Apple's Share of Smartphone Industry Profit Rises to 92%, Despite iPhone Representing Less Than 20% of Sales

[throAU]

I believe this is a factor. Those that disagree fail to realize that Apple rejects sub-standard components. That's a fact.

They also sell a lot of devices with a lot of high end flash. Compare flash read/write speeds in iOS devices to other devices some time.

As to a source for that claim? Can't remember exactly where, would have been 6 months ago, likely Arstechnica from memory.

But yes, if you're adding say, 16 GB of extra flash to say 100 million phones, you've placed a much more massive demand on your flash supplier. From what I've read, Apple's flash suppliers are producing as much of the flash apple use as they can already - if Apple tries sticking more flash in their devices, they will simply have to make less devices in total as there isn't enough of the flash they consume to go around. Thus, they make the devices with more flash relatively expensive - a phone with 64 GB is 3 additional 16 GB phones they can't make... and apple already sell as many iPhones as they can produce...

 

[bushido]

why wouldn't you be able to listen to music or work on a document over 4g?

cuz ... data caps. cant do much with 64kbs for the rest of the month

 

[gotluck]

32gb minimum storage and 2GB OF RAM for Christ sakes!

hah, honestly I would rather have 2gb ram if I had too choose.. so at least that seems to be coming!

16gb storage requires discipline, cant do much to accommodate lower RAM

 

[CrAkD]

hah, honestly I would rather have 2gb ram if I had too choose.. so at least that seems to be coming!

16gb storage requires discipline, cant do much to accommodate lower RAM

I've never been a ram nut until I got my 6+ I'm sick and tired of low ram crashes and slow downs and safari reloads enough is enough all ready.

 

[wiz329]

You have a twisted understanding about how the market works.
Of course a company has to please its customers. Otherwise the same customers will eventually stop buying.

Company's exist to make profits, that's a fact. But maximizing profits is not done by optimizing costs in the short term but also by making sure customers keep buying and thus maximizing revenue in the long term.

Yes.

Yes.

Yes.

This is why Apple was successful in the first place. And also why so many companies fail.

 

[Zoboomafoo]

I dare Tim to mention this at the next keynote when he's talking about how great the iPhone is, or Phil to tweet about this as one of the real justifications for keeping a 16GB base model (in addition to getting people to subscribe to iCloud), or Jony to mention this in his next video about what a marvel the next iPhone design is (this will be our most amazingly profitable design ever).

I feel like there's a funny or die video in this post somewhere...

 

[H2SO4]

They do, it's called dividends

MrKramer said ‘customers’, not shareholders. One might also be the other but there is a significant difference.

 

[H2SO4]

And the fact they don't play in the cut-throat low-end of the market keeps the margins high.

The iPhone is a remarkable product line. High end and high demand. There are so many cheaper alternatives that people could go for and still be relatively happy, yet they will pay the extra for an iPhone.

That’s not the whole story. There are plenty of people that are part of the eco system but that don’t want to chance leaving even though they might not like the phone.

 

[H2SO4]

I've never been a ram nut until I got my 6+ I'm sick and tired of low ram crashes and slow downs and safari reloads enough is enough all ready.

You must be in the 1% that doesn’t love your iPhone?

 

[CrAkD]

You must be in the 1% that doesn’t love your iPhone?

I love my iPhone I'd never get an android but it's time for apple to bite the bullet with the ram

 

[JustThinkin']

Hmm I'm not sure. Everybody seems to be happy but this is just a solid reminder of the remarkable profit margins Apple are making from these devices. And with 16GB still as the base I can't help but feel a little bitter that they don't do a bit more to increase storage. We do pay an awful lot for these devices.

Sometimes it's important to remember how hard we work for our money and how much we pay to a company. There's just something a little cult-like about throwing cash at a company and then cheering when we find out how much profit they've made. It seems really strange.

This isn't likely to be a popular opinion — I just feel a little jaded and I fully appreciate how petulant I must be sounding.

But if a company makes products we like/need/use, it's not so strange to be happy for their success. When a company makes money we know they'll be around to support our products and continue making new ones.


If they stagnate and stop developing the company (and its products), then they become more like a "consumer" than a "producer." That's when we should get upset.

 

[H2SO4]

I love my iPhone I'd never get an android but it's time for apple to bite the bullet with the ram

Really? Shame.
I wouldn't get an Android, (I don’t think), but I certainly don't love my iPhone. I think I have it in a different perspective than others. If someone said to me give up machine washing or give up a smart phone, I’d be saying goodbye to the phone rather than have to go to the launderette.
It has utility and usefulness to me but that’s it. It’s a phone.

