Apple takes 57% of handset profits, Samsung accounts for remaining 43%

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  • Reply 61 of 76
    kdarlingkdarling Posts: 1,640member

    Quote:

    Originally Posted by SolipsismX View Post



    1) I'm surprised at just how much Samsung is profiting which means Samsung's higher-end handsets are popular, regardless of how you feel about the company.


     


    Indeed.  The smartphone market can change pretty quickly.  I'm finding that notes/charts that I made to help myself even six months ago are out of date now.  A lot of assumptions (like Samsung sells mostly cheap phones) just don't cut it any more.


     


    This past quarter Samsung's handset division made approximately $29 billion in revenue.  Estimates say they sold 115 million phones, of which 45 million were dumbphones, and 70 million were smartphones. 


     


    Knowing some industry averages, we can start to determine where their phone revenue came from.


     



    • $3 billion comes from the 45 million dumb phones (industry average is $60 apiece)



    • $26 billion comes from 70 million smartphones = $370 avg (industry average two years ago was $330)


     


    Their average wholesale price is higher than some people think.

  • Reply 62 of 76
    MarvinMarvin Posts: 14,872moderator
    Apple's estimated 57 percent of handset industry profits was down from 72 percent in the December quarter, as Apple saw its operating margins fall from 40 percent to 35 percent. Those shifts were attributed to softer iPhone 5 sales and stronger demand for the legacy iPhone 4 and iPhone 4S models.

    Samsung, meanwhile, saw its "value share" grow from 29 percent of the industry's profits to an estimated 43 percent in the March quarter. Samsung's margins also increased slightly, from 20 percent to 22 percent.

    These figures look a little off.

    Apple's last quarter, they reported net profit of $9.5b. Apple's second fiscal quarter is the first calendar quarter:

    http://www.apple.com/pr/library/2013/04/23Apple-Reports-Second-Quarter-Results.html

    Samsung's net profit last quarter was $6.4b:

    http://bgr.com/2013/04/26/samsung-q1-2013-earnings-record-profit-466983/

    Samsung splits out phone profits in their earnings:

    http://www.samsung.com/us/aboutsamsung/ir/ireventpresentations/earningsrelease/downloads/2012/20130426_conference_eng.pdf

    Operating income from mobile is 60% of their total. If you take that from their operating profit of $7.9b, you get $4.7b, not $6b.

    The iPhone ratio is roughly the same 2/3:

    http://www.businessinsider.com/iphone-profit-2012-8

    so if you take the same 60% of their net profit + projected operating expenses in the above report, you get 0.6 x (9.5 + 3.85) = $8.01b

    That would put the ratio at 37% / 63%. Samsung's operating margin from their report is 6.51/32.82 = 19.8% so where does 22% come from?
    kdarling wrote:
    A lot of assumptions (like Samsung sells mostly cheap phones) just don't cut it any more.

    Not entirely. Samsung apparently sold 106.6 million phones (69.4m smartphones):

    http://bgr.com/2013/04/26/cell-phone-market-share-q1-2013-467162/

    Apple sold 37.4 million smartphones - that's all they sell. Despite this, Samsung made significantly less profit than Apple.

    In fact, if you divide out 60% of their respective revenues:

    Apple: iPhone revenue $26b/37.4m handsets = $695
    Samsung: $28.56b/106.6m handsets = $268

    I'd assume that Apple's average handset price would be lower but that would mean the portion of their revenue from the iPhone is higher. So whatever way you look at it, Apple is significantly more profitable than Samsung or Samsung sells mostly cheaper phones.
  • Reply 63 of 76
    kdarlingkdarling Posts: 1,640member

    Quote:

    Originally Posted by hill60 View Post


    Seeing as how Apple easily outsells their Galaxy S lines.



     


    Times are changing.  Yes, all iPhones together still outsell the entire Galaxy line, but not by as much these days.  


     



     


     


    Plus there's the other 40 odd million non-Galaxy smartphones that Samsung sells each quarter now.

