Apple Took 89% Of Q4 Smartphone Profits With Android OEMs In A Race To The Bottom

TechCrunch ^ | 2/26/15 | Ingrid Lunden

[aMorePerfectUnion]

Google’s Android has gobbled up market share world wide, now accounting for over 80% of all smartphone shipped globally. But when it comes to actually making money, Apple is eating all the profits as it continues its focus on premium devices.

Today Strategy Analytics said that Apple in Q4 last year accounted for 89% of all smartphone profits, equating to $18.8 billion, with Android taking only 11%, or $2.4 billion.

The blow for Android is softened only slightly less so only by the fact that other platform players like Microsoft, Blackberry and Firefox seemingly made no profit at all.

[aMorePerfectUnion]

The figures given here relate to profits generated by handset makers, not the services ecosystem and potential profits made by app publishers and others. Overall, smartphone profits were up 31.4% compared to the same quarter a year ago.

When it comes to who is performing best among Android OEMs, the results reveal growing competition for Samsung.

Neil Mawson, research director for Strategy Analytics, says the “three big profit drivers” for Android are Samsung, Huawei and Xiaomi.

“Samsung is the Android giant that delivers most of Android’s smartphone profits worldwide,” he tells me. Mawston says the company is not breaking out exact shares, except to say that “Samsung accounted for well over half of all Android smartphone profits globally in Q4 2014.”

As a point of comparison, in 2013, Samsung accounted for 95% of Android profits. That was a time where there was significantly more parity between Apple and the Korean handset maker both in terms of unit sales and revenues, with Apple accounting for “only” 57% of profit at the time.

It’s not too surprising that Apple — which last quarter had the most profitable company of any quarter, ever — is dominating in smartphone profits, but what is striking is just how wide the gulf has become.

The bigger picture seems to be that Android handset makers are in something of a race to the bottom at this point: the markets that are driving growth in smartphone adoption these days are emerging economies, where consumers are price sensitive. That’s leading to the production of a number of models that are pushing down the average sale price for devices, which long ago dropped below the $100 mark.

Apple may have missed the boat (so far) when it comes critical mass in market share in these developing markets, but it has more than made up for it by making a killing in places where it is strong. China is one such crossover example. While there is clearly a market for lower-cost and Android devices, Apple has been posting record sales in the country, reporting sales of $16 billion in the country in Q4. (China is not — yet — however overtaking Apple’s sales in markets like the U.S.)

In the world of smartphones, Android’s gains do not equal Apple’s loss. But Android’s gains might translate into Android losses down the line, Strategy Analytics notes.

“Apple’s strategy of premium products and lean logistics is proving hugely profitable,” Mawston writes in the report. “Android’s weak profitability for its hardware partners will worry Google. If major smartphone manufacturers, like Samsung or Huawei, cannot make decent profits from the Android ecosystem, they may be tempted in the future to look at alternative platforms such as Microsoft, Tizen or Firefox.”

[aMorePerfectUnion]

“Apple’s strategy of premium products and lean logistics is proving hugely profitable,” Mawston writes in the report. “Android’s weak profitability for its hardware partners will worry Google.”

Money sentence. Literally.

[Pearls Before Swine]

“We’ll make it up on volume.”

Or, this is an ongoing and very interesting study on market segmentation.

[Democrat_media]

Android has 80% of the smart phones world wide.

Steve Jobs is gone and Apple’s days are numbered

80% market share : do the math.

[ican'tbelieveit]

Love my new Samsung Note. It is a slick, well performing device.

[Star Traveler]

Hey Swordmaker, an article on Apple gobbling up ALL THE PROFITS for the smartphone market. It makes you wonder why those other companies EVEN BOTHER being “in business. AND, it also makes you realize that those other companies are not going to put much effort into making a better product when there is hardly any money to be made by them!

[DesertRhino]

Keep hearing theses fourth quarter stories. When apple finally released a smartphone with a decent sided screen and sold a ton of them. Samsung didn’t have a new release that quarter. So that’s the quarter a these breathless fanboy stories are based on.

