Apple captured 540% the profits of Samsung Mobile in 2016 as China's phone makers battled ...
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.
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.
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.
Comments
The last time I had 540% of 100% to be distributed I ended up as Analyst
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
"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.
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.
Maurizio
Apple = sold
end of story
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.
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.
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.