Apple accounted for around 92% of the total operating income from eight of the top smartphone makers in the first quarter, an increase from 65% in the previous year, according to a report from Canaccord Genuity managing director Mike Walkley. The report notes that Samsung’s share is limited to 15%, says MarketWatch.
Apple changed the scenario
Further, Apple and Samsung jointly account for more than 100% of industry profits as other mobile makers are running in losses. Canaccord’s findings show the volatility in the smartphone business, which was triggered by Apple when it launched the first iPhone in 2007. Nokia was the clear winner at that time, hogging around two-thirds of smartphone industry profits, according to Canaccord. But by the end of the decade, BlackBerry and Apple emerged as the new mighty competitors to Nokia, and Apple and Samsung divided the industry profits 50-50 by 2012. Now, Apple is way ahead of its rivals in terms of profits as high-end customers switch from Samsung to Apple.
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Apple’s share of the industry’s profits is nothing less than impressive as the company sells less than 20% of the smartphones. The difference between Apple and its competitors is what enables the iPhone maker to demand much higher prices for its phones. Other rivals majorly depend on Google’s Android system, so they are finding it difficult to differentiate their products and hence are competing only on the basis of price.
Android facing headwinds
Last week, a slew of events more or less hinted at the current scenario in the smartphone industry. Apple reportedly ordered its suppliers to start assembling a record number of new iPhone models. On the other hand, Samsung guided for lackluster profits while HTC reported a loss and Microsoft wrote off 80% of the value of the smartphone business it acquired from Nokia last year.
Neil Mawston, executive director at market research firm Strategy Analytics, said various Android vendors are struggling between low-cost, high-volume brands such as Xiaomi and Apple’s premium smartphones. Mawston said, “There is that danger that you get trapped in the middle,” adding that there are around 1,000 smartphone brands with several hundred in China alone.
Samsung, which was once a leader in all price segments, is now seeing headwinds from low-cost smartphone makers. The Korean company now expect profits to drop for a seventh straight quarter in the three months ended in June. Now it seems Samsung missed demand estimates for its latest phones and ordered too many Galaxy S6 phones.