[Will88]

Apple is simply in a position where brand preference allows them to premium price devices produced in cheap labor nations. It’s the formula for high profits as long as their customers are willing to pay their prices.

[aMorePerfectUnion]

“80% market share : do the math.”

Well, OK then!

Apple: 100% potential profits X 89% = 89% of profits generated by all smart phones worldwide.
Samsung competitors: 100% potential profits X 11% of generated by all smart phone profits worldwide

Apple: Keeps 89% of profits.
Samsung competitors: split 11% of profits.

OK. You’re wrong so far.

[Star Traveler]

The market analysis reports are that Android people are “jumping ship” over to Apple ... :-) ...

Another thing to keep in mind is that Apple ONLY makes smartphones, so their sales are solely based on that alone, while other manufacturers make even dumb phones and their sales are based on a combination of dumrb phones and smartphones ... oops!

[pieceofthepuzzle]

IMHO the market is ripe for an upstart effort to ‘out-hip’ Apple. I've been using Apple computers exclusively for a long time, so this isn't an anti-Apple comment. I think Android devices are looked at as ‘copycat’ at this point (real or not) and not particularly innovative. Apple's Achilles heal is that their success has been in part predicated on their ‘being different’ and ‘fresh’. Inevitably, they are now ‘mainstream’.

[Democrat_media]

Android has 80% of the world’s smart phones. In China and India alone Android will have 2 billion more smart phones in the next couple of years

Apple will be gone in 5 years . mark my words

goodbye Apple na na na hey hey goooddbye! lol

[Star Traveler]

Samsung’s last six quarters show a CHAMGE from the previous quarters (previous to the six quarters) and it has flipped into a downturn for them, while Apple’s is showing an upturn. So it’s more than one quarter (it’s six, at the very least)

[Star Traveler]

Apple “has been disappearing” for the last 30 years ... LOL ... according to the “crazy people” ... :-) ...

[bigbob]

Totally different business models

[Pearls Before Swine]

IMHO the market is ripe for an upstart effort to ‘out-hip’ Apple.

Samsung tried for a bit. Remember the commercial a year or so ago, when the parents were waiting on line for the next new iPhone, and the kids held their place. Then the kids shared some playlists using near-field facilities in their Samsung phones, while the Apple users looked on jealously.

I think that out-hip is possible, but that a more likely path is that Apple continues to offer a premium-priced product which allows people to self-segregate on price. It's a bit like the situation in cars, where the premium cars do have some nice extra features, but they are far more profitable than the more modest models and brands.

[Star Traveler]

A company can STAY MAINSTREAM by staying good in their products. Apple has not quit, “staying good” with the consumer.

[aMorePerfectUnion]

“Apple will be gone in 5 years . mark my words”

I admit you may be right, since I don’t have a crystal ball. Of course, you don’t either.

And I’m a simple guy.

... but if Apple continues to earn 89% of all smart phone profits with their 20% of market share, they’ll be, hmmmmmmm...

PROFITABLE.

Again, I’m just a simple businessman. I like profits. I prefer them. I am not interested in expensive hobbies disguised as businesses.

I believe the purpose of a business is to get and keep customers while making a profit.
I see Apple doing just that.
Android manufacturers seem to be doing the first and very marginally the second.

Based on that, I think for you to be correct will require something to change dramatically. I don’t see it yet.

I hope the Android system continues. Competition makes everyone better.

[Democrat_media]

80% world market share today for Android

[The Truth Will Make You Free]

You are wrong.

Look at Apple's strategy. Premium product and "ecosystem" that people will pay more for that generates profits, Looks at other companies. Generic products that are in the realm of low-cost provider. No profits. A profitable niche is better than unprofitable mass market.

Do the math.

Also consider who Apple's customers are: people with money. Whenever I fly first-class or get exit rows everyone has an Apple product. Regular coach: not so much. Who is the more desirable customer?

While anyone would agree that Jobs influence is missed, Apple could be a company like Walmart, which has grown immensely since Sam Walton passed on.