apple money

For some time, whenever Android proponents argued for the platform’s dominance based on handsets shipped, Apple fans would counter by pointing out the iPhone was tops in profits.

Indeed, a new report shows Apple had more than half of all mobile profits during the first quarter of 2013, leading Android handset rival Samsung.

According to Canaccord Genuity, the iPhone maker came away from this year’s first period with 57 percent of mobile phone profits, despite having just eight percent of the worldwide handset market share.

By contrast, South Korea’s Samsung – which leads in market share – earned just 43 percent of the share of profits. However, the two companies could soon switch positions. The analyst firm claims iPhone sales will be weak in the upcoming June quarter, overshadowed by profits fueled by Samsung’s new Galaxy S4…

“During the June quarter, we believe softer iPhone sales combined with Samsung Galaxy S4’s global ramp should result in Samsung surpassing Apple for the top share of handset industry profits,” writes analyst T. Michael Walkley in a note obtained by Philip Elmer-DeWitt of Fortune.

Before Apple adherents break a finger pointing out what’s wrong about such a forecast, we’ll take note of some counter-arguments.

apple-mobile-profit-share

Walkley apparently remains under the iPhone supply cloud.

A day after the Canaccord forecast of “softer iPhone sales” came word from Morgan Stanley’s Katy Huberty, who wrote in a note to clients:

After a slow start, iPhone 5 is now on track to meet carrier volume expectations and iPhone 4 price cuts could stimulate incremental demand near-term.

Samsung could see a bounce in the June second quarter.

However, all reports suggest Apple will unveil multiple handsets in time for the third quarter, ending in September.

T-Mobile USA, which reported half a million iPhone 5 units sold, has helped improve shipments of the Apple smartphone. And with the upcoming iPhone 5S refresh and a rumored less-pricey iPhone reportedly launching later this year, whatever Samsung profit gain is likely to be short-lived.

This trading off between Samsung and Apple is not going to settle down.

As Walkley showed, the two mobile phone makers are essentially all there is, when it comes to profitable handset manufacturers. In other words, get used to this duopoly – it will be the face of mobile competition for the foreseeable future.

That’s not to say that carriers are cool with the status quo – quite the contrary.

Per The Wall Street Journal, some of the world’s biggest handset makers and wireless carriers are “embracing alternative mobile operating systems” to help nurture a third mobile platform as a credible alternative to the iPhone and Android.

How do you think stands a chance of becoming the #3 mobile platform, Windows Phone or BlackBerry?

  • Gorgonphone

    eh

  • Now I’m no industry expert but I think it’s quite obvious that if for some reason Apples profits are lower than Samsung’s it’s because people are holding out for the 5S. You’d be stupid to buy the iPhone 5 now what with a new phone just around the corner…

  • No

    Well, this blog post will shut up a lot of the iPhone fanboys on this blog.

    • melci

      Nope.

      You see manufacturer profits are only a part of the picture. The real story is ecosystem share and Apple’s iOS continues to obliterate Android in all the metrics that actually matter to Developers, content producers, publishers, advertisers, online retailers, Apple and consumers themselves.

      It is iOS that has by far the highest Internet usage with 60-70% of mobile web browsing (Net Applications, ComScore, AT Internet, W3Counter, WikiMedia, etc), it is Apple’s iOS that makes up 88% of mobile e-commerce (IBM), 84% of mobile games revenue (NewZoo), 80% of mobile retail (Rich Relevance), 67% of mobile in-app and web advertising revenue (Opera), 430% greater developer revenue (Distimo), 43,000 iOS developers vs 10,000 Android developers (AppStoreHQ), etc etc.

      iOS has surged to a 78% share of the mobile business market in Q1 2013 with Android suffering a massive decline from 30% last year to only 22% last quarter. Good Technology reports that the iPad again completely dominated the Business tablet market with a massive 93.2% of activations while the iPhone accounted for 73% of all non-BB business smartphone activations against Android’s 27%.

      83% of airport wifi connections are iOS devices according to Boingo.

      The plain fact of the matter is that the vast majority of Android smartphone sales are cheap and nasty featurephone replacements that are incapable of delivering a good app and web browsing experience and thus make no difference to the bigger picture.

      Samsung has admitted to only selling 10 million high-end Galaxy III smartphones every quarter (only 20-25% as many as Apple has sold iPhones) and only recently hit 100 million Galaxy smartphones of all models sold in total. However Apple sold 220 million iPhones in that same time frame.

      This also begs the question why this analyst thinks that Samsung will overtake Apple in terms of profits on the back of Galaxy S4 sales when so few of Samsung’s smartphone sales are high-margin phones like the GS4?

      • Chaka10

        Wow, this is a great summary of the data points. Gonna keep it (with a quick screenshot on my iPad!). “cheap and nasty featurephone replacements”, indeed.