Apple's Profit Share Among Top Mobile Phone Vendors Rises to 66%

[MacRumors]

Apple's share of profits raked in by the world's top publicly-traded mobile phone vendors rose once again this quarter, as asymco's Horace Dediu notes in the latest edition of his quarterly tracking reports. According to Dediu's calculations, Apple's share of profits among the eight companies tracked rose to 66%, up from 57% last quarter.

This quarter saw a slight sequential decline in overall profit for the sector, but four vendors did not manage a profit from selling phones. Nokia, Motorola, Sony-Ericsson and LG all saw losses. The other vendors split the slightly decreased pie with Apple getting two thirds of it (66.3%)

This share is up from 57% in Q1 and 50% in Q3 and Q4. Samsung's share went to 15%, though that's not a peak level historically. In Q1 2008 the company was at 21%. RIM was at 11%, a level in a range that has been unchanged for three years. Finally, HTC captured 7.4%, a new high and an increase from 6% since last quarter.

Dediu notes that smartphones have become the primary driver of mobile phone vendor profitability, giving Apple a significant edge over most of the competition with its smartphone-only offerings.

Apple first grabbed the profit share lead from Nokia way back in the fourth quarter of 2008, and hit the 50% mark a year ago in the third quarter of 2010. Apple of course only holds about 5.6% unit share in the total mobile phone market, but earns much more profit on its premium-priced iPhones than other vendors do with their offerings.

Article Link: Apple's Profit Share Among Top Mobile Phone Vendors Rises to 66%

 

[Benjamins]

it'll be interesting to know how much Google profited from all those Android companies. It's a matter of time before they demand Google to pay them to use Android.

 

[FrizzleFryBen]

That really is amazing. All that before they start filling their phones with paid apps. Profit upfront and profit continuing thru the life of the product. Simple, but very well executed model.

 

[benpatient]

So basically, if you're an Apple shareholder, but not an iPhone customer, then this is great news.

If you are heavily invested in Apple, and have an iPhone, you might be coming out on top.

If you have an iPhone and a little bit of APPL stock, you're probably not even getting your own "profitshare" back over a 2 year contract.

If you have an iPhone and no APPL stock, you're paying a huge premium to be part of the club.

Pretty good marketing to be able to convince users that a company making 50+% profit on every sale is good for the users of that product.

This doesn't "drive innovation" so much as it drives up dividends for rich people.

 

[AppleScruff1]

Wouldn't it be nice if they lowered their prices a bit instead of lining their pockets? Now that would be something to praise them for, not this idiotic bragging about how much money they make. Why don't most Apple customers think like normal consumers? All they think about is, I want Apple to make lots of money? Strange.

 

[chirpie]

This doesn't "drive innovation" so much as it drives up dividends for rich people.

I dunno if I'd go that far. If Apple was paying out their earnings to shareholders left and right, then I might. But if they save and spend their money wisely to keep their position in the market, that just seems like good business.

 

[rickdollar]

it'll be interesting to know how much Google profited from all those Android companies. It's a matter of time before they demand Google to pay them to use Android.

I think, if anything, it's the other way around. Without Google, those other manufacturers would be selling far fewer phones.

 

[cvaldes]

If you have an iPhone and a little bit of APPL stock, you're probably not even getting your own "profitshare" back over a 2 year contract.

If you have an iPhone and no APPL stock, you're paying a huge premium to be part of the club.

What does the stock symbol for Appell Petroleum have to do with smartphones?

 

[nagromme]

If you have an iPhone and no APPL stock, you're paying a huge premium to be part of the club.

Clarification needed: what huge premium is that, exactly? Are there phones as good as the iPhone 4, with as good a screen and camera and the same selection/quality of apps, and the same ease of use and battery life, or even other features that truly compensate for lacking those... and that cost a “huge” amount less? What does that huge amount come to per month, spread over 2-3 years?

I’d hate to think I was paying for a “club” and not for the apps and OS and hardware that are serving me so amazingly well, compared to the frustrations and “good enough I guess” experiences I see Android users constantly facing. (Seriously, I can’t even reach them half the time because their batteries are dead! And their handsets keep being made obsolete and receiving no further updates WAY too early.)

I wonder... maybe Apple gets great manufacturing/component deals, rather than simply overpricing... nah. Crazy talk!

 

[aristotle]

If you have an iPhone and no APPL stock, you're paying a huge premium to be part of the club.

