Commentary

Apple Dominates Smartphone Profits

Despite the growing proliferation of smartphones and smartphone manufacturers globally, one company absolutely dominates profits on devices shipped. Of course, it’s Apple. 

True to form, Apple’s “quality over quantity” (though for some, that might read as “perceived quality”) approach to its business has placed the company in a rarefied atmosphere. According to Canaccord Genuity research released this week, Apple made 94% of the share of industry profits, up from 85% one year ago, and 92% last quarter. Here’s the crazy part: Apple only produced 14.5% (about 48 million) of the smartphones sold last quarter.

The average price of an iPhone was $670, and Apple sold a whopping 13 million iPhone 6S and 6S Plus units during launch week. The two new models gained upgraders and Android converts in key markets across the globe, including the U.S. and China.

However, these numbers don’t tell the whole story, as some of Apple’s up-and-coming competitors in China are deliberately unprofitable in order to gain greater market share with competitive pricing.

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Those unprofitable companies are competing with other Android-based phones where, in many cases, the only thing that differentiates them is the price. No one can compete directly with Apple in the luxury-level smartphone market.

With such a huge leading margin, some analysts wonder if Apple’s destiny is to hold steady or lose market share from here on out.

The International Data Company’s (IDC) Worldwide Quarterly Mobile Phone Tracker predicts that phones using the Android operating system will continue to hold about 81% of the market share through 2019, while iOS-based phones will lose about 2% of their share to end up at about 14%.

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