Apple captured 540% the profits of Samsung Mobile in 2016 as China's phone makers battled ...

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Apple's iPhone continued to grab the vast majority of smartphone profits globally, due to poor performance by Samsung and largely profitless production of massive numbers of lower end models by several companies in China.




Numbers reported by The Korea Herald from Strategy Analytics estimated that of the $53.7 billion in operating profits generated by the entire global smartphone market, Apple took $44.9 billion.

The firm stated that Samsung Mobile posted operating profits of $8.3 billion, despite shipping more smartphones than Apple over the entire year. In the fourth quarter, Apple sold more iPhones than Samsung's entire range of smartphones, largely as a result of the massive recall of defective Galaxy Note 7 models.

Samsung Mobile [IM] itself reported fiscal 2016 operating income of 10.81 Trillion KRW ($9.44 billion). That group also includes Samsung's minor sales of tablets, PCs and other minor devices. Apple reported total operating revenue for fiscal 2016 of $60 billion. It's not clear how Strategy Analytics arrived at its numbers, but in any case the disparity between Apple's ability to make money and Samsung's inability is striking.

An even greater contrast is apparent in China, where Huawei, despite being the largest phone maker in China, reportedly posted profits of only $929 million, which Strategy Analytics said represented 1.6 percent of global profits. Top Chinese brands together amounted to less than five percent of global smartphone profits

The firm also reported that "OPPO took 1.5 percent of the global profits, while its rival Vivo accounted for 1.3 percent," however Oppo and Vivo are actually two subsidiary brands produced by BBK Electronics. Regardless, all three top Chinese brands together amounted to less than five percent of global smartphone profits.

Xiaomi, the third largest Chinese phone maker, has struggled with profitability. Last November, its former global Vice President Hugo Barra admitted in an interview that his company "could sell 10 billion smartphones and [the company] wouldn't make a single dime in profits," describing that the company has been giving away phones "without making any money" with the intent to make money in reoccurring revenue streams. Barra has since left the company.

ZTE, which has been shipping a similar volume of phones compared to Xiaomi, was poised to report about a half billion dollars in profit last year but ended up reporting losses of $342 million after it was forced to pay $892 million in penalties for criminal conduct in violating U.S. sanctions and lying about it.

The inability of China's top five brands to earn even 5 percent of global profits despite getting so much ink for all the low-end devices they ship to lower tier cities in China makes a mockery of the incessant reporting of Apple "falling behind" in the Chinese market while earning virtually all of the available profits in the industry, both in China and everywhere else.




Outside of smartphones, which were historically profitable for most manufacturers, Apple also earns significant profits from sales of Mac, iPad and wearables among competitors that earn virtually nothing from their efforts.
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Comments

  • Reply 1 of 81
    wonkothesanewonkothesane Posts: 1,344member
    Ahm, 44.9 out of 53.7 is about 84%. 

    The last time I had 540% of 100% to be distributed  I ended up as Analyst  ;)
  • Reply 2 of 81
    mpowrmpowr Posts: 1member
    Mmmm Wonkothesane, the headline refers to the relationship between Apple's profit and Samsung's.. ($44.9Billion Apple mobile versus $8.3Billion Samsung Mobile) Apple 5.4x Samsung = 540%
    fastasleepchiaanton zuykovStrangeDaysbrucemclolliveranalogjackwatto_cobra
  • Reply 3 of 81
    JanNLJanNL Posts: 258member
    Ahm, 44.9 out of 53.7 is about 84%. 

    The last time I had 540% of 100% to be distributed  I ended up as Analyst  ;)
     :) But the 540% is about Apple in relation to Samsung Mobile.
    fastasleepSox129leavingthebigganton zuykovlolliverwatto_cobra
  • Reply 4 of 81
    wonkothesanewonkothesane Posts: 1,344member
    Ah this. Smile. I guess you're right. 
    I would have expected "5.4 times the profits" or something. Guess I'm sensitive due to the "Apple captured 110% of all smartphone profits" articles ;)
    hydrogenwatto_cobra
  • Reply 5 of 81
    JanNLJanNL Posts: 258member
    Ah this. Smile. I guess you're right. 
    I would have expected "5.4 times the profits" or something. Guess I'm sensitive due to the "Apple captured 110% of all smartphone profits" articles ;)
    True, those articles were reason for lot of (Analyst) discussions  ;)
  • Reply 6 of 81
    But... but... but Android has major market share percentage in China. Wall Street says that's what really matters. I'm sure my math is wrong, but it seems the more Android smartphones are sold in China and elsewhere, the less profit each Android manufacturer makes. I guess you can only slice a pie into so many pieces before whoever gets such a thin slice to eat feels as though he hasn't eaten anything. However, I'm certain I'll continue to see many more articles pointing out how Apple's iPhone is losing market share percentage to Android. That story never seems to get old in the news media. I'd always suspected Xiaomi wasn't making any money but there was always this endless stream of news of how Xiaomi was going to put Apple out of business in China.
    digital_guywatto_cobra
  • Reply 7 of 81
    avon b7avon b7 Posts: 3,473member
    This article has so much spin on it that it seems to suffer from giddiness.

