Apple Inc. (NASDAQ:AAPL) has, once again, proved that Smartphone industry is not about selling more number of devices. The latest Counterpoint report depicts that despite accounting for just 9% of total Smartphone shipments in Q2 2017, Apple dominates the industry with a 65% share of global mobile handset profit in Q2 2017.
The overall global mobile handset profit pool has declined by 10% YoY in Q2 2017. This decline is recorded due to the growing demand for mid-price-range mobile handsets. The aggressive marketing strategy by vendors like Xiaomi to flood the market with low price mobile handsets also played its role in the higher sales of comparatively thinner-margin mobile handsets. Besides, the success of Samsung’s mid-range J and Grand series smartphone strained the overall mobile handset profit in Q2 2017.
Despite the growing demand for mid-range mobile handsets, premium devices have maintained its dominance when it comes to calculating profit from mobile handset sales worldwide. Premium devices, price tagged more than $400 accounted for nearly 80% of the global mobile handset profit in the quarter.
The three fastest-growing smartphone manufacturers from China recorded commendable growth in their mobile profit share. While the profit share of Vivo and Oppo swelled by 50% compared to the year-ago quarter, Huawei doubled its profit share in just one year. The acceptance in the Asian market, especially in India, played a vital role in the growth of profit share.
While the profit share of all the leading mobile handset manufacturers swelled in the quarter the Korean smartphone major Samsung faced another setback. Despite recovering from the Note 7 debacle and gaining users’ confidence Samsung’s mobile handset profile share declined to 22.3% from 28.8% in the year-ago quarter.
Apple Dominates: It’s Not About Selling More Handsets
Though the Smartphone was introduced to the world way back in 1993, it was the launch of iPhone in 2007 that brought the radical shift to the global smartphone industry. From the beginning, Apple has been focused on catering to people who have deep pockets and demand nothing but the very best.
Unlike Samsung or any other Android smartphone OEMs, Apple never bothered to create a mobile handset for entry-level or mid-range smartphone users. The strategy not only resulted in tremendous excitement towards iPhone but also made Apple – the company on the verge of collapsing once – the world’s most valuable brand, much ahead of Samsung, Microsoft and Google.
Let me put things in perspective; In 2014, Apple shipped 192.7 million units of iPhone, capturing 14.8% of the total smartphone shipments. It is way below than 318.2 million units sold by Samsung which accounted one-fourth of the total market. In the following year 2015, the sales of iPhone went up to 231.5 million, helping Apple to capture 16.2% of global smartphone shipments. Interestingly, during the same year, Samsung sold 324.8 million units of smartphones, but its market share tumbled to 22.7%. In 2016, the shipment share of both Apple and Samsung hovered 15% and 22%, respectively. It is important to note that during this period, the worldwide shipment of smartphones went up from 1.3 billion units in 2014 to nearly 1.5 billion units in 2016.
It’s clear that for the last three years Apple has been steadily maintaining its share of total smartphone shipments. The share, however, never swelled more than 15% in any year. Despite, Apple has been accounting a lion’s share of the mobile handset profit year after year. In 2012, Apple accounted for 75% of the total profit generated by the top 8 mobile manufacturers. The profit share swelled further as Apple accounted for 79.2% share of total smartphone profit in 2016.
It’s quite evident from the above statics that despite increasing number of smartphone manufacturers and comparatively thin market share Apple has continued its dream run. The sole reason behind such impressive performance of Apple is the unparalleled brand loyalty and commitment to deliver nothing but the very best to the limited set of the user base. Consequently, only a fraction of iPhone users jump off the ship. In contrast, a sizable share of Android user base either upgrade or aspire to upgrade to iPhone every year.
The uniqueness and closed ecosystem of Apple have been paying off for Apple. In contrast, the availability of Android to almost every smartphone manufacturer has resulted in lost charm among users. A person buying a smartphone worth US$60 enjoys the same ecosystem as a person owning an Android phone worth $600 experiences. The dilution of differentiation has affected the brand value of Android devices. Consequently, a smartphone user finds more value in exorbitantly expensive iPhone than any other Android handset.