Apple’s share of global smartphone profits slumps as cheaper models, rivals cut into margins

Apple’s weakening dominance in profits is partially due to the popularity of its cheaper models, as well as the stronger performance of rivals

PUBLISHED : Thursday, 28 December, 2017, 2:01pm
UPDATED : Thursday, 28 December, 2017, 11:26pm

Apple’s share of profits in the global smartphone industry have slumped despite its latest iPhoneX selling for US$999, thanks to the popularity of the US company’s cheaper models as well as intense competition from rivals Samsung Electronics and Huawei Technologies.

The Cupertino, California-based Apple captured almost 60 per cent of the total profits generated by mobile handset sales in the July to September period, down sharply from the same three-month period in 2016 when the US company reaped 86 per cent of all profits generated in the industry, Counterpoint said in a research note released on Wednesday.

A stronger performance from Samsung and several Chinese brands helped global mobile handset profits grow 13 per cent year on year during the quarter, said Counterpoint, without providing a specific dollar amount.

“This is the first time the cumulative profits of Chinese brands crossed US$1.5 billion in a single quarter,” said Counterpoint associate director Tarun Patha. “Usually all the profits have been shared by just two brands – Samsung and Apple – however, Chinese brands have made inroads here.”

Investors will be watching profits trends for Apple as Huawei, China’s top brand, plans its entry into the US market next year with high-end phones priced above US$500 to compete with iPhone X and Samsung’s Galaxy Note 8, but analyst say it has a long way to go before US consumers will accept Huawei as a high end smartphone brand.

Apple’s profits far exceed that of its nearest competitors, with the company still able to reap an average of US$151 from each iPhone sale, compared with US$31 for Samsung and between US$13 and US$15 for Huawei and its Chinese rivals Oppo and Vivo.

Xiaomi, the budget Chinese phone brand which saw its mainland China smartphone sales surge 57 per cent year on year in the third quarter of 2017, according to IDC data, only reaps US$2 of profit per unit as it operates on very thin margins, said Counterpoint.

Hong Kong-based Counterpoint also expects strong profit gains from Apple in the current quarter ending December 31 as the holiday season is likely to have boosted sales of its most expensive iPhone X series which hit store shelves in November.

Based on a teardown analysis of the components, TechInsights last month estimated that it costs Apple US$358 for each iPhone X, which carries a retail price of US$999, leaving a gross margin of 64 per cent.

Although its influence continues to wane in China, Samsung made a strong comeback in the past quarter with its latest flagship Note 8 series a hit in the global market, enabling it to grab one quarter of all global profits compared an overall loss in the same period a year earlier when the company was hit by the Note 7’s exploding battery crisis.

Huawei’s 67 per cent year-on-year profit growth in the quarter was the highest among all vendors, lifting its global share of profits to just under 5 per cent from 3.3 per cent a year earlier. Oppo and Vivo, the second and third largest smartphone vendors in China, saw their profit shares fall to 4 per cent and 3.1 per cent respectively in the latest quarter, from 4.2 per cent and 3.7 per cent in the same period last year.

According to IDC’s worldwide quarterly smartphone tracker released in November, Samsung, Apple and Huawei are the top three smartphone vendors globally, with shares of 22.3 per cent, 12.5 per cent and 10.5 per cent, respectively. Oppo and Xiaomi were fourth and fifth with shares of 8.2 per cent and 7.4 per cent respectively.