    "The firm stated that Samsung Mobile posted operating profits of $8.3 billion, despite shipping more smartphones than Apple over the entire year. In the fourth quarter, Apple sold more iPhones than Samsung's entire range of smartphones, largely as a result of the massive recall of defective Galaxy Note 7 models."

    Apple shipping more phones in one quarter than 'Samsung's entire range of smartphones' is of little value if during the year Samsung still outsold Apple (and probably by a handsome margin), even with an unprecedented product recall. However, the information is presented in such a way as to plant the lingering idea in the reader's head that Apple far outsold Samsung. Of course, the real information is there, just conveniently obfuscated.

    In spite of the recall, $8.3 billion operating profits from the mobile division is still good business and let's not forget that Samsung also makes a profit out of every iPhone sold through the components it supplies to Apple.

    The article feeds on Apple's lion's share of the profits in detriment to other brands whose business goal isn't even the same.

    No manufacturer of low or mid tier phones has even the slightest intention of massive profit. Comparing those profits to those of Apple serves little or no purpose.

    The article tip toes around the Android market space plucking out information to serve its purpose and ignoring anything that might reduce the rpm of the spin:

    "
    Xiaomi, the third largest Chinese phone maker, has struggled with profitability. 

    ...

    ZTE, which has been shipping a similar volume of phones compared to Xiaomi, was poised to report about a half billion dollars in profit last year but ended up reporting losses of $342 million "

    Consecutive paragraphs. The first plants the idea of 'struggling with profitability' and singles out Xiaomi. Then it connects Xiaomi directly with ZTE in the next paragraph to continue the 'struggling with profitability' theme. It doesn't matter that the Xiaomi claim is based on little or no real financial information (at least the article doesn't offer any) and IIRC Xiaomi is a private company and doesn't have to publish such data. It just hangs off a claim that the company isn't even in the business making money off its handsets but seeks instead to monetise alternative revenue streams connected with the phone. If that's the case, why is it in an article on profitibility? The ZTE reference clearly states that it was a one-off charge that led to losses but that isn't too much of a problem as the 'struggling for profitability' hook had probably been swallowed already by the reader.

    Then Huawei gets thrown into the mix.

    Huawei is a newcomer to the handset market and if Apple has historically had an eye on Samsung, it now surely has the other on Huawei. And for very good reason.

    Initially Huawei made handsets for others, then under its own name, then under its own sub brand. It has met every challenge it has set itself in this short time. No mean feat.

    The article attempts to dampen the success of Huawei:

    "An even greater contrast is apparent in China, where Huawei, despite being the largest phone maker in China, reportedly posted profits of only $929 million, which Strategy Analytics said represented 1.6 percent of global profits"

    As I stated earlier, low and mid tier Android makers aren't even in the business of making large profits so that isn't really newsworthy, but Huawei has moved into the premium end and has publicly set its eyes on Apple as a reference point. That's newsworthy as it's a declaration of intent but it is still gearing up for action. The recent premium releases have been nothing more than a toe dipping exercise.

    Given its 'new kid on the block' status, "
    only $929 million" is a clear misrepresentation and understatement.

    Huawei hasn't set a foot wrong in its short time in the handset market and it hasn't even had a real presence in one of the world's top premium handset markets: the US.

    The latest P10 line won't even be officially available on the US so it's clear that there will be some financial underperformance from Huawei in the premium segment. However, that looks like it could change soon. I hear that a deal is on the cards with a major US carrier and if it doesn't  get shot down by the US government, Huawei will implement exactly the same successful strategy it has implemented elsewhere in the world. That should cause noticeable disruption to the  US premium market and if that happens, Huawei should see profits grow.

    MWC closed last week and most US correspondents commented on (and were openly surprised by) the overwhelming presence of Huawei in terms of handsets and marketing. In the fair itself, Huawei wasn't only pushing handsets but also its 5G proposals and that's where Huawei does its real business, selling its promotions to carriers that can later pickup huge discounts on Huawei handsets if they implement Huawei 4G (and later 5G) infrastructure solutions. The carriers then push those (very often premium) phones to attract customers. If those customers like the experience (remember that Huawei phones play very well with Huawei infraestructure), they have more chance of upgrading to another Huawei down the line.