If you have any other smartphone, you are paying a huge premium to be part of the club but the only difference with Apple is that they can leverage huge economies of scale for lower component costs which leads to a higher profit margin. For flash, they are not only leveraging their iPhone requirements but also for their laptops, iPods and other devices that have flash storage. Apple also saves money on using their own OS by having an upfront cost which diminishes with each unit sold and allows them to differentiate from the competition more effectively.

 

[fertilized-egg]

Pretty good marketing to be able to convince users that a company making 50+% profit on every sale is good for the users of that product.
...If you have an iPhone and no APPL stock, you're paying a huge premium to be part of the club.
...
This doesn't "drive innovation" so much as it drives up dividends for rich people.

Using the same logic, you're getting a great deal if you own an LG or a Nokia device?

For iOS users it's still a great news even if they don't own Apple stock because it guarantees the company will stay afloat and there'll be active development and support on the products and the platform.

 

[foodog]

Wouldn't it be nice if they lowered their prices a bit instead of lining their pockets? Now that would be something to praise them for, not this idiotic bragging about how much money they make. Why don't most Apple customers think like normal consumers? All they think about is, I want Apple to make lots of money? Strange.

Companies are in business to make as much money as they can.... that is the point.

 

[Benjamins]

So basically, if you're an Apple shareholder, but not an iPhone customer, then this is great news.

Actually, you pay about the same price for an iPhone vs Android phone.

The only difference is companies that make Android phones get much less money from the carrier.

 

[nagromme]

If you have any other smartphone, you are paying a huge premium to be part of the club but the only difference with Apple is that they can leverage huge economies of scale for lower component costs which leads to a higher profit margin. For flash, they are not only leveraging their iPhone requirements but also for their laptops, iPods and other devices that have flash storage. Apple also saves money on using their own OS by having an upfront cost which diminishes with each unit sold and allows them to differentiate from the competition more effectively.

Good point. I don’t know how economies of scale work with an OS (there’s some tipping point, but iOS development can’t be cheap). I DO know how they work with hardware: very well for Apple, since Apple sells just a couple of models, for a year or more, while other companies keep releasing and then scrapping dozens designs and playing catch-up! (And yes, occasionally, getting ahead with some certain spec or other.)

The biggest price to be in the Android Club (judging by my friends): needing new hardware so often. There’s always “the good one” right around the corner.... Simon Says, this one’s as good as iOS! Well worth paying a penalty before the end of your contract

 

[Eddyisgreat]

If you have an iPhone and no APPL stock, you're paying a huge premium to be part of the club.

Pretty good marketing to be able to convince users that a company making 50+% profit on every sale is good for the users of that product.

That's great news actually. That means that Apple won't stop working on the iPhone, accessory makers won't stop making accessories, developers won't stop developing, etc. Individuals who "invest" (for lack of a better term) in an iPhone can feel comfortable that their systems won't get binned tomorrow due to low revenue.

You also fail to account for the industry practices that allow apple to see these profit margins even though the retail cost of the iPhone is similar to that of other smart phones (although a little on the high side).

• Utilizing in house developed or well licensed patents
• No need to pay licensing fees for iOS (since they own it)
• Two phone models in production at any given time allow for streamlined manufacturing (the difference being color, radio type, and size)
• Profit sharing from the carriers themselves
• Ability to lock in low component prices due to being able to pay cash up front and assure a high consumer demand

then of course we see other vendors who play the margins game, instead hoping to undercut the competition on price but selling enough to make it worth while. Of course in an increasingly competitive market this gets difficult after while.
hence apple commanding an xx% profit margin is fine by me as long as they continue to offer a superior experience to what I can find elsewhere and the price is in line with other comparable alternatives.

 

[chrono1081]

Wouldn't it be nice if they lowered their prices a bit instead of lining their pockets? Now that would be something to praise them for, not this idiotic bragging about how much money they make. Why don't most Apple customers think like normal consumers? All they think about is, I want Apple to make lots of money? Strange.

That is the most ridiculous thing I keep hearing from people that have no idea what goes on in the world. Seriously no one, not ONE single person just throws their money at Apple because they want Apple to make money.

People buy Apple products because, dare I say it, they are GOOD products! People don't just buy Apple because its Apple. That idea is nothing but a myth stirred up by the people who hate Apple and its users for no reason.

By your same token of thought I could say that people who buy MS products because they enjoy them throw their money at MS only because they want MS to succeed. Doesn't make much sense when you reverse it does it?

I am just sick of these comments, its all thats on Macrumors anymore.

