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Apple captured two thirds of available mobile phone profits in Q2

The major publicly traded phone vendors have all reported results for the second quarter. Based on the data available so far we can begin putting together a picture of the market.

The first picture I’ll draw is usually the last: profitability. The following chart shows operating profit from the sale of mobile phones among the eight vendors I follow (Nokia, Samsung, LG, Sony-Ericsson, Motorola, HTC, Apple, RIM).

This quarter saw a slight sequential decline in overall profit for the sector, but four vendors did not manage a profit from selling phones. Nokia, Motorola, Sony-Ericsson and LG all saw losses. The other vendors split the slightly decreased pie with Apple getting two thirds of it (66.3%)

This share is up from 57% in Q1 and 50% in Q3 and Q4. Samsung’s share went to 15%, though that’s not a peak level historically. In Q1 2008 the company was at 21%. RIM was at 11%, a level in a range that has been unchanged for three years. Finally, HTC captured 7.4%, a new high and an increase from 6% since last quarter.  The profit share chart follows:

The ranking chart for profitability follows:

Finally, the “before-and-after” view of profit capture showing the change in profit share over a four year period.

 

The story remains largely unchanged from last quarter: Three companies which captured 11% of the profits before the modern smartphone era started (four years ago!) now capture 84% of the profits. Only one global brand phone vendor selling non-smart voice-oriented feature phones is still profitable however, as we shall see later, the only reason profits still exist for any vendor is due to the strength of their smartphone portfolio.

  • timnash

    With HTC and Samsung profits vulnerable to Apple / Oracle / Microsoft patent actions, there still seems to be room for Apple to grow its percentage, especially if it can extend selling older iPhone models at cheaper price points to more carriers. This has been successful with the 3GS on AT&T and as the iPhone4 is still selling in record numbers, Apple can use economies of production to drop the price after the launch of the iPhone5 and gain more market share without a huge hit to margins.

    • tim.hobbes

      Samsung reported a $1.58 billion operating profit for its mobile division.

      Apple reported $7.7 billion profit total, including iPods and Macs.

      This alone proves that Horace didn't make a fair count, but he also accounted all iTunes/App Store/services related profits as "sale of mobile phones". They are not "sale of mobile phones". Horace, show us the dollar numbers. It will be easier to prove that your charts are flawed.

      • asymco

        I only considered Apple's profit on the sale of mobile phones. I did not count iTunes/App Store/services income.

        The data is always available here: http://www.asymco.com/hire-me/vendor-bubbles/

      • tim.hobbes

        Care to post a table with the "profit on the sale of mobile phones" you assumed for all vendors?

        Because the page you linked doesn't have it.

        And given that Apple reported a total $7.7 billion in net profit, and Samsung's mobile reported $1.58 billion in net profit, it seems that your chart is wrong, because to have four times the profit of Samsung (as the chart shows) you would need to take into account all of Apple's profits (which it seems that you did).

        The charts look pretty and are popular among Apple fanbois, but you should show the real numbers if you are not afraid to be contested.

      • asymco

        All the data is available in the link I posted above. You just need to hover over a competitor point at any time. The tables involved include about 3000 entries.

        The specific data points for the last quarter re. profit from mobile phones are (in Billions)
        Nokia/Mot/Sam/SE/LG/RIM/Apple/HTC
        -0.35/-0.09/1.38/-0.07/-0.05/1.01/6.00/0.67

        [I may revise HTC data as they just published an addendum to their initial filing]

        Apple's operating profit of $6 billion from iPhone is derived as follows:
        20.3 million iPhones * $654/iPhone = $13.3bn in revenues (as per company reports)
        The gross margin is estimated at 55% from BOM analysis and from deduction from other product lines GM (i.e. "backing in" to the figure by estimating all the other GM figures and knowing the overall GM). From the gross margin the Operating Expenses ratio of 8.9% is subtracted. This is a ratio that is obtained by assuming OpEx as percent of sales applies across all products. This yields an operating margin of about 45%, which, when multiplied by the revenue figure above gives the estimated $6 billion in operating profit.