  • Reply 64 of 76
    kdarlingkdarling Posts: 1,640member

    Quote:

    Originally Posted by Marvin View Post



    Apple: iPhone revenue $26b/37.4m handsets = $695

    Samsung: $28.56b/106.6m handsets = $268


     


    Your Samsung average is across all handsets.  In my post, I separated out the dumbphones to get a better idea of what their smartphones averaged, which worked out to be $370.  


     


    Quote:


    I'd assume that Apple's average handset price would be lower but that would mean the portion of their revenue from the iPhone is higher. So whatever way you look at it, Apple is significantly more profitable than Samsung or Samsung sells mostly cheaper phones.



     


    Oh, for sure Apple sells their phones at a significantly higher average price.  Sprint has said they pay an average of 40% more for iPhones than for their other smartphones.


     


    Ironically, that's what worries the analysts so much.  They see the higher prices as eventually capping Apple's sales or causing carrier subsidy pushback.   For comparison, here's a chart of average price ranges vs Apple's prices:


     


  • Reply 65 of 76
    MarvinMarvin Posts: 14,872moderator
    kdarling wrote: »
    Your Samsung average is across all handsets.  In my post, I separated out the dumbphones to get a better idea of what their smartphones averaged, which worked out to be $370.

    Where does the revenue breakdown ($3b/26b) between smart/dumb phones come from?
    kdarling wrote: »
    Oh, for sure Apple sells their phones at a significantly higher average price.  Sprint has said they pay an average of 40% more for iPhones than for their other smartphones.

    Ironically, that's what worries the analysts so much.  They see the higher prices as eventually capping Apple's sales or causing carrier subsidy pushback.

    Except the average price is well above what Apple's cheapest iPhone is. People are choosing to spend more on the latest model. With Samsung, people are spending far less than the flagship models so people obviously don't think it's worth it i.e Android phones sell because they are cheap, not because they are better:

    http://gizmodo.com/5977625/android-is-popular-because-its-cheap-not-because-its-good

    Samsung is clearly increasing profitability so gradually they are shifting more flagship models and the competition is affecting Apple somewhat. Apple's profitability will fall and Samsung's will rise. It's clear it's a two-horse race. The question is what happens to everyone else and the Android eco-system? If it's not profitable for anyone other than Samsung to make an Android phone (and it's not), what moves will they make to stand out? Samsung already wants to have its own OS:

    http://www.osnews.com/story/26865/Samsung_s_future_is_Tizen_not_Android

    Where does that leave Google? The profitability and marketshare of the entire smartphone market sits with two eco-systems disconnected from them.
    kdarling wrote:
    Yes, all iPhones together still outsell the entire Galaxy line, but not by as much these days.

    Is this including the Galaxy Prevail/Ace etc?
  • Reply 66 of 76
    juiljuil Posts: 75member

    Quote:

    Originally Posted by KDarling View Post


     


    Easy enough to find out.  I Googled "samsung electronics", clicked through to the Investor Relations - Financials page, and looked at this PDF for 4Q 2012.


     


     



     


    CE = Consumer Electronics and includes laptops, TVs and appliances.


    IM  = IT and Mobile Communications (about 97% of revenue is cell phones)


    DP = Display panels (LCD, AMOLED) parts


     


    So the answer to your first question is that cell phones are separate from semiconductors. displays and appliances.  (But their profit is tallied alongside other IT profit.  The revenue is broken out for those, though.)


     


    As to your second comment, it looks like about half (edit: 60%) of Samsung Electronics' profits come from cell phones, not 90%.



     


    Cheers mate, much appreciated!

  • Reply 67 of 76
    hill60hill60 Posts: 6,992member
    Marvin wrote: »

    Is this including the Galaxy Prevail/Ace etc?

