
Apple’s Share of Smartphone Industry’s Profits Soars to 92% - andore_jr
http://on.wsj.com/1M4WXQx
======
cwyers
The headline makes it sound like Apple is doing better compared to Samsung
than it really is -- as the article details, Samsung makes 15% of the profits.
Apple and Samsung's share of the profits combined exceeds 100% because some
manufacturers are losing money.

~~~
smackfu
Yeah, it's an odd stat. For instance, if someone new enters the phone market,
and spends a ton of money and loses a LOT of money, the total profits for the
industry go down, and if Apple makes the same dollar profit as the year
before, their profit share number goes up. If the next year, that new
competitor goes out of business, their loss is not included in the total
profits of the industry, and Apple's share of the profits goes down.

So you could make a pretty convincing argument that this profit percentage
number is kinda meaningless. Why not just look at gross profit? Dollars
compare to dollars pretty well.

~~~
mcphage
> For instance, if someone new enters the phone market, and spends a ton of
> money and loses a LOT of money, the total profits for the industry go down,
> and if Apple makes the same dollar profit as the year before, their profit
> share number goes up.

I think it said that the 92% figure was based on the top 8 manufacturers,
which are mostly stable in terms of who they are from year to year.

------
roymurdock
None of the other companies have a repeatably successful flagship phone that
comes anywhere close to the iPhone in terms of brand recognition and prestige.

Some might argue the Samsung Galaxy, but the image associated with the galaxy
is not one of luxury, but of practicality and a sacrifice in usability in
exchange for for customization; the general Android vs. IOS argument.

Luxury breeds profit by turning users into silent evangelists/role models.
Combine this with Apple's extremely strong ability to [1] set prices (Android
is not a direct competitor, it's a whole different marketplace with its own
internal competition) and [2] force costs onto partners (who wouldn't want to
work with Apple and see that volume of business with those nice margins?) and
it's no surprise that the iPhone is destroying competition on the
profitability metric.

~~~
Cyph0n
Maybe before, but the S6 screams luxury IMO, and is very clearly attacking the
iPhone head-on.

~~~
roymurdock
I would still argue that Android does not compete directly with IOS. People
who are purchasing the iPhone are buying into more than just a phone: they are
buying into the Apple lifestyle and joining the iPhone/Macbook/Apple Store
experience.

People who are purchasing the S6 aren't buying into any lifestyle as far as I
can tell. Maybe they'll share a common bond with some other S6 users, but I
wouldn't call the Samsung ecosystem (what is the Samsung experience even?)
luxurious. It takes more than just one product to build luxury and
desirability.

~~~
noir_lord
In this case desirability is tied to fashion, people buy an iPhone because
they see other people with an iPhone.

None of the Android phones has ever really gotten the same cachet that the
iPhone does (Samsung nearly got it right with the S3) but it's down to
perception and marketing.

In terms of device capability Android phones are considerably higher spec and
just as usable (5.x is a big improvement) but it doesn't really matter,
fashion and marketing wins out.

You see this in other areas, Sennheiser headphones are demonstrably higher
quality (in sound and construction) than "Beats by dre" but if the difference
is small enough then fashion wins out again.

~~~
macintux
Such a tired, tired argument.

More cores != better usable specs.

If you prefer security and privacy, there's a strong case for iOS.

If you prefer day-of-release software updates, there's a strong case for iOS.

If you prefer robust photography solutions, there's a strong case for Apple's
camera hardware and software.

If you want to create audio, there's a strong case for the low latency of
Apple's stack.

~~~
noir_lord
Who said anything about cores?

Android phones equivalent to the price of an iPhone have higher resolution
screens, more storage and RAM.

Android phones half the price of the iPhone have equivalent screens, storage
and RAM.

I have Nexus devices so I get day-of-release software updates (even my Nexus 7
2012 is running 5.1.1)

I couldn't care less about photography solutions or audio so that really
doesn't apply.

Privacy, agreed, Android is a data hoover out the box.

