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Samsung And Apple Earn 99% Of ALL Smartphone Profit In Q1. Dangerous?

Eric McBride
15

 

If you had to pick the 2 biggest movers and shakers of the smartphone industry right now, this answer is no shocker: Apple and Samsung. Both companies have flagship devices that have sold tens of millions of units, both spend an insane amount of money on marketing, and both have majority smartphone marketshare in the mobile world. I knew both companies were doing well, but it absolutely STUNNED me to learn that in Q1 of 2012, a staggering 99% of ALL smartphone profit was made by Samsung and Apple (as reported by Asymco). These 2 companies are successfully dominating the smartphone market, and while it's good to see Samsung having such success recently, it could be very dangerous for Android as a whole, and here's why....

Stealing Marketshare Vs Creating It

Despite what many people might think, Samsung and Apple did not "steal“ their profits only at the expense of other OEMs. Rather, they created a new "pool“ of profits and created new opportunities that allowed them to extend their reach. Apple itself accounted for an unbelievable 73% of all profit for Q1 (good Gawd), and they did that by demanding premiums from all the operators who wanted to carry the iPhone 4S. Out of an estimated 500 worldwide carriers who wanted to carry the iPhone 4S, 250 paid Apple a hefty premium in order to sell the device.

Samsung themselves had 26% of the entire market, and accomplished this by offering a wide range of products at low, mid, and high price points. The strategy paid off, as both companies are so far ahead of any other handset maker that their only compeition is each other. Things are at least beginning to look up for HTC, as the One series could be what brings HTC back into positive profits in the second and third quarter. Sony, Motorola, and LG however have a long way to go.

Umm...Marketing Anyone?

The issue is that a lot of Android OEMs (LG in particular) only earn as much as they invest. I mean, it's pretty simple: Apple and Samsung + massive marketing spending = profit and consumer demand. If you don't invest, you don't earn. Some Android OEMs (Sony) are currently doing so bad, that their current goal is to simply lose less money. So this isn't all Samsung's fault when it comes to Android sales. After all, you reap what you sow. 

The Danger

So Samsung is doing great, which is a good thing for Android right? Not so fast. Yes they are doing well, and yes it's great they have emerged as someone who can compete with Apple in terms of high sales volume of Android devices. And again, yes it's good they market aggressively to get Android known among consumers. But what's worrying is that Samsung is the ONLY Android OEM who for the past 2 years have put up impressive sales numbers. Hell, they are only Android OEM in the past year that was in plus when it comes to revenue. But as they have worked hard to establish themselves, it could actually backfire on Android as a whole. 

Imagine this: Samsung monopolizes the sale of  Android smartphones to the point of where 70% Android sales are through their devices. Then they pull what I like to call"an Amazon“, fork Android completely to their liking and tailor it more as a Samsung experience phone. Don't think that could happen? Then look at the Kindle Fire. People don't look at that phone as an Android device. They look it as an Amazon tablet. Yet this tablet is the ONLY Android tablet that actually sells really well. If Samsung would take the same route, it could have a huge impact on Android as we know it. While I am very happy for Samsungs success, and even though I think they make great tablets and phones (I own one of each myself), I do NOT want to see them fork Android. The consequences would not be good for Android's long term strategy.

What do you guys think? Do you think Samsung will go the Amazon route and fork Android? Or do you think they care about their relationship with Google more than Amazon does?

Picture credits: images.t-nation.com - edited by myself

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Comments

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  • Ti Mo May 7, 2012 Link

    There is no way, that can't be possible. I have an HTC. My brother has an LG. Let's look at my friends.. Lots of them have I phones, a few htcs and a few Samsungs and a few lgs and a few Motorolas.

    No way in hell.

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  • Eric McBride May 7, 2012 Link

    I know what you mean! But remember, HTC just reported..again..profits at an all time low down 70%. These numbers only relate to sales of Q1 of this year, so its not a large time span. LG, Sony, and Moto have also all reported record losses.

    Sad but true :(

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  • Ti Mo May 7, 2012 Link

    What I think is sad is that around me, sooo many people buy iPhones. Especially girls. I'd say almost 50-75% of the (cool) girls have an iPhone.
    That's another interesting topic btw. I bet you remember high school and the losers and the cool kids? Surprisingly many cool kids have iPhones, surprisingly few of the not so cool kids have iphones/smartphones in general

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  • Eric McBride May 7, 2012 Link

    Very true. But in Europe that trend is changing. I see lots of iPhones, but I see a lot of Android phones as well. Slowly but surely its getting there.