    I specifically referred to the Galaxy S line, you've got to watch these slippery buggers who interchangeably drop the 'S'.
  • Reply 68 of 76
    kdarlingkdarling Posts: 1,640member

    Quote:

    Originally Posted by Marvin View Post



    Where does the revenue breakdown ($3b/26b) between smart/dumb phones come from?


     


    As I wrote, "$3 billion comes from the 45 million dumb phones (industry average is $60 apiece)".   That's actually probably a little on the high side, as the $60 is from 2011 and the cost / price have probably come down a bit.


     


    Quote:


    Is this including the Galaxy Prevail/Ace etc?




     


    From matching up with other sources, it doesn't seem to.  However, it does appear to include the Galaxy Note.  In other words, it's for the high end large screen phones (Galaxy S and Note) which are what most people compare iPhone sales with.


     


    Quote:

    Originally Posted by Juil View Post


    Cheers mate, much appreciated!



     


    Cheers, glad to help!

  • Reply 69 of 76
    graxspoograxspoo Posts: 162member


    Does it have a touch screen and let me browse the web? Does it let me make phone calls, read my email, run apps? Does it have instant messaging, play music, take photos? Yes! Yes Yes! Well, one phone costs $250, the other costs $650.


     


    Look at what Apple charges you for additional storage. An off-contract 16GB iPhone 5 is $650. A 64GB iPhone 5 is $850!!! I guess some people like getting taken to the cleaners.


    You can pop a 64GB SD card in your Android phone for $60. Plus you don't need  expensive "lightening" connectors, you can just use USB cables. Everything is cheaper on the Android side of the fence.


     


    People are price conscious, especially overseas, and especially on pre-paid plans. Unless Apple releases a low cost iPhone they will probably see their global smartphone market-share drop into the single digits by year's end. Which may be fine with them. 


     


    http://tech.fortune.cnn.com/2013/04/29/apple-iphone-share-sacconaghi/

  • Reply 70 of 76
    juiljuil Posts: 75member

    Quote:

    Originally Posted by graxspoo View Post


    ... I guess some people like getting taken to the cleaners...


    ... Everything is cheaper on the Android side of the fence...


     


    People are price conscious, especially overseas, and especially on pre-paid plans. Unless Apple releases a low cost iPhone they will probably see their global smartphone market-share drop into the single digits by year's end. Which may be fine with them. 


     


    http://tech.fortune.cnn.com/2013/04/29/apple-iphone-share-sacconaghi/



     


    I respect your points, but please don’t refer to people who are in a position of financial ease/freedom who chose a device according to the personal preference as "people that like getting taken to the cleaners".


     


    I would say that "some" people are price conscious. But not "people" as you say. Because, not everybody exclusively buy their clothing from the cheapest sources possible, not everybody drives the cheapest brands of cars, etc.


     


    And to me a $200-350 price difference in a product that you use for 2 years on a phone plan of $50-75 a month, amounts to an $8-15 difference in your monthly budget. Hardly so big a deal if you have have a bit of breathing room in your budget...

  • Reply 71 of 76
    MarvinMarvin Posts: 14,872moderator
    kdarling wrote: »
    As I wrote, "<span style="color:rgb(24,24,24);font-family:arial, helvetica, sans-serif;line-height:1.231;">$3 billion comes from the 45 million dumb phones (industry average is $60 apiece)".   That's actually probably a little on the high side, as the $60 is from 2011 and the cost / price have probably come down a bit.</span>

    Ok so you are assuming Samsung's average dumb phone price is around $60, multiplying by volume and deducting that off the total revenue to get the smartphone revenue and then dividing that by the smartphone volume gives the average selling price.
    kdarling wrote: »
    From matching up with other sources, it doesn't seem to.  However, it does appear to include the Galaxy Note.  In other words, it's for the high end large screen phones (Galaxy S and Note) which are what most people compare iPhone sales with.

    This means that 38m out of the 70m were the flagship phones (S, S2, S3, Note) and 32m were the rubbish kind (Prevail, Ace etc).

