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Apple’s Massive Share of Smartphone Profits is Worrying

February 17, 2016 - Written By David Steele

It’s no secret that Apple and Android have carved up the smartphone market between them. Android has the market share but Apple has the money. There are several structural reasons for this, including how Google have given away Android whereas Apple jealously guards iOS. As a business, Apple have a firm rein on controls and this is reflected in a new chart available at the source, which shows the market and profit share of a number of the world’s largest smartphone manufacturers. The long and short of it is that Apple took 91% of the profit in 2015 and the next largest, Samsung, took 14%. And yes, this adds up to 105% and the reason for this is because a number of competitors lost money; the biggest loser in the data being Microsoft, having lost 3% of the market’s profit during 2015. The data is imperfect as Chinese manufacturers do not, generally, disclose profits. However, consider this: Apple took 91% of the smartphone profit on the back of 17% of the worldwide market share. Samsung, with 24% market share, took 14% of the profit.

What’s going on? Apple’s smartphone business generates a high margin thanks to their careful rein on spending, which includes building their products under tightly controlled facilities typically in China. The technology used in their devices is often considered to be beautifully refined and well positioned. By way of an example, you won’t find a potentially under-utilized octa-core System-on-Chip under the skin of the iPhone, but instead a more restrained and efficient in-house designed dual-core chipset. However, whilst their product development is intelligent, the real genius behind Apple is in their marketing: their products are very expensive in comparison to the competition and essentially no better, yet people still buy them.

We have already reported on the slim margins that almost all Android manufacturers record on their devices and the situation is not getting any easier. Samsung turn a profit for every device sold, LG make a few cents and almost everybody else loses money, which is reflected by their negative profit figures. This isn’t a sustainable business model and things need to change. Apple can spend progressively and relatively less and less on their innovative product development and still stay competitive with the rest of the market. It’s difficult to see how the current situation helps consumers: Apple has no incentive to truly innovate. Meanwhile, businesses tempted by filling their devices with less than useful new features must be tempted to introduce more and more radical ideas into their smartphones to try to tempt people away from iOS.