Despite selling only 48 million iPhones in the third quarter, Apple continues to own an overwhelming majority of the total operating income in the smartphone industry. In fact, in the period between July and September, Apple owned nearly all the profits made from smartphones sold during that period.
In a research note by research firm Canaccord Genuity obtained by Apple Insider, analysts say Apple owned 94 percent of all smartphone profits in this year's third quarter, while everyone else made minimal profit or lost money. Samsung, which shipped a total of 81 million units in the same quarter, is a far second with 11 percent of the profit share.
The total figure amounts up to 105 percent, which analyst Mike Walkley explains by saying the seven other smartphone manufacturers included in the study, including Microsoft, BlackBerry, Lenovo and Lenovo-owned Motorola, Sony, LG and HTC, either did not make money or lost money during the same quarter.
Walkley says the humongous discrepancy between Apple's profits and the rest of the industry is due to the latter's failure to market premium smartphones, or smartphones that cost above $400. Samsung, for instance, may have the Galaxy S6 and Galaxy Note 5 selling at a similar price range as Samsung's new iPhones, but the South Korean manufacturer's average selling price is only $180 compared to Apple's $670.
That's because, while Apple made money by selling premium-priced smartphones, Samsung and the rest had to rely on low-cost Android smartphones that cut into the companies' profit margins. And even though these smartphones sell well in emerging markets such as India and Brazil, the reduced profit margins leave little room to make money. Apple, meanwhile, enjoys a hefty 37 percent profit margin, allowing it to run away with almost all of the profits and leave Android OEMs in the dust.
However, Canaccard warns it may not have accurate figures, saying it may have overestimated Apple's profits because of the non-inclusion of rapidly growing Chinese smartphone makers such as Xiaomi and Huawei into the study.
"Given the ramp of Chinese OEM smartphone volumes and particularly strong Q2/2015 smartphone market share gains for Huawei, we note our industry profit analysis excludes a large portion of this group of OEMs gaining an increasing share of the smartphone and handset market profits due to lack of available and comparable profit metrics" says Cannacord.
Still, the research firm notes that the Chinese companies employ aggressive pricing strategies that deliberately eschew profits to obtain a rapid rise in global recognition.
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