        Your figure of $7.7 billion net profit is not comparable with the figures above because I am calculating operating profit which is before taxes and net profit is after taxes. When comparing across multiple companies in multiple countries it's important to take taxes out of the comparison since they can vary widely. Operating profit is the standard measure in the industry (it's sometimes called EBIT–see a wikipedia article on this for intro).

        Regarding Samsung, the data is supplied differently. The company does not provide a precise number of devices sold or their average price. They do provide group-level operating margin. Therefore, the value of operating profits from mobile phones comes from their published operating margin for the telecommunications segment 13.7% multiplied by their sales from mobile phones (which are shown as a 45% increase from last year's $6.9bn or $10.1bn * .137 = $1.38bn.)

        There are possibilities for error in both estimates which can be discussed at length but the margin of error is unlikely to be much higher than the level of precision of the charts.

        The reason I present charts and not tables is because there is implied false precision in exact figures. I am happy to discuss methodology however. On another note, I treat all claims of errors in my data or deduction as precious gifts. Without correction, my methods do not improve. What makes an error claim most valuable is its specificity. A claim without details is just teasing.

      • tim.hobbes

        Thanks for the clarification, but my point stands. The point is that nobody can guess your methodology if you do not formalize it.

        Nobody can guess from where you took numbers that were not published if you do not explain it.

        If you do not formalize your research and open it for dissection, these charts are just entertainment pieces. No value at all.

        PS: The link mentioned didn't work in my browser (and I got an obviously false warning "malicious script detected"… go figure).

      • asymco

        I believe your point (made twice) was that the chart was wrong:
        1) "It will be easier to prove that your charts are flawed"
        2) "it seems that your chart is wrong"

        The link I sent uses Flash and is a "widget" built with Google Docs.

      • Reda B

        Great job on your chart and the analysis!!
        I think this subject is the number one subject at Boards of Nokia and the like
        To Try to undrestand what happened and how to be able to strategize to recapture lost market and reposition their brand

      • James

        @Tim Hobbes.

        Go back to your hole. You're trolling is petty, repetitive, and pointless. This is a site for thinking adults, and you are not welcome here.

      • http://twitter.com/Marcos_El_Malo @Marcos_El_Malo

        I disagree, James. Mr. Hobbes challenged Mr. Dediu on some points and offered criticism. He didn't mince his words, but he wasn't childish or insulting.

        Give Horace some credit. Clearly he relishes such challenges and clearly he is prepared for them, while also being humble enough to learn when he is wrong. What is out of place is trying to shut down honest debate because you see it as an attack on Dediu.

        If Mr. Hobbes is indeed trolling, than it goes without saying he is not welcome here. So far I have not seen any evidence that he has. (I reserve the right to change this opinion if I encounter new facts.) Ultimately, it is for Horace to say who or who isn't welcome to post, and I think you're out of line.

      • tim.hobbes

        Thanks for being gentlemen, Horace and Marcos.

  • O.C.

    Yes, and in a couple of years time Apple will be racking in 100% of the available profits in the mobile phone business. Everyone will be making calls, or better yet dropping calls, on an iPhone. Surfing the web on an iPad, working on an Macbook, entering the iCloud, listening to music on iTunes. We can finally come together and sing kumbaya. Oh what a wonderful would this could be…

    • Kizedek

      I think you borrowed that vision from a Coca-Cola ad.

      Do super markets still sell their own generic brands of cola? They surely do! And remain profitable as long as people think they do the job they are hired to do just well enough.

      If Apple competitors can make devices that "do the job" well enough to compete with Apple, more power to them! Trouble is, they are all very confused these days as to what job their devices should be doing in a rapidly changing world. It takes Apple to show them how to do their job for them! If they don't want to go there, that's their problem!

    • kizedek

      I think you borrowed that vision from a Coca-Cola ad.

      Do super markets still sell their own generic brands of cola? They surely do! And remain profitable as long as people think they do the job they are hired to do just well enough.

