Everybody knows that Android has been dominating the smartphone industry for some time now, in terms of sheer volume of of smartphone sales and in global market share. But when it comes to operating profits, Apple may have the last laugh, at least during the last few months.
As reported by the Wall Street Journal, Apple holds a staggering 92 percent of the total operating profits posted by the top eight phone makers in the world during the first quarter of this year. This was stated by no other than Mike Walkley, the managing director of Canaccord Genuity, a global investment and finance firm. Walkley’s estimate represents profits before interest and taxes, and is a major improvement on the 65 percent share that Apple managed during the first quarter of 2014 a year ago.
What is even more remarkable is that Apple snagged more than 90 percent of the total operating profits of the smartphone industry while accounting only for 20 percent of all units of smartphones sold across the globe.
As expected, Samsung is behind the iPhone maker, with 15 percent of all operating profits in the smartphone industry. But wait -- Apple’s 92 percent and Samsung’s 15 percent do not add up to 100 percent. What gives? As explained by Canaccord, Apple and Samsung actually grabbed more than 100 percent of the total industry profits because other phone makers either only managed to break even or posted losses during the first quarter of the year.
But one must wonder though -- how did Apple grab over 90 percent while only enjoying 20 percent of all smartphone sales. The obvious reason, of course, is that Apple sells its smartphones for much higher prices compared to other current smartphone offerings in the global market. For instance, last year Apple sold iPhones at an average selling price across the global of $624. Moreover, Apple’s profits were boosted by the its current flagship devices, the iPhone 6 and the iPhone 6 Plus, which during the holiday season became two of the biggest selling smartphones of all time. Fast forward to the first quarter of this year, Apple managed to sell 43 percent more iPhone units than it had one year ago, and at a higher price -- during this time, the average price of iPhones went from $60 to $659 (pulled up by the huge demand for the new iPhone 6 models).
Another significant factor contributing to Apple’s success is that the tech giant basically just sells one type of smartphone, the iPhone. This is in contrast to Android, which features a very diverse range of models and prices. Because Apple essentially just offers one kind of smartphone, it has more freedom to command a higher price due to the fact that its product is unique in the market.
Of course, let us not forget that while Apple is enjoying great sales, its competitors are not faring so well. Its chief rival Samsung is currently suffering through dips in unit sales, operating profits, and market share.
The question for Apple now is how it can keep this up. The company is currently readying to unveil a new iPhone 6 model this year, and for sure, it is going to face some competition. But it has the momentum now, and it is definitely going to take advantage of it.
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