Apple Collects 87% Of All The Profits In The Smartphone Handset Industry

February 16, 2014 Leave a comment

Apple Collects 87% Of All The Profits In The Smartphone Handset Industry

JAY YAROW TECH  FEB. 14, 2014, 2:22 AM

Monopoly!

Apple has a relatively tiny slice of the smartphone market, measured by phones shipped to consumers.

According to the latest data from IDC, iPhones were 17.6% of smartphones shipped last quarter. Android-based phones were 78.1% of the phones shipped.

But if you measure the smartphone market by profits, Apple is practically a monopoly.

Analyst Tavis McCourt at Raymond James estimates Apple has 87.4% of smartphone profits.

The next closest is Samsung, with 32.2% of smartphone profits.

Yes, those numbers add up to over 100%. That’s because everyone else is losing money, and so McCourt gives the rest of the world’s phone makers negative profit share.

This is pretty astounding, and a neat little fact for Apple. But, it’s not necessarily something to brag about.

Apple is minting cash because it prices its phones at a premium relative to the competition. In most of the world, an entry level iPhone 5S costs over $800. At that price, cheaper Android makers have swooped in and taken share from the iPhone.

Apple has thrived even with a smaller piece of the market. But its growth has finally hit a wall. Revenue was up 6% last quarter as the iPhone slows.

The next wave of smartphone buyers are not going to be willing to pay $800 for a phone. And the next wave of smartphone makers will be able to produce a low-cost phone that can replicate a lot of what the iPhone offers.

Apple has shown no inclination to lower its prices, despite the fact that it has more money than it needs. The question that hangs over Apple is what happens next? Where does growth come from if it’s going to protect its monopoly on smartphone profits.

 

Filed under TMT Trends

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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