It is no surprise that Apple, Inc. was the winner in global smartphone profits this year with a 79.2-percent haul of the estimated worldwide total operating profits available for 2016 of $53.7 billion. Second place was held by Samsung’s 14.6-percent of global profits or an operating profit of $8.3 billion. The Chinese companies work on a much smaller profit scale, although sales are growing. Huawei accounted for 1.6-percent or $929 million in profit, followed by OPPO, which took in 1.5-percent, and Vivo grabbed 1.3 percent according to Yonhap research.
Apple customers are so loyal that they are willing to pay a high price giving Apple a much higher profit margin. This loyalty allows Apple to bring in more money per smartphone sale than other manufacturers. Apple’s high sales figures give them negotiating power to pay as little as possible for parts and labor, which again adds to their profit margins. Samsung produces many of their own parts that help them in keeping some costs down, but while their devices sell for a premium price, there is less room for profit per device. Certainly, the demise of their Galaxy Note 7 hurt their profits significantly in 2016. Between the launch, recall, revised devices, and then the final recall, it is estimated there were losses as high as $10 billion – not only from the actual costs involved but also from customers that jumped from Samsung to other devices. The Chinese companies always have operated at a lower profit margin in the quest to increase sales by offering a quality product at a lower price. With this type of corporate policy, profits are expected to be lower.
Each company has their own ideology on how to make profits - Apple will charge whatever the market will handle and how much it costs them to make their iPhone has little bearing of how much they charge. Samsung, while they have many other divisions in which to make profits, base their pricing of how much it costs them to produce the device and then adds a little extra to sell larger quantities. The Chinese companies are looking for a smaller profit and higher sales volume, and it seems to be working as sales are increasing for those companies. However, Apple and Samsung are the leading players and will continue to battle for supremacy.