’s going to happen is Apple cutting iPhone prices, at least by a little bit. I’m not saying Apple should do that. If people don’t want to buy iPhones that’s their choice. Apple will just have to find other ways to grow revenue.