      If Apple competitors can make devices that "do the job" well enough to compete with Apple, more power to them! Trouble is, they are all very confused these days as to what job their devices should be doing in a rapidly changing world. It takes Apple to show them how to do their job for them! If they don't want to go there, that's their business (literally) and their loss (literally)!

    • Dave

      Your sarcasm indicates you have little understanding of this blogs intended purpose.

      • O.C.

        its an Apple Fan blog with a hint of business wrapped around it.

      • Dave

        The numbers speak for themselves, whether one be an apple fan or not. The problems facing the rest of the mobile phone industry from Apples disruptive presence is fascinating. Especially if one was smart enough to invest in AAPL years ago. I was. It seems you were not. That Apple market share has grown and profit share continues to grow is not Apples problem. If you have a problem with that, rather than being bitter, you might benefit from this blog for insight as to what the rest of the mobile industry could do to to compete rather than the race to the bottom they currently are engaged in,

    • famousringo

      You sound pretty bitter. Nokia shareholder?

      • Alosaur

        Ha ha ha! Burn!

    • asymco

      I think you're confusing sales volume with profitability. The chances that Apple will capture nearly 100% of the profits are rather good but that does not imply "everyone" will be using iPhones. One can capture all the profits without being a volume leader. In fact, for Google to succeed, it would help a lot if there was negligible profitability in device sales. Too much profitability in devices may cause some vendors to obtain a backbone and build their own platforms.

    • ArtimusMacimus

      Exactly!
      You , I hope, understand that Apple is coming to take back what is rightfully theirs. That means the PC market as well as the phone, PMP and post PC markets.
      Then we will no longer see the tech world handicapped and slowed down by inferior companies pushing their fake Macs, iPods, iPhones, iPads and OSs.
      Only then we will be truly free and happy.

      PS : This is not meant to be sarcastic.

    • Alosaur

      Whatever dude, seriously. I know reality bites, but resorting to this obviously partisan B.S. just makes you look like a fool. You're either a Android guy, or a really pissed off Nokia guy. I feel for you.

  • Kristian

    What is the revenue situation? Thanx again :)

  • Iosweekly

    If nokia fired everyone except 1 accountant, and stopped everything else, they would likely be earning a billion a year from apple royalty payments and have zero costs. Would be in a better situation than now.

    • CndnRschr

      It isn't clear that Apple's payment to Nokia is anywhere near a $billion annually. There was some retro-payment. Nokia does provide people with jobs and cutting them off (aside from the social consequences) would also trigger severance payments that would drown out any royalties. Nortel just bagged $4.5 billion from its patent sale yet this is a defunct company that still owes shareholders billions.

  • relentlessfocus

    Thanks Horace, I've been wanting to see this info "Asymcod" for quite awhile and you've exceeded my expectations. So the next question I have is how Apple's push down into the less expensive areas of the smartphone market will affect their percentage of overall market profit, that is, where is the tradeoff between marketshare and profitshare? At what point is less profitable to pursue marketshare? I guess that depends on the margins Apple can generate on cheaper phones. I don't suppose there's a way of ferreting out this info, is there?

    • Adam Thompson

      With apple growing unit shipments at a 100%+ YoY clip there is no need to go down market yet. Apple can and will continue this share gain at the high end for at least another year and its profit share will show comtinued growth. apple alone will grow the profit pie and by definition its share of it will grow.

      All this talk about going down market is absurd. There is no good reason for apple to even think about doing so at this point. Sure, TC talks about it but then he says Apple is good at getting people to pay up for quality products and that’s exactly what they should, and will, continue to do.

      • davel

        I disagree.

        If Apple can make a quality fone for a bit less to compete in the pre paid market it will certainly pay off short and long term.

        The situation of Apple selling all it can make will not last forever.

        I am not saying make a low cost commodity fone. Apple should make a quality Apple product. In fact they already do with the 3GS.

      • relentlessfocus

        Calling something absurd is not an argument. The "good" reasons for moving down market with a classy product which doesn't disrupt your existing premium product is to bring in a significant proportion of the huge numbers of people who cant yet afford the premium smartphone into Apple's ecosystem. You don't want to cede them to a competitors ecosystem. These people exist in the first world and developing countries in very large numbers. Getting those people into the Apple economy is important IMO.

