Samsung And Apple Grab 100% Of Smartphone Manufacturer Profits

The smartphone market may be booming, but Apple and Samsung are the only manufacturers meaningfully profiting from the bonanza.

The two companies, which together accounted for half of global smartphone shipments, combined for a 100% share of industry profits in the first quarter, according to estimates from Canaccord Genuity. That’s down slightly from 101% share in the fourth quarter. 

The number can be greater than 100 per cent because Canaccord calculates profit share as “value share,” which includes profits to offset other manufacturers’ losses (losses are counted as negative value share). 

Nokia, RIM, Sony, LG and HTC were also profitable, but just barely. The analysis did not include high-growth Chinese manufacturers like Huawei, ZTE, and Lenovo.  

The big story is that Samsung continues to take a larger share of industry profits. It accounted for a 43% value share of profits in the quarter, up from 26% a year ago. This is primarily a function of scale, as Samsung’s shipments volume has exploded.

It demonstrates that there are only two ways to reliably turn a profit in handset manufacturing: premium products or enormous scale. Samsung relies on scale, but Apple turns a bigger profit selling premium devices. 

Samsung sold nearly twice as many smartphones as Apple in the first quarter, but only made three-quarters of the profit. 

As Nokia faces pressure to move more aggressively into low-cost smartphones, it will need to reckon with the difficulties inherent in scaling such an initiative into profitability.

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Here’s a look at more recent quarterly developments:

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