 

[ArcaneDevice]

There two reasons:

1. There's no competition. I hate Apple since Steve Jobs is not there anymore, and I think their last products are crappy. But I've been using them for 15 years and I know the reasons why

Well the problem is that no competitor has been friggin capable of even matching these reasons. Android Lollipop is beautiful, maybe better than iOS8, but all the messy option, categorisation, the completely obnoxious updates AND the REALLY UGLY android phones puts them in a category nowhere near the iPhones.

2. Because of this, they have the power to overprice un-innovative, low/obsolete spec'd, low quality and even...ugly iPhones at margin NEVER reached by any company before. And there are many stupid latecomer fans, which most people even casual Apple user won't argue about, because even if Apple has become obvious crap, there's no competition to compare it out there.

Competition is irrelevant. This entire scenario is a result of Steve Jobs influence. He began the Apple mantra of selling shiny underpowered devices to the tech ignorant. Apple has been about getting away with the cheapest and most underpowered specs at the highest price possible since the iMac hit the market.

Before this iPhone "surprise" news Apple were dropping cheap underpowered video cards and chipsets into their highest priced Macs, skimping on RAM in everything, removing ports and flexibility and spinning that as a good thing, taking out what used to be pack-in accessories and selling up to the consumer instead ...

This isn't new. This is Apple being Apple. They make money because the Apple market is now filled with superficial users who just want the shiniest toy on the block.

 

[ArcaneDevice]

Apple offers a 16 GB option for the most price sensitive buyers. That's the only reason.

Baloney. They offer it because they know they can get away with charging a high price for a low spec. If you want an iPhone because all your school friends are using it or your family is using them and you can't afford anything else, that's the only entry point.

32GB entry point would barely impact Apple's profit margins. It's a pathetic argument to defend the 16GB stance as a "favor" for the consumer.

 

[MacFan1957]

So they're the best of a bad lot, but being the best of a bad lot doesn't give them the right to charge a premium. Just checking I've got that straight.

What a ridiculous thing to say. Being recognized by consumers as a premium brand takes a lot of hard work. Any company that gets that kind of name fully deserves it, as does Apple

I think its fair to say, no you don't have that "straight", not even close!

 

[cdmoore74]

The one thing Samsung wished it could copy

Think about what you're saying. Apple still has the nerve to release a 16GB iPhone at $650 when Samsung only charges $600 for 32GB (Verizon) and recently Samsung offered a $100 rebate if you bought the 64GB version.
Do people here enjoy paying more for less? Sure seems like it. And I own both the S6 and iPad Air 2 so I don't pick sides.
And it's a damn shame the Apple has the nerve to defend/release a 16GB iPhone in 2015. Apple knows that 16GB suck so they force people into spending $100 more.

 

[QCassidy352]

You're absolutely right. Again I know there's really not a viable alternative and that these prices aren't anything new in the market. It's just that they are making an awful lot of money, and coupled with Phil Schiller's rhetoric of 'well we can't really afford to up the 16GB base storage' really doesn't sit right with me.

It doesn't sit well with me, either. But the only thing we can do is vote with our wallets because frankly, Apple doesn't care what we say on message boards - only what we buy.

I have a 64 GB iPhone 6. And if the base had been 32 GB I probably would have gotten that. So I can rant on here how unhappy I am that the base model is 16 GB, but my "wallet vote" was exactly what they wanted - an upsell to an even more profitable model. Well played, Apple. Well played.

 

[ApfelKuchen]

"...with the two combining to tally up for more than 100 percent of the industry's profits, "because other makers broke even or lost money, in Canaccord’s calculations.""

This is a stupid way to calculate, giving the profit makers a way to exceed 100% because others lose money. Ridiculous concept.

If they want to do a more reasonable calculation it would be ROI and ROS based.

The article is about a very simplistic measurement - share of estimated industry profits. In that sense, 100% is 100%. If Apple has 92%, Samsung 15%, then overall, the rest of the industry has to be earning -7%.

I agree, there are far better ways to measure a company's fiscal performance, but that's not what this is about. It's not intended for people who are making investment decisions. There are other companies producing "reasonable calculations," which, for the most part, are far more difficult to read, no less Tweet. This is purely done to attract attention, and as such, "nuance" would be a buzz-kill. Even a caveat like "plus/minus X%" hasn't entered into the discussion. It's an "elevator pitch," not a prospectus.

 

[Analog Kid]

This argument about the 16GB model remains absurd. Apple also sells 8GB, 64GB and 128GB models that some people fail to notice. If the 16GB wasn't in demand it wouldn't sell.

Profit is a measure of customers' perceived value. It is the difference between what people value the device at and what it costs to make it. If people thought the iPhone was a bad deal, they would pay less for it, or not buy it. If they don't buy it, then the fixed costs of sales would lead to lower profit margins (in addition to lower unit sales). Either way, profits would fall.