        This doesn't mean Apple has to race to the bottom, they won't and shouldn't. They always should try to stick to the mantra of not entering a market segment unless they have something to contribute. They are fully able to produce a classy product that costs less but is desirable and doesn't steal from their existing product customers the way the white plastic macbook did for a long while in the macbook lineup or as the iPod Nano and even the shuffle did for music players.

        Indeed the good/better/best of the iMac and MacPro range is a similar strategy.

        In terms of the iPhone this would be easy to accomplish. Using 3gs components and wrapping in it a fun and desirable housing would not disrupt the iPhone 4/5 sales points but bring more people into the Apple ecosystem. Using older parts, lower RAM, a quality screen but not a retina quality screen and perhaps a slightly lower quality battery could possibly accomplish this. In a new Jonny Ives body this could be a very nice inexpensive product. I don't see the downside to this. You apparently do but you haven't spelled out anything other than your contempt for the idea. How about supporting it with a business argument? I'll listen.

      • Adam Thompson

        You just described the 3GS. I agree that Apple should continue to offer the 3GS but they should not offer any new phone product until smart phone growth begins to slow and Apple can produce enough of the current model iPhone to satisfy what will be much higher demand when iPhone is on 400+ carriers. Since iPhone is currently only on 220 carriers and is able to add roughly 40 per quarter (they added 40 last quarter) they shouldn't go down market for at least another 18 months. Everyone is caught up on Apple serving this market but should they serve it before they can serve the more lucrative, more profitable high end of the market? Of course not. And since Apple isn't even close to serving the high end (220 carriers and they need to eventually get to 400+) they won't be going down market with anything but the 3GS anytime soon.

      • relentlessfocus

        Well in my earlier reply to you I said that they should repackage the 3gs so yes what I described was the 3gs. The only difference between what you say and what I say is that Apple should build a new exterior for the 3gs to market it next year.

        I don't understand why you make this an either/or situation. They can do what you describe and sell a repackaged 3gs in markets. Anyway, time will tell.

      • molecule

        I think it's likely that selling the 3GS alongside newer iPhone 4/5 models would hurt the sales of those newer models more than it would hurt other vendors. People are buying iPhones because they've convinced themselves that they're better phones than the Android alternatives – better OS, better integration, more apps, etc. My guess is that a 3GS would satisfy those "needs" just as well as a newer iPhone for many people. So, unless Apple can sell cheap 3GS phones at the same profit margin as the newer phones, they'd be hurting themselves to give people that choice.

      • Cordell

        Apple already sells a low-end iOS device, the iPod Touch, through its Apple Stores for ~$180 that some customers are using in conjunction with an app like Skype as a WiFi-only mobile phone. The device just needs a ~$10 radio chipset and antenna to support cellular service. Most low-end Android phones sell for between $100 to $150, (e.g T-Mobile/Huawei Comet, LG Optimus). Selling the equivalent of a cellular-capable iPod Touch for ~$200 would reverse Apple's flagging iPod sales without impacting their iPhone margins. Meanwhile, they would keep these customers in their very profitable iTunes ecosystem.

        Apple learned a very valuable lesson when it went solely for profit margins over sales with its Macintosh computers. As they lost market share to PC vendors, they lost the volume discounts on their purchased components, squeezing the margins they were trying to protect. The Macintosh's unique processor and bus exacerbated this problem. After Microsoft copied the Mac's UI and most of its ease of use, Apple largely lost the market it had created — along with the profits. The small premium the Macintosh commanded at that point basically covered the higher costs of its components.

      • molecule

        I could see a cell-phone version of the iPod Touch being popular without severely cannibalizing iPhone 4/5 sales. The iTouch has a crappy camera and no GPS. The 3GS is still too similar in capabilities to the new iPhone models.