    You said that they shipped 115 phones of which 38m are the flagship ones and you said "A lot of assumptions (like Samsung sells mostly cheap phones) just don't cut it any more". Don't those figures mean that Samsung does in fact mostly sell cheap phones? They have to even with the smartphones if their average selling price is half of Apple's but their volumes are getting closer.
  • Reply 72 of 76
    kdarlingkdarling Posts: 1,640member

    Quote:

    Originally Posted by Marvin View Post



    This means that 38m out of the 70m were the flagship phones (S, S2, S3, Note) and 32m were the rubbish kind (Prevail, Ace etc).


     


    Yep, although I think the flagship phones were estimated as only around 24 million last quarter.  So using the smartphone cut of $26B revenue, it could break down as something like this (feel free to use other numbers):


     



    • $13 billion from 24 million Galaxy @ $550 avg wholesale


    • $13 billion from 46 million non-Galaxy smartphones = $280 avg wholesale for those


     


    If we decided that half of those 46 million sold were super low end smarpthones wholesaled for only $150 (= $3.5B), then the other half would jump to an average $420 apiece! 


     


    Quote:


    You said that they shipped 115 phones of which 38m are the flagship ones and you said "A lot of assumptions (like Samsung sells mostly cheap phones) just don't cut it any more". Don't those figures mean that Samsung does in fact mostly sell cheap phones?



     


    Of course it's not all just flagship and cheap phones.  There are whole ranges of phones, from very high end, going through high, then various mid ranges, and finally down to lower ranges.


     


    Also, "less than iPhone price" does not equal "cheap".  Apple is getting very high prices for hardware that others sell for hundreds less.  Good for Apple, of course, but it doesn't make the other phones junk simply because they cost less to buy.  A $300 phone is a pretty good device in most of the world.

  • Reply 73 of 76
    hill60hill60 Posts: 6,992member
    kdarling wrote: »
    Yep, although I think the flagship phones were estimated as only around 24 million last quarter.  So using the smartphone cut of $26B revenue, it could break down as something like this (feel free to use other numbers):
    • $13 billion from 24 million Galaxy @ $550 avg wholesale
    • $13 billion from 46 million non-Galaxy smartphones = $280 avg wholesale for those
     
    If we decided that half of those 46 million sold were super low end smarpthones wholesaled for only $150 (= $3.5B), then the other half would jump to an average $420 apiece! 
     

    <span style="line-height:1.231;">Of course it's not all just flagship and cheap phones.  There are whole ranges of phones, from very high end, going through high, then various mid ranges, and finally down to lower ranges.</span>


    Also, "less than iPhone price" does not equal "cheap".  Apple is getting very high prices for hardware that others sell for hundreds less.  Good for Apple, of course, but it doesn't make the other phones junk simply because they cost less to buy.  A $300 phone is a pretty good device in most of the world.

    What hardware?

    Apple designs most of their own hardware, more bespoke than off the shelf.

    Other phone makers don't have access to hardware Apple uses.
  • Reply 74 of 76
    dasanman69dasanman69 Posts: 13,002member
    hill60 wrote: »
    What hardware?

    Apple designs most of their own hardware, more bespoke than off the shelf.

    Other phone makers don't have access to hardware Apple uses.

    Seeing as how Samsung makes some of those parts I would have to disagree.
  • Reply 75 of 76
    hill60hill60 Posts: 6,992member
    dasanman69 wrote: »
    Seeing as how Samsung makes some of those parts I would have to disagree.

    Put "most" and "some" together, doesn't that mean agreement?

    I.e. the "some" that is extraneous to the "most".
  • Reply 76 of 76
    dasanman69dasanman69 Posts: 13,002member
    hill60 wrote: »
    Put "most" and "some" together, doesn't that mean agreement?

    I.e. the "some" that is extraneous to the "most".

    Apple designing and Samsung making are 2 different things. It means Samsung as a phone maker has 'access' to hardware Apple uses.
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