Apple Captured 79% of Global Smartphone Profits in 2016

[Tycho24]

You're making points that have nothing to do with @v0lume4 quote nor the topic of the article.

This is about profits and percentages of said profits. The resale value of used iPhones and Galaxies have nothing to do with those profits. In fact, each sale of one of those "used iPhone keeps an unbelievable value" actually takes profit away from Apple.

Apple never discounts phones at mid life? Uh, that's not true. Outside of the debut period, iPhones can be found discounted as low as BOGO (buy one get one) pricing through multiple carriers. I think AT&T is still running that promo now. Speaking of AT&T, they're one of Apple's biggest customers. Not you and me. The vast majority of Apple's iPhone profit comes from their primary customers: telcos, big box retailers, etc. For the most part, Apple doesn't get paid when you go into a store to buy a phone. Apple was paid long ago when that phone was put on a boat, truck, or plane and shipped to their customers.

As you say... AT&T pays their standard price long before they run their deals.
They don't offer BOGO iPhones because Apple gave them that deal! They accept the loss of the profit from that phone in order to lock in two new customers for 2 1/2 years (these BOGO deals are done via bill credits over 30 months; if you leave during that time- you must pay the remainder left on the phone).
OP was indeed correct- Apple does NOT discount their phones midway in the year before the new one drops.

 

[69Mustang]

As you say... AT&T pays their standard price long before they run their deals.
They don't offer BOGO iPhones because Apple gave them that deal! They accept the loss of the profit from that phone in order to lock in two new customers for 2 1/2 years (these BOGO deals are done via bill credits over 30 months; if you leave during that time- you must pay the remainder left on the phone).
OP was indeed correct- Apple does NOT discount their phones midway in the year before the new one drops.

I understand how BOGO's work. I also understand the intent of the OP's assertion which was Apple doesn't discount but others do. Further in the thread you'll see where the assertion was amended to focus specifically on the Apple Store. Now if we're going to delve into pedantry, then no OEM discounts their phones since any discounting would be done by the reseller. So you're right, Apple does not discount their phones midway in the year. Howeva, their phones are discounted midway through the year, just like phones from other OEMs. So I guess you have to ask yourself if the focus is Apple the company discounting phones or is it Apple phones not being discounted. The former is true, the latter... not so much.

 

[Tycho24]

I understand how BOGO's work. I also understand the intent of the OP's assertion which was Apple doesn't discount but others do. Further in the thread you'll see where the assertion was amended to focus specifically on the Apple Store. Now if we're going to delve into pedantry, then no OEM discounts their phones since any discounting would be done by the reseller. So you're right, Apple does not discount their phones midway in the year. Howeva, their phones are discounted midway through the year, just like phones from other OEMs. So I guess you have to ask yourself if the focus is Apple the company discounting phones or is it Apple phones not being discounted. The former is true, the latter... not so much.

I follow your point!
However, from working for Verizon for four years (immediately after 4S release), I can assure you that in this particular instance, I have some insight to share that I suppose most consumers are ill aware of.
The deals on all of the Android OEMs actually ARE subsidized by the manufacturers. They offer credits back on the cost you paid for the phone, as a retailer, if you sell it within a particular window... or they offer SPIFFS (bonuses paid directly to the retailer or salesperson).
The carriers lose little to no money on those promos; even the advertising is subsidized by the OEMs.
However, Apple does NOT participate in any of those programs. When the carriers discount iPhones, they bear all the costs. It is a credit to their name that the carriers find this worthwhile!
I am not trying to be pedantic whatsoever; I simply believe the phrase: "Apple does not discount their phones mid-cycle, as the majority of other OEMs do" is a 100% true statement, no splitting of hairs necessary!

 

[kdarling]

Since when is making excessive profit at the expense of all of us a good thing? It's kind of a nasty statistic. Hooray hooray, Apple gouges its customers deeper than anyone else.

Yeah, it's like bragging that you buy gas from the oil company making the highest profit.

At least no one (yet) has written the bogus chestnut that Apple needs all that for R&D. On the contrary, Apple has a quarter trillion of our dollars stashed in the bank doing nothing, AFTER they paid for R&D.

Not surprised. Apple's supply chain prowess and ability to command a 40-50% markup is unmatched. It really is remarkable -- I can't name another company pulling in similar margins.

RIM (Blackberry) used to be like that.

Didn't they capture 110% of industry profits not so long ago?

That was using what I call "stupid reporter math" which relied on a lot of companies losing money and lowering the sum total of profits and losses. It's an incorrect way to impart useful information, and later when few/none are losing money, the abrupt change confuses people. It's just a click bait method.

In reality, nobody can make more than 100% of the actual profit, and as I've pointed out before, Apple normally runs about 70-90%, which is still huge.

 

[v0lume4]

RIM (Blackberry) used to be like that.