      • Cordell

        Considering Apple's pricing on its Macintosh and iPod product lines, one would expect Apple to cover three general price points for the iPhone. Macintosh starts at ~$900, (MacBook refurbished or with its education discount) and continues up to ~$2700 (customized high-end) with the typical sale around ~$1600. The iPod starts at ~$130 (refurbished 8GB Nano) — excluding the functionally crippled Shuffle — and continues up to ~$400 (64G Touch) with the typical sale around ~$230. One might therefore expect a low-end iPhone at 1/3 the price of Apple's high-end phone. Assuming some high-end iPhone price erosion to ~$700, this would imply a low-end iPhone at ~$230 with the bulk of iPhone sales at ~$450, basically the price of an updated, A4 processor iPhone 3GS.

      • http://twitter.com/Marcos_El_Malo @Marcos_El_Malo

        "Most low-end Android phones sell for between $100 to $150, (e.g T-Mobile/Huawei Comet, LG Optimus)."

        Are these subsidized or non subsidized prices?

      • GJG

        This whole argument is off-target. The key to this (and many other things that Apple is doing Horace) is Apple's timing of its product replacement/market disruption activities. Why compete for market share when you're doing fantastic grabbing profits? Clearly the amount of potential profit being left on the table is minor, yet lets them avoid all of the hassles that accompany monopoly situations.

        In my opinion, the next iPhone product announcements will see an iPhone 5, an iPhone 4GS(sic), and probably a reconfigured iPhone 3GS for the pre-paid market. I see no advantage in going further down the market. The frugal engineering approaches can only take you so far, and why compete where there's clearly little or no profit to be made???

        Extending product life takes you further down the learning curve, but it doesn't really help you much because the curve is effectively flat at that point.

        Apple's marketing/manufacturing strategy quite clearly is to disrupt the market through new product introductions as soon as they get down to the flat part of the learning curve. (It's been that way for a long time even if Tim C, Phil S and Steve J are the only ones that really understand the implications.) That never gives the competitors a chance to catch up unless a rather different technology becomes available.

        Indeed, I believe that Samsung remains in the race because of Apple's volume purchases of several components forces and allowed Samsung to achieve learning curve production in advance of pricing changes with Apple, and thus match Apple's component prices a quarter earlier than the other competitors.

  • EWPellegrino

    Actually looking at these numbers it doesn't really seem that Apple is eating the profit pie, more that the handset profit pie shrank and Apple baked a completely new pie. Ignoring the loss-makers, pre-Apple industry profits were bouncing around 5BN, now they're bouncing around 9BN. Given the far lower smartphone ASP at Samsung et al, even if they had all of Apple's business their collective profits would still be low, maybe around 4BN.

  • anandeinkam

    The throw of an Apple made a dent in the mobile phone industry.

    Hi Horace
    Am I allowed to share one of your graphs with my friends through facebook wall?

    • asymco

      Sure. Sharing is allowed with attribution/citation.

  • relentlessfocus

    It occurs to me that since Samsung and Apple both sold about 20 million phones last quarter if we're to believe Sammy's stats, your data above shows that Sammy's 20 million phone sales were far less profitable than Apples. Presumably that's because they were either at a different price point or they weren't all sold but part of BOGOF strategies. Maybe what we need to do is start to segment smartphone sales stats into high end, mid priced and low end phones. Just as Apple sells 90+% of laptops over $1,000 I assume Apple dominates the high end smartphone market.

    • newtonrj

      Relentless,

      I was thinking similarly. The data is suggesting that, unlike laptops, customers are choosing premium iPhones to such a degree that most other vendors are selling for a loss. That could mean the Cost of Goods/IP/Mfg has gone up and/or the ASP has gone down. We know that AAPL's ASP is clearly stable or elevating and we know that other all other vendors are selling +3x the combined handsets. The question is for how long will a vendor sell handsets at a loss before either changing their strategy/price or exiting the market?

      -RJ

      ps: I will add that 'other' laptop vendors are seeing increased competition from Apple but netbooks are crushed by iPad/MBA double-play on their market.

    • kevin

      It's most likely that featurephones are being sold to carriers at a loss, thus every major mixed (ie. sells both featurephones and smartphones) handset maker except Samsung is reporting losses. Samsung Telecom might be generating its higher margin and profits (on both featurephones and smartphones) by getting its semiconductors and displays at a preferred lower price from the other Samsung units as Samsung may have strategic reasons to shift reported profits to its telecom unit.

