A recent report by Canaccord Genuity analyst Michael Walkley claimed that Apple is currently pocketing 52% of the handset industry’s operating profits among the top 8 OEMs. And that’s not just smartphones, that’s the entire mobile phone market.

That’s a staggering number considering Apple has only released 5 handsets in its short time as a phone-maker. How does Apple manage to pull in more money than other manufacturers, like Samsung or Motorola, that release dozens of new phone models a year?

The question actually answers itself. Apple’s minimal handset lineup allows it to order phone components in ridiculous mass quantities. Other manufacturers like Samsung produce several different models that each require different parts, so they can’t order items in bulk.

Andrew Kim does a great job of illustrating this with two distinct graphics. First, there is Apple’s current product line:

As Kim points out, Apple’s iPhone lineup is lean and simple with only four different models. Sure, there also white versions of the iPhone 4 and 4S, but their innards are still the same as their black counterparts. Now have a look at Samsung’s current [US] lineup:

With nearly 50 different handsets on the market, there’s no way Samsung could order parts in bulk the way Apple does. Nearly every model uses a different display and different CPU board. In fact, each one seems to made up of entirely different components than the others.

Now, take Apple. It sold over 17 million iPhones last quarter. So, if you consider that only the 3GS and 4 models were available, Apple had to have ordered at least 8.5 million sets of the same components to cover its supply for the three month period.

Just like food and other items at a Costco or Sam’s Club, phone components can be heavily discounted when you buy in bulk. The more you buy, the cheaper they get. And lower supply costs mean more money Apple gets to keep per handset sold.

Obviously, there are other factors behind Apple’s ability to make higher profit margins than other manufacturers (the Tim Cook effect), and higher-than-average phone subsidies, to name a few. But you can’t argue that Apple’s slim product line doesn’t have a lot to do with it.

  • I’ll tell you why they make a ton of money..the iPhone is made at cost ( of cause ) and it’s fantastic ..

  • Anonymous

    This is off the topic but if there is no unlock for iPhone 4S (not factory unlock).
    There will be no second user market for iPhone 4S which is lock with carrier.
    First user has to use it forever because it locked with carrier.
    So there will be sale decline on new generation iPhone as there is no market for second user market.
    This is just my opinion though.

    • No ..just call your carrier they will and do unlock it from there networks..you might need to give it a few months first be for you do this..I’ll call my carrier near the end of my contract and they will unlock it for me..I did this with my 3GS ..

      • Anonymous

        Thanks for infomation.
        My opinion was wrong though.

      • Anonymous

        My version 4S got unlocked by the rep a few days ago (as I travel oversees a lot), no issues just pop in a new sim card lol..haven’t tested on AT&T or toile, who knows if it will work.l

    • I was going to agrue with you but now i understand. If someone on At&t wants it they can just get it new, no reason to spend 300 on a used one

      • Anonymous

        I use AT&T prepaid on a pay-as-you-go basis, free from a two-year contract. Paying for a “used” iPhone makes economic sense only if you do use prepaid:

        First, my monthly expense is free of fed and states taxes, E911 fees, and recovery surcharges that AT&TV kindly adds to your bill (and may add to more than 20% to your bill). I also get 5% web discount on monthly refill virtual cards.

        Then, as AT&T is the only 3G GSM game in the US (T-Mobile which is cheaper under prepaid does not support the 3G UMTS iPhone bands), I still rack $100’s of savings from monthly terms of the two-year contract simply because I pay-as-I-go.

        And, finally, although optional, I always rebuild my iDevices to almost-new state using iFixIt guidance.

        For example, my current iPhone 4 is now white, whereas the original was black, and looks and feels pristine — I replaced the back and front glass, the black flex ports for the (top) audio and (bottom) charger, and even the middle metal plate. All for about $75 in OEM parts from China.

        But if you stick to an AT&T contract, then, yeah, there is no gain on buying a “used” locked iPhone, as AT&T gives no discounts to non-subsidy devices.

      • where about did you order the parts? I want to make my black iPhone white as well.

      • Anonymous

        Umm I change iPhones yearly, and also take excellent care of them..maybe I may interest you on a 4S next year around June?

      • Anonymous

        Thanks, YujinNY. In the past three years (3G, 3GS, 4) I have got all my used iPhone stash from co-workers that always, like you, update to the latest hardware release. And I get them for next-to-nothing (I fix their phones when they crash the back glass or the front glass/LCD/digitizer assembly).

        Again, thanks for the offer.

  • Gdghgfgjy Ggjffv

    FYI, dumbphones do not count

  • Question? Why are you comparing some dumbphones to smartphones?? Not all of samsungs phones are smartphones, so this picture is not accurate. What you wrote is true, Apple does save a lot of money this way. But that pic makes it look like its a bigger difference than it really is.

    • Anonymous

      Either way you look at it, the comparison stands true. Samsung could have developped only 4-5 same size phones, but they didn’t. Not irst anyhow. Apple was first and is ‘still’ racking all the benefits.

      • i think samsung would make a lot more money if they would keep the sizes and materials in sync with all there phones. i mean, theres 5 different versions of the galaxy s2, 1 for sprint, 1 more tmobile, 2 for att, and then the euro version. And now theres the galaxy nexus, but thats not an s2. for the most part, all these s2’s have different screen sizes, and different cpu’s. some are the same as others in one part, but not all.

    • If you reread the first paragraph it says ALL phones and not just smartphones

      • Yes i realize that, but comparing the iphone to a dumbphone is like comparing a Ferrari to a Ford Pinto. Just doesn’t make sense.

      • It makes sense because we are comparing how much money each brand makes. not what types of phones they make. there is a huge market for dumbphones. The older generations stick with them because of their simplicity.

        Though it would make more sense for them to make just a few models in each category rather than 50 all over the place. ie smartphones, dumbphones – normal style, blackberry style, flip style etc and share the parts in each to save on costs.

  • The design, materials used, retina screen and the Apple. These make me to have an IPhone.

  • Kim’s original article shows 134 Samsung handsets, not just “nearly 50”. Even less surprising that Apple grabs such a large share of the profits.

  • Anonymous

    Flash is dead~

  • Anonymous

    They just smart about running their operations, there is no fat in their manufacturing. But still, they dominate because they have a good product, even though android has the lead in quantity, people choose apple due to quality and an above the line customer service.. Sure they have issues, but these issues get solve fast as they only have a few headsets to worry about.

    I was at a Verizon store a few days ago, and and hear this old lady saying she wanted to return an iPhone 4S, the rep said “really? That something we don’t get a lot”, and then she said, “oh I love it, just want the one in white”.