Smartphones: Samsung ships the most handsets, but Apple makes most of the profit

Apple has reaped most of the profits from the smartphone boom over the past decade, but its share of profits from the industry actually declined in Q2 2021 – albeit to a still pretty healthy 75%. 

According to analyst Counterpoint Research, Apple accounted for three-quarters of the smartphone industry’s profits in Q2 2021.

The analyst doesn’t state the total revenue of profits for the industry. However, research firm Gartner reported global smartphone sales reached almost 329 million in Q2 2021, up 10.8% year-on-year. Apple reported that in fiscal Q3 2021 iPhone sales rose by 50%, year over year, to $39.6 billion. 

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Counterpoint pegs the highpoint of Apple’s share of smartphone profits at Q4 2020 when it took 86% of profits off the back of strong iPhone 12 sales. 

Apple’s line up of hardware and software across iPhone, iPad, and Mac devices, including media and its cloud services, is a major advantage. 

“Apple also benefits from interoperability between its devices. The convenience with which one may shift between a Mac, iPad and an iPhone encourages users of one Apple device to stay within the Apple ecosystem by acquiring other of the brand’s devices,” Counterpoint notes.  

“This is made possible by Apple’s significant control over both hardware and software, enabling a seamless shift of work on an app between multiple devices. While this has been the case for some time, it has become particularly pronounced with the stickiness of music, media, news, storage, etc. Apple is likely to retain this edge, enabling it to continue charging premium prices for its handsets, thus maintaining high operating profit margins.”

Samsung ships far more smartphones than Apple, but remains in second place in terms of profits. Huawei’s shipments and profits have fallen dramatically in the past two years because of US sanctions. Huawei has ceded ground to other Chinese brands such as Xiaomi, Oppo and Vivo. 

But profits and revenues for the entire smartphone industry could be hit in coming quarters. Like many companies, Apple is being affected by the global semiconductor crunch. 

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Bloomberg reported that Apple may cut production of its iPhone 13 by up to 10 million units due to chip shortages. It was expected to make 90 million iPhone 13 units by the end of 2021.     

“We expect supply constraints during the September quarter to be greater than what we experienced here in the June quarter, the constraints will primarily impact iPhone,” Apple’s chief financial officer, Luca Maestri, said in July. 

Taiwan’s TSMC, the world’s biggest contract chipmaker and a key supplier to Apple, yesterday reported that supplies would be restricted through 2022, Reuters reported. 

Gartner forecasted the shortage of chips will last well into 2022, and will eventually affect growth in the smartphone market. 

Samsung, another large semiconductor manufacturer, has warned that the issue could delay the release of a new Galaxy Note smartphone until 2022.