 

[*LTD*]

If you have an iPhone and no APPL stock, you're paying a huge premium to be part of the club.

The best tends to cost more. Users of the #1 smartphone vendor on the planet seem to agree.

Pretty good marketing to be able to convince users that a company making 50+% profit on every sale is good for the users of that product.

We don't care how much profit Apple is making, though it's great to see they're a HEALTHY company that can thus CONTINUE to make great products. So our investment in the Apple ecosystem will LAST.

All we want is the best User Experience. It looks like it's quite affordable, too.

This doesn't "drive innovation" so much as it drives up dividends for rich people.

It's a *product* of innovation. Apple's (continued) profits are the result of consumer response to their innovation. They can be nothing else.

 

[Benjamins]

I think, if anything, it's the other way around. Without Google, those other manufacturers would be selling far fewer phones.

now that they have WP7, Android is no longer the only game in town.

Google might end up paying HTC, Samsung etc to use android. Just like Google's paying Apple/Mozilla to use Google as the default search engine.

 

[gkarris]

I like how Nokia's Blue is being replaced by Apple's Blue...

 

[*LTD*]

All they think about is, I want Apple to make lots of money? Strange.

I just wanted an iPhone, dude.

I kinda figured I'd have to pay money to get one.

I didn't realize paying for stuff wasn't cool.

 

[smeade]

For the amount of trouble-free technology and daily utility I get from my iPhone, it's a bargain - even with a 2 year commitment and high carrier prices. I think it's priced just right.

 

[rayray5884]

Wouldn't it be nice if they lowered their prices a bit instead of lining their pockets? Now that would be something to praise them for, not this idiotic bragging about how much money they make. Why don't most Apple customers think like normal consumers? All they think about is, I want Apple to make lots of money? Strange.

My previous, and first laptop, was a Dell. It gave me a ton of grief. My previous, and first router, was a Linksys. It gave me a ton of grief. My previous phones were Nokia, Sanyo, and Samsung flip phones. They worked as dumb phones but their firmware was never updated despite regular bugs in the software. Support for hardware issues was a pain because most stores weren't 'corporate' stores and could not swap out your phone for a new one at the time.

I now have a MacBook (early '08), an iPhone 3G and 4, an Airport Extreme, and an iPad 2. They give me as close to zero grief as one could hope for. I'm not simply 'lining their pockets', I'm paying for a quality product that is well designed and supported just as well. To me it's worth it.

 

[iScott428]

Unless one of these companies actually comes out with a product that can compete with the 3gs, Apples share will just continue to grow.

Also if I were any of these companies I would be attempting to give my left nut to strike a deal to license iOS. The fragmented Android platform and bull WP7, stand no chance. HP's Web Os I think has the best chance to compete.

But unless Apple developed the phone for a licensing company that will never happen. Can we say mobile phone monopoly because all other companies failed compete! Yes these other companies may sell phones, but business need to make money, not push product.

 

[iScott428]

I now have a MacBook (early '08), an iPhone 3G and 4, an Airport Extreme, and an iPad 2. They give me as close to zero grief as one could hope for. I'm not simply 'lining their pockets', I'm paying for a quality product that is well designed and supported just as well. To me it's worth it.

Preach it brother, quality and service always costs more.

 

[Popeye206]

So basically, if you're an Apple shareholder, but not an iPhone customer, then this is great news.

If you are heavily invested in Apple, and have an iPhone, you might be coming out on top.

If you have an iPhone and a little bit of APPL stock, you're probably not even getting your own "profitshare" back over a 2 year contract.

If you have an iPhone and no APPL stock, you're paying a huge premium to be part of the club.

Pretty good marketing to be able to convince users that a company making 50+% profit on every sale is good for the users of that product.

This doesn't "drive innovation" so much as it drives up dividends for rich people.

LOL! Funny analysis... but so far off.

First of all, you have to look at the value of the iPhone. In the US, it's $200 under a 2 year contract. Right in there with other smart phones of it's caliper. So as a consumer, the value is there and worth every penny.

Now just because Apple can negotiate better contracts, or is more efficient at building the iPhone than others has nothing to do with price. It's their job to make money. I don't care if it costs them $20 to make the iPhone 4... it's worth the $200 I paid for it.

But, with that said, probably why Apple's profit is there is because they ship more iPhones than any other model made. Plus people like LG have 10 models to deal with, where Apple has 1... 2 if your count the 3G.

Just because Apple is smarter than the others, does not mean the consumer is getting ripped off.