Apple & Samsung Are Taking the Smartphone Money, Running

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Just a couple of years ago there were at least five manufacturers of phones profiting in the market, but a new report by Asymco shows just how much that has changed. While there are still a handful of vendors in the market, only two - Apple and Samsung - are making any money.

HTC, RIM, and Nokia all had less than stellar results in the first quarter of this year, and Sony Erickson, Motorola, and LG haven’t had much promise for several quarters. However, as Horace Dediu of Asymco.com pointed out, it’s not because the market for mobile phones is weak. “Units are up 7% with smartphones up 47%. Revenues are up 20% and overall profits are up 52%.”

Huh?

It’s become a two-horse race of profitability in the mobile phone market. Samsung garnered 26% of the profits while Apple took a whopping 73% leaving only 1% for HTC. The remainder of the vendors were unprofitable in the first quarter of 2012.

Source: Asymco

Looking at the total dollars of profit it becomes clear that while the underperforming manufacturers have not been doing well in terms of operating profit, it is really striking how the profits of Apple and Samsung are driving the overall growth in the market. Two years ago, first quarter profits in the industry were $5.3 billion, this year they were $14.4 billion.

Rather than taking profits from other vendors in the market, it seems that much of the growth has come from premiums that the wireless carriers are paying for the iPhone 4S. Carriers have made the decision to pay these premiums in order to compete and retain customers. Those who have not been able to offer the iPhone have seen their smartphone business suffer.

Source: Asymco

At the other end of the scale, the end that Apple chooses not to participate in, the market for non-smartphones has become a commodity market where customers are looking for phones that are cheap and offer basic functions. There is little margin for profitability there, even though the market is large and stable.

Asymco frequently comments on the tech industry. Most recently, the company noted that Apple Stores generates more than 17 times the profit per square foot as the rest of the industry.

Comments

wab95

This is one case in point where a picture (or graph) is worth a thousand words; and these graphs speak eloquently of the smartphone market.

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