~~~
superuser2
... and yet, with all that horsepower, they still stutter and lag like crazy.
An iPhone might be a less powerful computer, but you wouldn't know it from the
UX ( _if_ you are upgrading every 2 years and running the iOS release that was
designed for your phone - running too many versions ahead can produce a
similar experience).

~~~
chc
I guess it's different for different people. My wife's Nexus 5 that she
purchased a couple of months after I got my iPhone 4S has held up much, much
better than the iPhone did. I was so frustrated with how laggy and crash-prone
my iPhone was (especially next to my wife's still-awesome Nexus) that I ended
up buying a G4.

~~~
robinson7d
It may be worth noting that the Nexus 5 came out more than two years after the
iPhone 4S (Oct 31, 2013 vs Oct 14, 2011), and as of now it hasn't even been 2
years since the Nexus 5 was released.

That said, it has been less than 4 years since the iPhone 4S was released;
they shouldn't be failing yet, and that reflects poorly on the iPhone (as well
as iOS) in your case. However, I'm also not yet convinced that the Nexus 5
will be operating well in late 2017 - that's yet to be determined.

~~~
chc
Interesting, I didn't realize that. We bought both of them new from the
carrier a few months apart. We each just asked for an inexpensive model of the
respective brands, so I guess that is largely down to the Nexus 5 being crazy
cheap and Apple keeping the 4S in circulation for a long time.

------
venomsnake
And that kids is what you get when you deal with carrier update plans for your
devices, allow bundling of crapware with the phones and do your best to kill
your operating system with fragmentation ...

A political decision that was bad is keeping on giving.

Apple victory was given to them

~~~
smackfu
Except that Android phones sell great, they just don't make much money for
their makers.

~~~
visarga
The point stands. People who have a choice (have enough money) choose iPhone
rather than allow crapware and not having access to timely updates. I am very
pissed with Samsung for not upgrading my Android from 4.4.2 yet. I used to be
an iPhone user and while using iPhone I didn't have problems upgrading my
phone to the latest version.

~~~
adevine
But there are "pure Android" options (e.g. Nexus and Moto X) that get timely
updates that don't have any of those problems.

However, even those great phones still have the problem of having to compete
against one another, and there is very little differentiation since Google
owns the experience. I get some key innovations on Moto X that I don't get on
iPhone (the ability to redden the screen at night is key for me, plus nice
things like automatically detecting when you're driving so incoming texts and
voice calls are read to you), but Moto X still has to compete with other high
end Android devices so they are limited in the premium they can charge.

------
tim333
I see Nokia got around 2/3 the profits in 2007 when the iPhone started. I
guess the profits tend to flow to those who have the best designed phones. I
wonder if it'll still be Apple in another 8 years.

([http://9to5mac.com/2015/07/13/apple-smartphone-profit-
share/](http://9to5mac.com/2015/07/13/apple-smartphone-profit-share/))

~~~
adevine
But 2007 was really before the whole app ecosystem took off. For anyone who
has invested a significant amount in apps, there are much higher switching
costs now than there were in 2007. Plus, besides just the actual monetary
costs, people USE their smartphones MUCH MUCH more than in 2007, so there is a
much greater cost in just having to learn a different OS.

~~~
orkoden
The costs for switching isn't that high. Most people don't spend a lot of
money on apps. More than half of the money is spent on games anyway. These are
played for a while and then new games are purchased.

The handful of productivity apps won't exceed 20$ for the vast majority of
users.

I buy lots of apps and games. Every time I switched platforms (webOS ->
Android -> iPhone -> WP), I spent around 15$ to cover my initial needs.
Compared to what I pay for a phone, it's negligible.

------
mark_l_watson
I am surprised. I have friends and family members with iPhone 6 and 6+ and
they are very nice but I think my Note 4 is even better. The quality of the
videos and pictures I take are unbelievable. The Android OS is configurable
and easy to use.