    But dont expect the iPhone to go away. Mark my words that this year, the iPhone 5 will be a BEAST.

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  • Ti Mo May 7, 2012 Link

    Yeah that's another thing. Back in Germany, that was like 10 months ago, not that many people have iphones. I mean yeah you see a lot Of iphones, but you see just as many androids and like a billion more non-smartphones.
    Here in America... Damn, too many iphones

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  • Eric McBride May 7, 2012 Link

    Yeah..but that will change :-D

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  • Ti Mo May 7, 2012 Link

    I wouldn't project that change over the next 2-4 years though. Till then Apple will remain the best. We'll see what happens then and whether people might find Apple boring by then. We can only hope so

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  • Stefan E. May 7, 2012 Link

    These numbers only factor in real profit, not the sales, not the market share. There actually got to be some with negative impact on this chart (does this enlarge the "cake" to distribute beyond 100%?).

    I think that is a pretty useless curve.

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  • Eric McBride May 7, 2012 Link

    In all honesty, I wouldnt expect it ever to change! The iPhone will do what it does best, and thats fit in the pocket of mass consumers. Android will grow, but as far as completely overtake it, thats unlikely. The iPhone is the most popular phone in the world when it comes to brand identification, and changing that will be next to impossible.

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  • Eric McBride May 7, 2012 Link

    @Stefan - Good point, but at the same time it does show a trend thats hard to ignore. When 4 out of 5 OEMS are failing to move units, yet 1 is dominating units, it becomes pretty clear which OEM consumers are favoring.

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  • Ti Mo May 7, 2012 Link

    Ever are strong words.. 6 years ago many people didn't even know what Apple is beside a fruit.
    Nothing will last forever. In 5 years the mobile market will look completely different. Maybe then we all have Google glasses and Apple missed that trend and Apple becomes Nokia... You never know :)

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  • ljhaye May 7, 2012 Link

    This is an alarming trend, asymco has done extensive research on apple's numbers and revenue and it's impressive. Apple is unlike any company we have ever seen in the past 100 years. This trend is very worrisome as iOS is a complete platform as its effective on various form factors ( iPhone, iPod touch and iPad) versus android is only effective on smartphones so far ( do not mention kindle fire). I'm not surprised Samsung is getting the kings share of android (unit and revenue) since they are the most blatant in terms of "copying" Apple, hence all the lawsuits by Apple against them (30 lawsuits around world). S voice is their knock off of apple's Siri, s drive vs iCloud, music hub vs iTunes, pop up stores vs apples retail chain, see the pattern yet. If not, then YOU will be surprised when they fork Android ala Amazon.

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  • ljhaye May 7, 2012 Link

    Android right now is just successful on smartphones and for only one OEM. The issue becomes Google versus Samsung regarding the direction the android OS takes in the future. The other OEMs do not have any influence on Android look at the Nexus program it's been Samsung for the past two models and I'm willing to bet it will be Samsung for the third model as well. Many on this forum won't mind if Samsung makes the next Nexus device but I do it tells me that Samsung is starting to pull some strings and squeeze out the other OEMs for this high profile marketing chip. Android as a COMPLETE and versatile platform will not beat apples iOS until Google starts to really throw its weight around. They are starting to clamp down on the OS and cleaning up the Play store, these are the right moves, as "Open" source is not what it's cracked up to be and google knows it.

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  • ljhaye May 7, 2012 Link

    htc makes 1% of the smartphone profits. 1% means your a step away from bankruptcy. I have two engineering friends who work at Apple and they say Apple is at WAR for mobile computing and they test products that make the iPhone and iPad look like garbage. The iOS will become a very different platform especially on the iPad starting with iOS 7.0.

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  • Eric McBride May 7, 2012 Link

    @ljhaye - It wont surprise me at all actually. Thats totally the path they are heading. And I agree about what you said about Apple..companies like them dont come along that often. Its all out civil war between Android OEM carriers, and it is indeed worrying. Google has a lot to improve, and I hope they more actively tackle the issues that need ironed out. I would LOVE to see what Apple is working on behind close doors. Google makes cars that drive themselves. I wonder what Apple is up to? Hmm.....

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