Nobody can stay on top forever. Not even Apple.

 

[tillsbury]

Yeah, it's like bragging that you buy gas from the oil company making the highest profit.

No it's not, because there's no discernible difference between gas from different oil companies. The product is to all intents and purposes the same between the companies (and in many cases is exactly the same).

The comparison would be more appropriate to buying cars from the most profitable car company. But again, you have it the wrong way around. People buy iphones from Apple because the iphone is good, not because of Apple's profits. And, then, Apple's profits are high because people buy lots of iphones from them.

And as we all know, most other phone manufacturers make most of their volume from crummy low-cost phones, on which the margins are rubbish.

 

[H2SO4]

Yeah, it's like bragging that you buy gas from the oil company making the highest profit.

At least no one (yet) has written the bogus chestnut that Apple needs all that for R&D. On the contrary, Apple has a quarter trillion of our dollars stashed in the bank doing nothing, AFTER they paid for R&D.



RIM (Blackberry) used to be like that.



That was using what I call "stupid reporter math" which relied on a lot of companies losing money and lowering the sum total of profits and losses. It's an incorrect way to impart useful information, and later when few/none are losing money, the abrupt change confuses people. It's just a click bait method.

In reality, nobody can make more than 100% of the actual profit, and as I've pointed out before, Apple normally runs about 70-90%, which is still huge.

I agree, was really just being facetious as I know a lot around here agreed with it. I wonder where those posters are now…….?

 

[mi7chy]

Apple's margin is so high because they're selling low specs and old tech at flagship prices. 750p, last gen LCD, 2GB DRAM, etc. are what you get with a $50 to $80 phone.

 

[C DM]

Apple's margin is so high because they're selling low specs and old tech at flagship prices. 750p, last gen LCD, 2GB DRAM, etc. are what you get with a $50 to $80 phone.

Except the performance is still that of a flagship phone nonetheless. Specs aren't everything as they say. But all that is already well known.

 

[I7guy]

Apple's margin is so high because they're selling low specs and old tech at flagship prices. 750p, last gen LCD, 2GB DRAM, etc. are what you get with a $50 to $80 phone.

Apples custom chip designs are the best in the business and their iPhone 7 display is "the most accurate". Samsung phones with touchwiz, e.g. Needs all of that ram. No different than judging a car strictly on the number of liters without looking at turbo, engineering etc.

 

[tillsbury]

Apple's margin is so high because they're selling low specs and old tech at flagship prices. 750p, last gen LCD, 2GB DRAM, etc. are what you get with a $50 to $80 phone.

No, Apple's margin is so high because they only sell high-end phones. Even the SE is relatively expensive in the phone market. I have no doubt at all that the margin on a Samsung S7 is just as generous as that of the iphone 7. But hardly anyone buys those top end Samsung models. Most people buy the cheap models.

 

[Carnegie]

No, Apple's margin is so high because they only sell high-end phones. Even the SE is relatively expensive in the phone market. I have no doubt at all that the margin on a Samsung S7 is just as generous as that of the iphone 7. But hardly anyone buys those top end Samsung models. Most people buy the cheap models.

Yeah. It's not necessarily that Apple's gross margins on comparable products are unusually high, it's also (or more so) that Apple sells a better mix of products when it comes to gross margins - i.e., it sells mostly premium smartphones whereas others, while many of them do sell premium smartphones, sell a lot of low- and mid-level smartphones as well.

Beyond that, Apple's greater profitability is also driven by greater operational efficiency (part of which is the result of the leverage created by the larger gross profits which come from greater sales of higher gross margin products). I walked through some numbers elsewhere, so I won't repeat them here unless someone would like me to; but Apple doesn't spend as much on R&D and SG&A as some of its competitors do (even in absolute terms when it comes to Samsung, but especially relative to its revenue and gross profits).

Those expenses are typically reported on a company-wide basis rather than apportioned to particular product categories, so considering how they'd affect particular product categories involves some deduction and, frankly, guess work. That's part of why we can't really say how much profit Apple or, e.g., Huawei made from smartphones in particular, we can only estimate it.

To get an idea of the general dynamic that I'm referring to, consider this: Company wide, Samsung had a slightly better gross margin for its FY 2016 than Apple did for its (though it likely didn't when it comes to smartphones in particular). But while most of Apple's gross margin (more than 2/3rds of it) was realized as operating margin, most of Samsung's (almost 2/3rds of it) was eaten up by R&D and SG&A, particularly the latter. So Samsung's operating margin was much lower even though its gross margin was higher.

The same, to an even greater degree, can be said of Huawei (based on reporting for 2015, the last full year that Huawei has as-yet reported). Huawei's (company-wide, certainly not smartphone in particular) gross and operating margins were 42% and 12% respectively. Apple's were 40% and 30%.