I do have a theory: I see some people install hundreds of crappy apps on the
Android devices; perhaps that hurts performance? I use my Androids as is,
except for a very small number of additional apps.

------
norea-armozel
It's weird how Samsung, LG, and HTC are struggling to make a profit on their
phones (some have very good phones like the LG G4 which even Chris Pirillo
said it was a good phone), but Apple just keeps growing their profits. I
wonder if it has to do with how they've limited number of phone models or is
it purely brand recognition that's driving this growth.

~~~
shawndumas
Is it possible--not saying it's so, just asking a hypothetical question--that
Apple just makes more desirable phones?

[Edit] Wow, everybody, I meant more desirable as in; people are willing to pay
more. I know FTA that they are only 20% by volume.

~~~
hellofunk
Apple's actual market share is less than 20% of all smartphones worldwide,
though their share of _profits_ is at 92%. This is not about their phone
selling more than other phones (they aren't necessarily), but rather how Apple
manages profit margins. Their phones are much more expensive than the
competition, command premium prices and thus yield premium profits.

~~~
josefresco
Yet, in at least North America, equivalent "high end" Android smartphones cost
the same _on contract_ and even off contract than iPhones. I can get an older
iPhone 5c for free (probably a 5S is I go with a smaller carrier). Where are
people paying a "premium" for the iPhone?

Is is that not _enough_ people choose the flagship Android devices to move the
needle? I'm genuinely curious/asking because it seems/appears there's some
parity (price) between the current flagship Android devices and Apple's
newest.

~~~
hellofunk
Also, profit formulas aren't that simple. You have consider Apple's costs vs
their revenue for each phone, and also their contract terms with providers vs
other phones. I don't know the details. But perhaps Apple earns more for their
phone contracts even if consumers pay the same. One thing we do know is that
Apple leads the world in an extremely well-oiled production pipeline and
network of suppliers that no doubt also helps keep their costs down and thus
their profits high. I doubt Android manufacturers are operating at that same
margin.

~~~
josefresco
Good points. I would imagine that Apple has a better supply chain, and more
aggressive/favorable terms with each provider than competing smartphone
makers. I'm not sure it accounts for the entire difference. I wonder if
there's a middle area or marketplace where people pay disproportionally more
on average which helps this figure (92%) climb so high.

------
andy_ppp
I'm going to suggest why Apple are successful at phones:

1) Timing/Being First (remeber before apple when everything had a hardware
keyboard?)

2) Branding and Advertising

3) Product Hardware (features are all just right - camera, battery,
performance, screen etc.)

4) iOS + App Store (no-one wants to change their apps)

5) New features first (consistently first with new features - iphone, retina,
gorilla glass, siri, touch id)

6) Android + whatever seems inferior (and largely is)

7) They charge lots more money

8) They have fewer products and so can drive down the cost of manufacturing.

9) They are run by smarter people not marketing departments.

10) They do all of the above TOGETHER and all of the above support each other.
If they start missing one the others start to be less desirable/possible too.

~~~
JustSomeNobody
1) No. 2) Yes. 3) Battery life is not "just right" Ask ... anyone.

... this is boring...

9) Wait, what? Did you really just say that?

~~~
omikun
1) Who else had 60fps smooth UI on a phone/tablet before Apple? 9) Marketing
drives gimmicky features and empty specs - Samsung's hover touch and gaze
detect that is off by default because using them is a pain, 4 slow cores
instead of 2 fast ones, OS defaults that favor energy burning features
(location services, true multi-tasking), screens with higher res that are
indistinguishable to retina screens but with worse color profile.

Some companies have fixed some of those pain points with their recent models,
but it's too little too late for the existing consumer base who buys flagship
products.

~~~
JustSomeNobody
1) What are you on about? Who said anything about 60fps UI? OP mentioned
physical keyboards. That was what my comment was directed towards. There were
touchscreen only phones before iPhone that didn't have physical keyboards.

60 fps... That's like jumping in and saying, who had true HD phones first? We
could spend all day telling each other who had what before who.

