Apple ships 6% of mobile devices but milks 77% of market profits

[MightyJordan]

Samsung shipped about 50 million smartphones last quarter ? about double the number Apple sold and, according to IDC, the largest number of units ever shipped by a handset vendor in a single quarter. But does it matter?

No.

Because when you look at the broader mobile industry, Apple ? thanks to the higher gross margins of the iPhone and iPad ? far outshines its rivals in both revenue and operating profits.

Though it shipped only about 6 percent of the industry?s smartphones and tablets in the second quarter, Apple captured about 43 percent of the industry?s revenue, according to Raymond James analyst Tavis McCourt. And it generated an astonishing 77 percent of the industry?s operating profits. This, even in a seasonally weak period for iPhone sales.

So while Samsung outselling the iPhone two to one is a nice milestone and, no doubt, a point of pride for the Korean company, it?s not the financial victory that it might first appear. Samsung might be the mobile industry?s king, but Apple still rules overall in the most important metric of all: Profit.

?Ultimately, profits are the feedstock of innovation; and, innovation drives profits,? McCourt writes. ?Until Samsung starts generating more profits than Apple, we would not be overly concerned with who has the unit share lead. Remember, HP and Dell still sell a lot more PCs than Apple sells Macs, but does it matter??

Probably not to Apple.

http://allthingsd.com/20120806/apple-gorging-on-mobile-industry-revenue/

No surprise there then. Hooray for the Apple Tax! /s

[Mackster]

But Jony Ive said they don't do it for money! :shifty:

[vacs]

Any sane person would now question the price strategy of Apple products after reading this article and reconsider ever buying again an over-priced Apple device but I guess most people are that much blinded by Apple marketing department that they will jump in the air out of happiness, yell: "Apple is so amazing" and run into the next Apple-store to buy the new iPad/iPhone/MacBook/Whatever.

Crazy world.

[Ryoken]

Apple's target market are not the people that come in and want a free phone, which is where most of the shipped devices come from..

It's like comparing budget cars to sports/luxury cars then ranting over how few they ship and their cost.. It's not the same market.. renders all the announcements of numbers like this all but meaningless for both sides..

[bandit_liberty_rumble]

Any sane person would now question the price strategy of Apple products after reading this article and reconsider ever buying again an over-priced Apple device

Do you usually make your purchasing decision based on the profit margins of the manufacturer?

[shifts]

Love articles like these that base things on reports that miss out things such as R & D, operating costs, manufacturing and distribution etc etc.

Why must the forums always start ripping on iPhone owners at the drop of the hat? How much are samsung making from each phone, why does neowin never report on the build costs on a handset like that for example. The Android OS is free right ?? so surely Samsung, in this example, would be up there as well. After all wasn't something like 10m units shipped last quarter or something like that?

Another thought I've had is that if Apple is making so much money from iPads and iPhones why is everyone else competing in that area not just price slashing to get the market share etc? If anything their high prices means they set the market and everyone else can just come in around about certain price points because Apple have done the testing for their competitors.

Is the report saying that with all the companies making Android handsets and if you were to combine their net profits, Apple is still making more?

Would people hate the iPhone less if it was cheaper and in turn had all the associated ramifications on that like reducing staff etc?

[.Neo]

Any sane person would now question the price strategy of Apple products after reading this article and reconsider ever buying again an over-priced Apple device but I guess most people are that much blinded by Apple marketing department that they will jump in the air out of happiness, yell: "Apple is so amazing" and run into the next Apple-store to buy the new iPad/iPhone/MacBook/Whatever.

Crazy world.

I'd gladly pay the true price up front for an ad free product. Rather that than being lured into thinking I got a better deal, but ending up paying the full price afterwards through the means of ad supported software I knew nothing about. The latter being Microsoft's strategy.

[neo1911]

But Jony Ive said they don't do it for money! :shifty:

Is that even related?

He may say anything and yet Apple continues to gain profits.

[rfirth]

I'd gladly pay the true price up front for an ad free product. Rather that than being lured into thinking I got a better deal, but ending up paying the full price afterwards through the means of ad supported software. The latter being Microsoft's new strategy.

Are you talking about Microsoft's online services? Why are you talking about online services when the topic is mobile devices? And why do you think this is a new strategy?

[.Neo]

Are you talking about Microsoft's online services? Why are you talking about online services when the topic is mobile devices? And why do you think this is a new strategy?

Instead of asking a question and giving the answer yourself in the form of a second question, try waiting for the actual answer. No, I'm talking about Windows 8 which will be running on mobile devices as well. That said, online services are an increasingly more important aspect of said mobile devices too. I edited my post to get rid of "new" (you beat me to it) because I guess it isn't a totally new practice for Microsoft. Although I do believe it's new that default Windows apps now spot ads too.

[Eddo89]

You know, this really just tells me one thing:

Good business model. They had a good idea, and maxmised the profits very well. You got to give them that, as much as I loath their current patent trolling.

[Boz]

and this is good for consumer how?

[Raa]

I just don't understand how people can justify that sort of markup...

[Chicane-UK Veteran]

If you don't like them or their prices, don't buy their products.

Evidently lots of people do, and are happy to pay for it. And if they're happy or stupid (depending on your viewpoint) to pay it, then kudos to Apple.

They're a successful company making products people love - fair play to them.