As a thought exercise, let's assume the critics are right and increasing storage is in Apple's interest because people would be happier with a 32GB "base model", whatever that means. If customers were happier, they would value the product more and, if they value the product more, profits would rise. If the profits rise, the critics would become more incensed and demand a 64GB "base model", whatever that means.

Eventually the demands would escalate until profits fall, and the critics would have to concede that it is no longer in Apple's interest to increase storage. They would have just found the profit maximizing point.

That is, they would have just done what Apple's very competent staff is doing all the time-- as is Samsung's, and the rest. Other companies aren't losing money because they think customers would be happy paying them less than it costs to make their product, they're losing money because they can't make a product that people are willing to pay enough for.

 

[Analog Kid]

"...with the two combining to tally up for more than 100 percent of the industry's profits, "because other makers broke even or lost money, in Canaccord’s calculations.""

This is a stupid way to calculate, giving the profit makers a way to exceed 100% because others lose money. Ridiculous concept.

If they want to do a more reasonable calculation it would be ROI and ROS based.

I'm not following... ROS is basically profit over revenue, right? So if someone is losing money and therefore has negative profit, how does dividing it by a positive revenue make it not negative?

It's not giving anyone anything-- it is simply saying "there is this much money to be made, here's where it's going". ROS would actually make Samsung look worse than it is because it would completely discount their advantage in unit sales. Lower margin/ higher volume (Samsung) is not necessarily worse than higher margin/ lower volume (Apple), it's a business model difference. You can't know which is performing better overall until you multiply through by unit sales.

ROI isn't anything that anyone outside the board room is going to be able to guess.

 

[You are the One]

Impressive numbers anyways. I'm very happy with my rMBP 2012 and my 5s. They give me more value/cost than any alternative. Really looking forward to the nextgen rMBPa though this one will do its job fine for another 1-2 years.

 

[Hastings101]

I still think market share is going to start to hurt them eventually. Then again, in 10 years we probably won't be using Android or iOS things anymore.

 

[kdarling]

A new report out over the weekend by Canaccord Genuity estimates that Apple has recorded a 92 percent share of the world's entire smartphone market in the first quarter of 2015, which is up from 65 percent a year earlier. The company managed to do so on less than 20 percent of actual smartphone sales, which the Wall Street Journal accounts to the company's "ability to command much higher prices for its phones."

Which is why the iPhone only sells well where there's a big subsidy to hide its true price from the consumer.

Also, other phone makers make inexpensive smartphones so that even people in poor countries can communicate. Sometimes that means a profit as little as $3 per phone, but that's the price of being the good guys.

It also helps that Apple doesn't pay taxes on much of its revenue, by keeping almost 2/3 of its cash outside the US.

Plus, they continue to delay paying per-device royalties to companies like Motorola, even after years of using their IP.

They also sell a lot of devices with a lot of high end flash. Compare flash read/write speeds in iOS devices to other devices some time.

For years, Apple used some of the cheapest NAND you could get. And recently, Apple went cheap on the iPhone 6 trying to use TLC NAND in place of MLC.

But yes, their sequential access speeds are up lately. Random access speeds are still middling, though.

 

[unplugme71]

Hmm I'm not sure. Everybody seems to be happy but this is just a solid reminder of the remarkable profit margins Apple are making from these devices. And with 16GB still as the base I can't help but feel a little bitter that they don't do a bit more to increase storage. We do pay an awful lot for these devices.

Sometimes it's important to remember how hard we work for our money and how much we pay to a company. There's just something a little cult-like about throwing cash at a company and then cheering when we find out how much profit they've made. It seems really strange.

This isn't likely to be a popular opinion — I just feel a little jaded and I fully appreciate how petulant I must be sounding.

It's best to be a shareholder in a company you are part of a cult. I've made more money in stock than I've spent now. I bought 500 shares when it was just under $100 pre split.

 

[Keane16]

[COLOR=rgba(0, 0, 0, 0.701961)]

Which is why the iPhone only sells well where there's a big subsidy to hide its true price from the consumer.

Also, other phone makers make inexpensive smartphones so that even people in poor countries can communicate. Sometimes that means a profit as little as $3 per phone, but that's the price of being the good guys.

It also helps that Apple doesn't pay taxes on much of its revenue, by keeping almost 2/3 of its cash outside the US.

Plus, they continue to delay paying per-device royalties to companies like Motorola, even after years of using their IP.

Is this parody?

"Good guys". "Doesn't pay taxes". And I'm sure they're just brushing the royalty bills under the carpet at Cupertino.

I'm sure the good guys making tech out of the goodness of their hearts pay every tax at face value, ignore all potential loopholes all while paying every legal bill instantly without question.

Sometimes I do love the ridiculousness of MacRumors, great for a laugh to see what some people really believe. [/COLOR]