Apple doesn't need to sell a billion smartphones to beat Android

Apple sold 75.4 million iPhones over the holiday quarter, the company announced last week. That makes a total of more than 192 million sold for the year.

That sounds like a lot, but Android dwarfed Apple with over a billion smartphone shipments in 2014, according to a Strategy Analytics report.

In fact, Strategy Analytics says Android phones represented 81.2% of the smartphone market share last year. iOS phones were just 15% of the market.

It’s true that it would take years for Apple to ship a billion iPhones.

But focusing on market share misses why the iPhone has become so integral to Apple’s business.

The iPhone is a profit machine. Even before Apple released the iPhone 6 and 6 Plus, Apple was already capturing a sizable majority of smartphone profits:

Global operating profit share by smartphone vendorBI IntelligenceGlobal operating profit share by smartphone vendor

The 6 and 6 Plus are hugely profitable for Apple, too. By offering a 16 GB model, which doesn’t contain enough storage for most people, Apple effectively motivates you to buy the 64 GB model for $US100 more.

If you want the 6 Plus, that’s another $US100. Most of that extra cash goes straight to Apple’s bottom line.

Samsung, the biggest Android maker out there, reported Q4 profits of $US4.88 billion last week. Apple’s profits were around $US18 billion over the same period — more than any other company has ever earned in a quarter.

But they both sold about the same number of smartphones in Q4.

Both companies make more than smartphones, but the latest earnings show how Apple has focused on quality (and price) rather than quantity.

It’s been a staggering success so far.

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