Yes, ​Apple's iPhone is still generating monster profits, and Android is still miles behind

iPhone grabs 91 percent of worldwide smartphone profits, while the nearest Android maker only manages two percent. But it's not clear how long this situation will continue.
Written by Steve Ranger, Global News Director

Though Apple's iPhone is first on profitability, it's second on market share.

Image: iStock

Apple's iPhone remains a money-generating juggernaut, accounting for 91 percent of all smartphone profits.

Global smartphone profits stood at $9.4bn for the third quarter of 2016, and Apple's iPhone grabbed nearly all of it, according to calculations by Strategy Analytics.

Linda Sui, director at Strategy Analytics, said: "Apple's ability to maximize pricing and minimize production cost is hugely impressive and the iPhone continues to generate monster profits."

Huawei, Vivo, and Oppo are the next three most profitable smartphone vendors globally this quarter -- but they are still a long way behind Apple.

According to Strategy Analytics' calculations, Apple made an operating profit of around $8.5bn from its smartphones in the third quarter of the year. It estimates that Huawei generated $200m of smartphone operating profit worldwide in the quarter -- just two percent of the total -- but enough to make it the world's most profitable Android vendor for the first time.

"An efficient supply chain, sleek products and effective marketing have been among the main drivers of Huawei's robust profitability," said Neil Mawston, executive director at Strategy Analytics. Vivo and Oppo also managed to take two percent of global profit each, thanks to "disciplined pricing and soaring shipments across Asia", the analysts said. Strategy Analytics's calculations includes global smartphone hardware profit only, where profit is defined as realized operating profit.

From a market share perspective, the situation is very different: according to figures from Gartner, Apple had just a 11.5 percent market share in the third quarter of this year, Huawei had 8.7 percent, and Oppo had 6.7 percent.

Samsung remains the biggest Android device maker on 19.2 percent, but problems surrounding the Galaxy Note 7 drove it to cut $2.3 billion off its profit forecast. Samsung was the world's second most profitable smartphone vendor in the third quarter of 2015, tumbling to ninth place in Q3 2016.

The question will be whether Apple can maintain that profit margin in the face of declining iPhone sales.

"We expect Apple to remain by far the world's most profitable smartphone vendor throughout 2017. Apple has a loyal fan base that is willing to pay high prices for the latest iPhone and this will continue to support Apple's profits. Next year is the 10th anniversary of the iPhone, so hardcore Apple fans will be more motivated than ever to buy the latest and greatest model at whatever premium price-point Apple eventually decides to charge," said Mawston.

Android smartphone profitability today is heavily correlated to scale and price, he said: "The more you sell, at the highest possible price-point, the larger your profits will be."

He added: "The Android smartphone market is very overcrowded, so there is little profit at the low-end where cut-throat pricing is the norm, while almost all the Android profits are found at the high-end, where Samsung dominates and should return to decent profit in the first half of next year."

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