------
davidf18
Because of Apple stores, iPhones have an enormous amount of good support. In
Manhattan there are 6 stores including one open 365/24/7\. You could make a
Genius Bar appointment at 3 AM if you wanted. The people are nice and the
support is good including 1-800-MyApple.

I use iPhone's FaceTime Audio a lot domestically and internationally since it
has better audio quality (HD audio) then the regular network. Verizon is now
offering HD audio but only on their newer phones and only within the Verizon
network.

On the iPhone 6, FaceTime Video over cellular uses half the bandwidth of
previous models.

~~~
droopyEyelids
If anyone else is curious about the bandwidth thing, it's becasue the new
phones have a h265 chip, and use that codec.

[http://www.phonearena.com/news/New-Apple-iPhone-models-
use-h...](http://www.phonearena.com/news/New-Apple-iPhone-models-use-half-the-
bandwidth-for-FaceTime-thanks-to-H.265-codec_id60665)

If anyone else is curious, this does a decent job of explaining it.
[http://www.digitaltrends.com/computing/h-265-hevc-
encoding-e...](http://www.digitaltrends.com/computing/h-265-hevc-encoding-
explained/)

------
Dwolb
This quote stands out the most, "One key to Apple’s profit dominance: higher
prices. Apple’s iPhone last year sold for a global average of $624, compared
with $185 for smartphones running Android"

Literally Apple can command a 3x price premium in the same product category.
I'd like to see Android flagships broken out from this number, however.

The issue of Apple profit dominance is pretty complex and I'm sure there are
really smart people looking to understand and attack it.

~~~
paublyrne
That average price includes phones of low specs and high specs, while Apple
only does high(ish) spec. The Samsung Galaxy is similarly priced to the
iPhone.

There is plenty of price premium built in there though, that's for sure.

~~~
JohnTHaller
Apple only does premium phones whereas Samsung et al do premium as well as
mid-market as well as down-market devices.

The iPhone is basically always more expensive than the equivalent Samsung
Galaxy device. The Galaxy S6 is currently $549 for a 32GB version with a high-
res 5.1" QHD screen (better than 1080p). The semi-equivalent iPhone 6 is $649
for a 16GB version with a mid-resolution 4.7" screen (approximately 720p) is a
full $100 more expensive than the S6. Upgrading the iPhone to the next memory
size up (64GB) adds $100. Upgrading to a high def screen (6 Plus with a 5.5"
1080p screen) is another $100.

One big reason Apple makes so much more profit than everyone else is that they
sell lesser specced phones for a higher price than the competition's higher
specced phones. Most people think of the iPhone 6 as being equivalent to the
Galaxy S6 despite having a smaller, lower resolution screen, 1/2 the storage
space for music and pictures, slower processor, etc.

------
silverlake
Isn't this similar to the PC market? The beige boxes became a commodity, and
all profits went to Intel and Microsoft. Dell, Compaq, Gateway, HP, etc. all
barely made money in the consumer market. How will Samsung, HTC, et. al
differentiate their devices?

~~~
Eric_WVGG
Not exactly. The profits went to Intel and Microsoft because they were
figuratively selling ALL the computers. Apple is gobbling the profits in a
different way.

Samsung/HTC/others aren't failing to make money because their products aren't
differentiated, it's because they're selling large numbers of low-end, low-
margin products. The question is how they can compete with Apple on the high-
end. Nobody's managed to do that.

