Apple Continues to Hog the Majority of Smartphone Market’s Profit

Apple and Xiaomi keep trading places as the top-selling smartphone OEM in terms of shipment volume. However, a report indicates that the iPhone manufacturer continued to maintain a stronghold over 75 percent of the global smartphone market’s operating profit in the second quarter of 2021.

In Q2 2021, iPhones accounted for just 13 percent of the total smartphones shipped globally. However, in terms of revenue the phone earned Apple 40 percent of the global smartphone sale revenue, and 75 percent of the profits. Samsung accounted for a majority of the remaining 25 percent of profits. Here’s what market analyst Counterpoint Research stated in the report:

“Apple has been the biggest profit and revenue generator in the handset business. In Q2 2021, it captured 75 percent of the overall handset market operating profit and 40 percent of the revenue despite contributing a relatively moderate 13 percent to global handset shipments.”

The research firm attributed the steady revenue stream and a big uptick in its shipment share to the success of the iPhone 13 models.

“While this performance shows the power of the Apple brand, it is still lower than the peak of Q4 2020 when its revenue share reached a staggering 50 percent, up from 28 percent in Q3 2020, and its profit share reached an unprecedented 86percent, up from 51 percent in the previous quarter. While there was a significant jump in its shipment share, from 9 percent to 17 percent in the same period, the extent of its revenue share reflects the success of its first 5G-enabled iPhone series.”

The research firm also attributed Apple’s consistency and success to consumer interest in the Apple ecosystem that is at an all-time high.

“Apple also benefits from interoperability between its devices. The convenience with which one may shift between a Mac, iPad, and an iPhone encourages users of one Apple device to stay within the Apple ecosystem by acquiring other of the brand’s devices. This is made possible by Apple’s significant control over both hardware and software, enabling a seamless shift of work on an app between multiple devices.”

“While this has been the case for some time, it has become particularly pronounced with the stickiness of music, media, news, storage, etc. Apple is likely to retain this edge, enabling it to continue charging premium prices for its handsets, thus maintaining high operating profit margins.”

Last month, the Cupertino giant was observed to control a 57 percent share in the $400+ smartphone market.

Our Take

Apple’s success appears to be a testament to the fact that a business could succeed even if a company operates in a closed ecosystem with pricey products. Its performance is stellar compared to several Android manufacturers that sell devices at razor-thin margins.

[Via Counterpoint Research]