    It is too early to tell how this will pan out and it could all unravel, but that could happen to Apple too.

    It's good for Apple shareholders to see the mobile division performing so well but that is its goal. They do not really compete in the low/mid tier. However, there are many other handset makers that simply do not have that same goal and are geared towards far lower margins. Comparing them to Apple serves little purpose.



    edited March 2017 asdasdcharlesgres
  • Reply 8 of 81
    lwiolwio Posts: 83member
    and Apple makes an increasingly large profit from services including the App Store were Android makers have a very hard time making anything at all.
    digital_guyjbdragonwatto_cobra
  • Reply 9 of 81
    chasmchasm Posts: 1,275member
    The article suffers from serious Kool-Aid-ism, but the lead sentence tells the entire story: "Apple's iPhone continued to grab the vast majority of smartphone profits globally" As long as that continues happening, Apple really couldn't care less if Android has more share in (name of country). Because the Android model (or rather the manufacturing part of the Android model) is simply not sustainable. Apple also has more mind-share than Android. Nobody compares the cost of health care to an Android phone -- even a premium one. The "iPhone" is shorthand for "premium smartphone." Same way we refer to Congress' health care plans as "Cadillac."
    digital_guy
  • Reply 10 of 81
    Rayz2016Rayz2016 Posts: 4,556member
    Ahm, 44.9 out of 53.7 is about 84%. 

    The last time I had 540% of 100% to be distributed  I ended up as Analyst  ;)
    ROFL!
  • Reply 11 of 81
    blastdoorblastdoor Posts: 1,894member
    My takeaways --

    1. Despite the enormous profit advantage, Apple does not seem able to completely knock the competition out of the high-end market. The Chinese are not as far behind in terms of features and performance as one might expect given the resource disadvantage. I think this is because Apple can't come up with enough good ideas for investing those profits back into the iPhone business. That's not a criticism, it's just the nature of a mature product -- innovations come more slowly because the opportunities for meaningful improvement are far less obvious than they were when "copy/paste" was a big new feature. 

    2. The Mac is a very profitable business that deserves more investment from Apple! I think it is realistic to believe that Apple could double (at least) its share of the global PC market if they tried. They should dominate the high-end of the PC market in the way they dominate the high-end of the smartphone market. 
    rogifan_newwatto_cobra
  • Reply 12 of 81
    A missing data that would be interesting (implied but not explicitly given) is how much of the profits in the Chinese market Apple is getting.

    Maurizio
    watto_cobra
  • Reply 13 of 81
    NY1822NY1822 Posts: 591member
    Samsung = shipped
    Apple = sold

    end of story
    dedgeckowatto_cobra
  • Reply 14 of 81
    ddawson100ddawson100 Posts: 451member
    Ah this. Smile. I guess you're right. 
    I would have expected "5.4 times the profits" or something. Guess I'm sensitive due to the "Apple captured 110% of all smartphone profits" articles ;)
    5.4, while it does have the characteristic of being accurate, fails to capture the drama of 540%. There's a certain amount of glee involved in choosing that larger number. I read DED's articles as much for that triumphant tinge as for the information. :)
    edited March 2017 watto_cobra
  • Reply 15 of 81
    MacProMacPro Posts: 18,144member
    NY1822 said:
    Samsung = shipped
    Apple = sold