      • relentlessfocus

        The 20 million phones that Samsung sold were all smartphones, the number didn't include featurephones.

        I have no proof but I doubt that Sammy's semiconductor arm sell to Sammy phones at a special price other than normal bulk ordering prices. I'm under the impression that different divisions of Sammy operate as independent businesses though someone perhaps can confirm.

      • kevin

        These charts show all phones, not just smartphones. Apple, RIM, and HTC only sell smartphones. Samsung's sells both, so its operating margin (and profits) could be dragged down by featurephone sales (especially if featurephones are sold at a loss). So the chart doesn't necessarily show that Samsung's Galaxy (top-end) smartphones are less profitable than iPhone.

      • kevin

        Just to clarify: Samsung sells a range of smartphones. It refers to its low-end smartphones as "mass market smartphones". Those surely generate less profit per phone than its Galaxy line.

      • EWPellegrino

        Samsung and HTC are both seeing higher ASP, particularly HTC – and in their case there's no semi business to abuse. I think it just comes down to brand perception and superior execution.

      • kevin

        Samsung ASP could be increasing because smartphones are becoming a bigger share of its cellphone sales. I hadn't seen that HTC is increasing ASP, but if so, that is interesting as iPhone ASP has remained flat (though much higher than HTC's).

      • EWPellegrino

        Well it's not like it's racing up, but they do seem to be doing the best of the android OEMs – from their results

        'ASP (in USD) was US$349, up 2.6% yoy, down 2.8% qoq'
        http://www.mzcan.com/taiwan/2498/events/138/EN/HT

    • asymco

      This is only the first of many articles discussing the quarter. Pricing, volumes, sales levels, smartphones, and platforms analysis will all follow.

      You can begin to look at the data in advance by using the multi-dimensional interactive tool here: http://www.asymco.com/hire-me/vendor-bubbles/

  • Shrike

    Oh, you must produce a vector plot! Those are cool.

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  • Eric D.

    Samsung is going to make it hard for Horace — no breakdown of phone or tablet shipments in their latest results. They're shipping more smart phones than Apple. I wonder if there's a way to break down how profitable those are, compared to the rest of their offerings. That's where the battle's going.

    • mrrtmrrt

      No Samsung sold less smartphones than Apple last quarter – 19 million versus Apple's 20.3 million iPhones.

      -Mart

    • asymco

      Samsung is no longer reporting with precision but they are reporting some data and it can be estimated (with some uncertainty.)

      I chose to be a bit more generous with their smartphone estimates (19.9) but others have already chimed in with their estimates. RIM did something similar a few quarters ago when they stopped reporting average sales price.

  • http://twitter.com/BrianSHall @BrianSHall

    Great stuff, thanks.

  • Ralph

    Does this let one deduce an upper bound on how much profit Apple can make on phones?

    Apple cannot double its share of profits, but for the purpose of napkin math, I'll suppose it could.

    I hypothesize without much data–no, it's more accurate to say I wildly speculate–that even though the market is still in the process of shifting to smart phones (and the mobile phone market is growing), the most profitable parts of the possible smart phone market have already been developed. That is, people in emerging markets will buy a lot of smart phones, but they are less likely to deliver big profits. Therefore, this chain of wild speculation lets me think that maybe there's an upper bound for the profit that can be captured from phones that is, say eight times the current size. (I'd be delighted if that wild guess could be refined by others.)

    So according to these guesses, Apple's profit from phones could not be more than about 16x what it is now – which would mean that Apple could not sustain 100% growth in phone projects for more than a few more years.

    There's still a lot of growth potential, but maybe Apple is getting to a point where it can see the ceiling of the mobile phone space on a log graph.

    • Ralph

      This upper bound would of course be a bound on how much profit anyone could make from phones, but Apple is closer to that bound than most vendors.