------
Grue3
Alternate title: "20% of people paid _waaaay_ too much for their cellphone".

~~~
unprepare
What a curious thought, that i seem to see repeated over and over.

What exactly is more expensive about the apple product here:

Apple iphone 6 - $649.92 full retail price

Samsung galaxy s6 edge - $779.76 full retail price

LG G4 - $599.76 full retail price (on sale)

HTC One M9 - $649.92 full retail price

This puts the iphone as the second least expensive flagship phone currently
available, prices are all straight from tmobiles site.

If we expand the storage and bump to the top models:

Samsung galaxy s6 edge - $959.83 full retail price

Apple iPhone 6+ - $949.99 full retail price

Was your point only that everyone who buys a flagship smartphone is paying
'waaay too much' for their cellphone?

If your point was that Apple's smartphones are somehow the most expensive
ones, then you are simply incorrect; this is the belief i was trying to
counter with these numbers.

edit: formatting

~~~
jjbiotech
I paid $1 for my Galaxy S5 upgrade, with a two year contract extension.
Essentially I got the phone for free because I planned on keeping my carrier
for the next two years anyway. That cost was subsidized by my carrier, and
probably indirectly by Samsung also. I've never paid sticker price for an
Android phone, and I don't know anyone who has.

"One key to Apple’s profit dominance: higher prices. Apple’s iPhone last year
sold for a global average of $624, compared with $185 for smartphones running
Android, according to Strategy Analytics. "

You can't say the same when buying an iPhone. There's more complexity to this
than sticker price. The numbers don't like, Apple pulls in 92% of the market's
profits while selling less than 20% of the phones. Use logic and tell me what
that means.

~~~
unprepare
As I said in my first comment,

>Was your point only that everyone who buys a flagship smartphone is paying
'waaay too much' for their cellphone?

Your statistic only shows that android serves all market segments, and does
nothing to show that Apple phones are more expensive than the phones with
which they compete. Yeah the Moto G is less expensive than the iPhone, if
thats your point the discussion should stop there, because we are comparing a
budget segment phone to a flagship segment phone.

>I paid $1 for my Galaxy S5 upgrade, with a two year contract extension.
Essentially I got the phone for free because I planned on keeping my carrier
for the next two years anyway. That cost was subsidized by my carrier, and
probably indirectly by Samsung also. I've never paid sticker price for an
Android phone, and I don't know anyone who has.

Ok, so lets do a price comparison that way

With a 2-year contract on verizon (couldnt find contract prices on tmobile):

LG G4 - $199.99

HTC One M9 - $199.99

Samsung Galaxy s6 - $199.99 (after $50 mail in rebate)

Samsung Galaxy s6 edge - $299.99 (after $50 mail in rebate)

iphone 6 - $199.99

iphone 6+ - $299.99

The galaxy s 5 is the same price as the 5S, both last years flagships

------
prapam2
So why are so many companies jumping in if there were not much profits? I see
variety of low end Android sold in India, surely they would exit if they don't
make a profit.But many are now upping the specs and releasing good quality
mobiles. I checkout out a 400ppi mobile with Android 5 which seemed better
then my N4. It seems at least in India the mid to high level mobiles sales
might fall back.

------
lucozade
> An Apple spokeswoman declined to comment

But the huge, smug grin on her face was probably telling...

I tend to have Apple devices nowadays but I have to say this is a bit
concerning. One would hope that there's enough money to go around to encourage
innovation and competition. If it stays this dominant for one vendor, it
surely will cause things to stagnate.

~~~
mcphage
> If it stays this dominant for one vendor, it surely will cause things to
> stagnate.

It might, although I could also see the opposite: if everyone is doing okay,
selling enough to get by and grow with the market, there might be less push to
get out there and try new things. Instead, companies would compete on price,
on advertising, on superficial design. But if there are lots of companies
struggling to find a foothold, then they'll be lots of motivation for trying
new things, in search of anything that'll work, and give them an advantage.
There's no margin for them to be complacent.

------
skc
You really have to wonder why any one would even want to consider getting into
this business at this point. It's a blood bath and there is only one winner it
seems.

------
bsaul
Funny how this news makes me think i may have a better deal buying an android
phone next time, since they're making less margin over me.

~~~
roymurdock
This also means that they care about you less. It's a numbers game for these
high-volume, low profit companies.

------
cies
This is called a "Winner takes it all market". What is interesting is that
smartphone became such a market considering the profits, because when
considering the revenue it is much more fragmented.