    end of story
    More like, Samsung = Given away in Rice Crispie Box. 😉
    Daekwanwatto_cobra
  • Reply 16 of 81
    freeperfreeper Posts: 77member
    The REAL STORY is that Apple's profit share DECLINED from 110% the last 2 years to only 83.6% last year, and this was DESPITE 1) the iPhone 7 outselling the iPhone 6S by large margins and 2) the Note 7 debacle and 3) the LG G5 and LG V20 debacles and 4) Lenovo's totally messing up the acquisition of Motorola, resulting in their selling both fewer of their phones and Motorola phones than before and 5) Xiaomi's sales plummeting. This year, look for Samsung's profits to significantly rise and the situations with LG, Xiaomi and Lenovo to at least stabilize.
    chasm said:
    The article suffers from serious Kool-Aid-ism, but the lead sentence tells the entire story: "Because the Android model (or rather the manufacturing part of the Android model) is simply not sustainable.
    You guys have been spouting that wishful thinking for years. It has never been true and it never will be true. Profits of $8 billion a year are not sustainable? Since when? Profits of $800 million a year are not sustainable? Again, since when? Profits of $100 million a year are not sustainable? Again, when did this begin to be the case? Especially since - realize this - for everyone but HTC, Android smartphones and other mobile devices are not their only business. For Samsung, LG, Asus, Acer, Sony, Huawei, Xiaomi, Oppo, LeCo, OnePlus and the rest, Android smartphones are just one product of many in their portfolio. Many of these companies actually offer more products and services than Apple does. So, selling Android phones adds $50-$150 million to their bottom line in a good year that they are glad to get, and subtracts $50-$150 million from their bottom line in a bad year that they can easily subsidize with their other businesses. Especially if these other businesses include manufacturing components - which are sold in their own devices - as well as selling accessories for their Android devices, and selling Internet and mobile plans for their Android devices. And in China, companies like Huawei, Xiaomi and the rest can actually make money off their own app stores as well as by renting and selling movies and music, and do so. Even outside of China, LG a couple of years ago stated that so long as they continue making enough money on Android accessories to cover their losses on Android phones and tablets, they will continue to make Android phones and tablets. Sony also continues to sell Android phones - primarily in Japan - because their Android products are part of the larger Playstation ecosystem, to the point where they compete with and cannibalize sales of the PlayStation Vita (which is a failure in America but a huge deal in Japan). This is why the only companies that have ever exited the Android phone business are HP and Dell, who were very small players to begin with. (Several more have exited the Android tablet business: HP, Dell, Philips and Pyle.) Instead, new companies enter the Android phone business every year. Including Nokia (or rather the HMD consortium that is selling products with the Nokia name), who if they had switched to Android instead of wasting years with Symbian and then going all in with Windows Mobile, they would have never gone out of business to begin with, but instead would be making billions along with Samsung right now. This should not be a surprise. There has ALWAYS been a bargain electronics market of companies who make profits of a few hundred million a year by selling large volumes. Bargain TVs, stereos, clock radios, you name it. And Apple fans never go around claiming that those guys are going to go out of business. It is only the laptop, tablet and smartphone makers that Apple claims will go out of business because it is only those guys that compete with Apple. It makes no sense. Go to Amazon.com, Best Buy or whatever and look at all the TVs, computer monitors that can be had for $99 or all the routers that can be had for $40. Or the folks selling bluetooth headphones for $20 when Beats and Airpods costs 10 times that much. Do those guys have "unsustainable business models" too? If you guys are hoping for a world with no competition, it is not going to happen.
    SpamSandwich
  • Reply 17 of 81
    maestro64maestro64 Posts: 4,479member
    JanNL said:
    Ahm, 44.9 out of 53.7 is about 84%. 

    The last time I had 540% of 100% to be distributed  I ended up as Analyst  ;)
     :) But the 540% is about Apple in relation to Samsung Mobile.

    that is why he is not an analyst, but I have to admit I almost fell for the click bait title trap. I had to look at the numbers closely and do my own math to realize that Apple's profits were 5X of Samsung thus the 540% number. I tell people all the time beware of the % sign it is not telling the whole truth.
  • Reply 18 of 81
    Herbivore2Herbivore2 Posts: 362member
    Avon B7 said, "No manufacturer of low or mid tier phones has even the slightest intention of massive profit. Comparing those profits to those of Apple serves little or no purpose."

    If maximizing profits isn't the goal, then it's time for those companies to get out of the business. 

    The criticism of the points DED made with statements like this are pretty ridiculous. 

    Apple and Samsung are the only two companies capable of reliably profiting from the smartphone industry. Samsung primarily in components and Apple in the finished product and vertically integrated system. 

    Samsung is attempting to move to Apple's vertically integrated model much to the consternation of Google. Samsung's plan is to move off of Android all together and over to Tizen. Samsung's Tizen phone sales in India are pretty nice. And it is quite worrisome to Google. Because if Samsung is successful, the only high end players will be Apple and Samsung. And neither will be running on Android. 

    https://techviral.net/samsung-shift-devices-android-tizen-os/

    So it actually be self-fulfilling if the low end Android device manufacturers aren't interested in large profits. Because it won't happen. There will be Apple and Samsung. The others, including Huawei won't be playing at the high end of anything. Samsung's Gear S3 makes the Android wear watches from Huawei and LG look atrocious. 
    patchythepiratewatto_cobra
  • Reply 19 of 81
    maestro64maestro64 Posts: 4,479member

    When you see numbers like this is the reason we are not seeing a whole lot of innovation in the cell phone markets and why everyone is copying Apple. No company is making enough to do their own R&D to come up with new ideas, whether they are good or not does not matter. You need more companies working on ideas and bringing them to market to see which one are worth keeping around. Right now Apple is the only company putting out new ideas and everyone else is just tweaking those ideas. Samsung was trying to push the envelop but keep falling on their face.

    watto_cobra
  • Reply 20 of 81
    rogifan_newrogifan_new Posts: 3,825member
    I don't remember Apple fans/customers being so obsessed with how much profit the company was making in the past. Why is that so important now?
    dasanman69brucemc
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