Apple Takes a Dramatic Lead in Smartphone Industry’s Profits

Despite selling less than 20 percent of smartphones in terms of unit sales, Apple recorded 92 percent of the total operating income of smartphone sales for Q1, up from 65 percent last year. Apple and Samsung lead the industry while other phone makers broke even or lost money, according to Canaccord Genuity research. Apple has recorded such a significant lead because of higher prices per unit. This has forced rival brands, that mostly run on the Android operating system, to compete by cutting prices.

Apple_iPhone_5sAccording to The Wall Street Journal, Apple transformed the smartphone industry with the introduction of the iPhone in 2007; however, by 2012 Apple and Samsung split the industry profile. Competitors such as Microsoft and Xiaomi have reacted by aiming to profit after phones have already been sold through paid app downloads, add-ons, and phone accessories. Samsung shares a similar strategy.

Apple’s iPhone sold last year for an average of $624, compared to $185 for smartphones running Android. By the end of its fiscal quarter in March, Apple sold 43 percent more phones than the previous year, and at a higher price.

“As the smartphone market matures and growth slows, it is starting to resemble the personal-computer business in some ways,” notes WSJ. “Average PC prices have plunged, and most manufacturers struggle to eke out profits. But Apple captured more than half of industry profits last year, even though its Mac line accounted for only about six of every 100 computers sold, according to Bernstein Research.”

“The dominance of Apple is something that is very hard to overcome,” according to Denny Strigl, former chief operating officer of Verizon. “Apple has to stumble somehow or another, and I don’t think that’s going to happen.”