    • asymco

      This sort of analysis leads to problems. Almost all disruptive growth is unforeseeable. Try thinking through this analysis for all mobile phones in 1995. Would you have reached the conclusion that it's a multi-trillion dollar market with 6.5 billion users in 15 years?

    • http://twitter.com/Marcos_El_Malo @Marcos_El_Malo

      "Apple cannot double its share of profits, but for the purpose of napkin math, I'll suppose it could."

      I'm not sure how you can suppose such an impossibility and derive anything useful. Apple has a 66% share of the total. Doubling its profits is within the realm of possibility, but not doubling its share. The total market can grow and change, but a share of that market can never be larger than the market.

      "which would mean that Apple could not sustain 100% growth in phone projects for more than a few more years."

      That depends on how the market grows and changes. We're due to hit 7 billion potential Apple customers by October of this year, according to some estimates. http://www.worldometers.info/population/

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  • Ophelia

    It also seems that there is a chance that Apples share could drop just as fast over the next five years should the company fail to innovate without Steve Jobs around to focus and lead the company.

    • http://www.noisetech-software.com/Y.A.S.C..html Steven Noyes

      There is a chance for all things. Bing may overtake Google in search. Amazon may stop being a popular internet market place. Apple may collapse. We may achieve break even and sustainable fusion power in the next 3 years.

    • Hamranhansenhansen

      There is also a chance that California could fall into the Pacific.

    • asymco

      The profitability will drop if innovation stops. But personifying innovation implies Apple does not have processes or priorities in place outside the mind of one person. That's becoming increasingly harder to believe.

  • http://twitter.com/tommy4490 @tommy4490

    In competition with iOS devices, phone OEM's join the list of market segments that are seeing their profits evaporate before their very eyes: smart tv, tablets, computers, consoles: all are suffering debilitating losses before the Apple juggernaut!

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  • famousringo

    That Nokia collapse this quarter is so dramatic. I thought they'd be able to coast on their dumbphone dominance a little longer.

    I can't help but wonder if RIM will take a similar dive sometime in the near future.

    Looking forward to the next update of the AMP index.

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  • Noanswer

    I still can't understand why people are cheering why company are making such big profit margins? Very little of you got any stocks so why are you drooling over Apple profits? That's your money.. If their would be more competition, iPhone price would drop significally – don't you want that? No? So then why are you angry when T&T or Verizon don't drop internet price?

    • asymco

      Profitability is a signal designed by markets for identifying value creation. Making losses is also the best indicator for value destruction.

    • Kizedek

      One's a product and one's a service. A Mac is a Mac, no matter who buys it or what they use it for (actually, students and teachers get a break). The cost has been pretty constant and you tend to get more value with each new model — each is better than the one before, at the same price.

      With a service like internet, the cost of provision is the same, no matter what data is passed. What makes people angry is when the provider, in effect, says "Oh, you like using your iPhone, do you? Well, I think we'll just start looking at how you are using your device and putting a higher rate on different types of data, or on certain services and websites you access."

      The shenanigans of the telcos can affect the price of the iPhone too — some of that competition you desire to see is due to the lack of competition between local telecoms company. The local providers know they can get away with more, because the iPhone sells out. Recently I saw an offer to get a free iPhone — but the monthly tariff on the two-year contract was 100 Euro! Crazy. They didn't charge that for other phones.

      Either data service is unlimited or it's not. Either you have a cap, or you don't. The pipe should be dumb. People would be equally angry if Apple decided to charge a lawyer or doctor more for the same computer.

  • EWPellegrino

    Horace, is there a page detailing the methodology behind these numbers anywhere? For example are you comparing pre-tax profits or post-tax? Thanks

    • asymco

      I was hoping it would be self-explanatory. Operating profit is defined as pre-tax: Operating profit equals gross profit minus all operating expenses. This is the surplus generated by operations. It is also known as earnings before interest and taxes (EBIT), operating profit before interest and taxes (OPBIT) or simply profit before interest and taxes (PBIT).