[szo]

There are a lot of factors to such high profits. Price is not the only thing. The cost for Apple to manufacture their products is getting less and less every single time, because they usually spend billions of dollars in advance to buy crucial components very cheaply like flash memory and other important electronics. Also, their production cycle is very streamlined. Didn't we read somewhere how Apple didn't have to pay their suppliers of manufacturers such as Foxconn in advance and how they would pay them after nearly 84 days? During this quarter, they would recoup all the manufacturing costs. Furthermore, Apple is damn stingy. When was the last time that you heard they did a billion dollar or multi billion dollar acquisition like microsoft ($8.5b for skype) or google ($12b for Motorola)? Their larget acquisition was a semiconductor company recently for $500m. What I am saying is that they're really good at being efficient and saving money. We rarely hear of them having to write off giant losses like Microsoft's $8 Aquantiative acquisition failure. They also make very profitable agreements with the telecom companies on how much profit share is returned to them. Why is Sprint willing to spend $15billion just to have the iPhone? There is huge demand and Apple knows that and can leverage their way to ask for more! Furthermore, no one is forcing the consumers to buy their products. They are not even a necessity in the business or industrial field like microsoft, but people still buy their products. There's more to the story than just high prices. It's also because of the high demand for their products. When you have such high demand, of course you are going to keep high prices. The shareholder's want that and that's why Apple's doing so well.

Also the question should be Apple ships ?% of smart phones but milks.... of market profits?

This should just be about smart phone and not including the market share of feature phones/dumb phones!

[xeleraph]

and this is good for consumer how?

Maybe that's precisely the point: it's not.

[ILikeTobacco]

and this is good for consumer how?

Better question: This is bad for the consumer how? Their cellphones are priced the same as any other smart phone. Sounds like other companies are simply doing business wrong, pun intended. They are turning into the Ford of the mobile phone industry. Anyone who hates on them being able to deliver a product the consumer wants at the price they agree with is just being arrogant at that point. Of course they will have the highest profits and common sense should tell you that. They don't compete in the free phone market which is why their total market share is so low overall, but look at there smart phone market share and you'll understand why their profits are higher than everyone elses.

[PGHammer]

Better question: This is bad for the consumer how? Their cellphones are priced the same as any other smart phone. Sounds like other companies are simply doing business wrong, pun intended. They are turning into the Ford of the mobile phone industry. Anyone who hates on them being able to deliver a product the consumer wants at the price they agree with is just being arrogant at that point. Of course they will have the highest profits and common sense should tell you that. They don't compete in the free phone market which is why their total market share is so low overall, but look at there smart phone market share and you'll understand why their profits are higher than everyone elses.

Actually, the iPhone 4S is only priced equally to unsubsidized/lightly-subsidized phones - don't believe me; go to the online stores of any of the major carriers (or better yet, walk into a retail store of one) and price-compare yourself. And I am *talking* smartphones - not either feature phones or dumbphones (which are now pretty much left to lifeline services); it is actually getting *harder* to buy a feature phone from a major carrier - not easier.

[BajiRav]

Won't this be skewed by those cheap Chinese fakes? Well still valid in a way.

[MightyJordan]

Actually, the iPhone 4S is only priced equally to unsubsidized/lightly-subsidized phones - don't believe me; go to the online stores of any of the major carriers (or better yet, walk into a retail store of one) and price-compare yourself. And I am *talking* smartphones - not either feature phones or dumbphones (which are now pretty much left to lifeline services); it is actually getting *harder* to buy a feature phone from a major carrier - not easier.

Unfortunately, that is correct. I say "unfortunately" because the 16GB iPhone 4S is ?500 SIM-free over here, and so is the Samsung Galaxy S III, as well as the Samsung Galaxy Note. Amazingly, the Samsung Galaxy Nexus is ?530. And for comparison's sake with the current flagship phones, the Nokia Lumia 900 is ?430, the HTC One X is ?480, and the BlackBerry Bold 9900 is ?450.

[+Fahim S. MVC]

It's not bad for the consumer. The difference is Apple don't allow their mobile devices to be subsidized by carriers like other manufacturers. They also take a large cut of carrier revenue compared to other manufacturers.

What it amounts to is a very sensible (business-wise) approach to the mobile device space, which others would be wise to imitate.

[ILikeTobacco]

Actually, the iPhone 4S is only priced equally to unsubsidized/lightly-subsidized phones - don't believe me; go to the online stores of any of the major carriers (or better yet, walk into a retail store of one) and price-compare yourself. And I am *talking* smartphones - not either feature phones or dumbphones (which are now pretty much left to lifeline services); it is actually getting *harder* to buy a feature phone from a major carrier - not easier.

Here is a list of phones with a 2 year contract subsidized price:

Samsung Galaxy Note - 249.99

Samsung Galaxy S III - 199.99

Apple iPhone 4S - 199.99

HTC Titan II - 199.99

Samsung Focus - 199.99

BlackBerry Bold - 199.99

http://www.att.com/s...martphones.html

The 4S is Apples most updated smart phone and is priced exactly the same as other brands most updated phones.

EDIT: Note that I am speaking from the perspective of the USA. It may be different in England which posted after mine seem to point at a different situation.

[szo]

It's not bad for the consumer. The difference is Apple don't allow their mobile devices to be subsidized by carriers like other manufacturers. They also take a large cut of carrier revenue compared to other manufacturers.

What it amounts to is a very sensible (business-wise) approach to the mobile device space, which others would be wise to imitate.

:)

[ILikeTobacco]

It's not bad for the consumer. The difference is Apple don't allow their mobile devices to be subsidized by carriers like other manufacturers.

I am going to assume you don't live in the USA, where the iPhone is subsidized by carriers.

[Hardcore Til I Die]

I am going to assume you don't live in the USA, where the iPhone is subsidized by carriers.

And the UK!