      • EWPellegrino

        Ok, that's what I thought, but then I'm a bit perplexed by the Samsung number. They reported 1.67TN KRW, or 1.58BN USD telecom operating profit, so are you assuming that .2BN USD of that was tablets or other non handset devices? Thanks

      • asymco

        Their telecom division includes networks so that figure is useless. I derived the phone operating profit on the basis of multiplying their operating margin (13.7%) by their device revenues which were given as 45% higher than year ago or $10.1bn. See slide 4 of presentation here <a href="http://:http://www.samsung.com/us/aboutsamsung/ir/ireventpresentations/earningsrelease/downloads/2011/20110729_conference_eng.pdf:http://www.samsung.com/us/aboutsamsung/ir/ireventpresentations/earningsrelease/downloads/2011/20110729_conference_eng.pdf<br />I should say that this process of deduction is not consistent. Different vendors report different data for different quarters. They not only differ from each other but are not consistent quarter to quarter. Sometimes you have to deduce and sometimes (rarely) you have to estimate. Then there are currency fluctuations which may cause one vendor's reported gain in EUR/Won/etc. to be a loss in USD.However, the pictures I draw are designed to be slightly imprecise (limited by the error of one pixel and human retinas) and yet still tell the story. This is why I prefer charts over tables.

      • EWPellegrino

        Thanks that's exactly what I was curious about, I appreciate that everything is necessarily inexact.

      • berult

        Conceptual, abstract thoughts are carried forward by visual clues and crude, recognizable patterns. That's where the rationales truly come into their own and jump above the metrics fray to initiate some process towards comprehensive transparency. 

        Precision, paradoxically, often blurs the continuum of reality.

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  • http://www.smartlevers.com Rukesh Patel

    Horace, the furthest label on the x-axis of the third chart (profit share ranking) reads Q12012 instead of Q22011.

    • http://www.asymco.com Horace Dediu

      The lines are trimmed because I decided not to record a rank if there are negative profits.

      • http://www.smartlevers.com Rukesh Patel

        I see.

        Though the old lines do make the chart look more complete and striking, at least if one has seen that version before the new one.

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  • deV

    The second chart is so unnecessarily convoluted.

    It should show that Apple has taken the majority of the profits from Nokia. While LG collapsed recently, and Sony-Ericsson collapsed in 2008, everyone else has stayed roughly the same during that whole period. HTC has gained a percentage point or two. Motorola is just as dead as they always were. Samsung is roughly holding steady. RIM is actually still kicking.

    It just looks distorted because they all go down even though that’s really deception. Most of them should be represented the same way HTC is as fairly flat. And Apple should be right above Nokia, because they are absorbing Nokia’s former profits. Then the chart wouldn’t be so deceptive.

    • http://www.asymco.com Horace Dediu

      The order of the areas in the area chart are not arbitrary and are not chosen subjectively. The convention I follow which is an acceptable convention is that older participants in a market are placed at the bottom and newer participants are placed on top. The older thus form a “base” which is not distorted by newer and more volatile data. Thus you can see that the incumbent phone vendors are placed at the bottom and the smartphone vendors are placed on top.

      Because there are multiple ways to interpret the data, I provide multiple charts. I also provide access to the raw data. You can also look at the data in hundreds of ways with the visualizer tools in the “Explore Vendor Data” section. You can also download the data from Google Docs to analyze them with your own tools.

      Perhaps after doing so, if you do come to some novel and notable perspective, you could share it by posting the images in your comments or on a blog of your own.

    • Costelmarin11

      Not surprisingly Apple is producing the best phones out there right now… http://www.ccmp3.net

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  • Smith Man

    “Apple cannot double its share of profits, but for the purpose of napkin math, I’ll suppose it could.”

    I’m
    not sure how you can suppose such an impossibility and derive anything
    useful. Apple has a 66% share of the total. Doubling its profits is
    within the realm of possibility, but not doubling its share. The total
    market can grow and change, but a share of that market can never be
    larger than the market.

    “which would mean that Apple could not sustain 100% growth in phone projects for more than a few more years.”

    That
    depends on how the market grows and changes. We’re due to hit 7 billion
    potential Apple customers by October of this year, according to some
    estimates.

    Pasarica

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