Stories about Samsung gaining on Apple in smartphone profit share are a red herring, and here's why

According to research by Cannacord Genuity analyst Michael Walkley, as shared by Fortune, Apple still rakes in a whopping 57% of the profits in the mobile industry, while Samsung grabs the other 43%. Note that I said “mobile industry” not “smartphone industry”. In case you’re wondering why this adds up to 100% despite the presence of other players, it looks like the small profits from guys like BlackBerry and HTC are offset by losses from LG, Motorola, Nokia and others. The report also apparently goes into some detail on how Samsung should overtake Apple to be #1 in profitability. This is a red herring. It does not matter. And here's why...

According to Cannacord Genuity, Apple has 8% of the mobile market. Considering Apple is only involved in the smartphone market, and currently only offers 3 phones -- the iPhone 5, iPhone 4S, and iPhone 4 -- I think this is an incredible result. And yes, Samsung has much more overall mobile share than Apple, but that’s because they sell lots of feature phones, and because they offer a far wide range of Android phones than Apple does iPhones. Samsung ships a lot more phones than Apple and at the high end of the market, they both have great hardware with fairly high price points. Samsung should be able to make a lot of money. That Apple can make way more money than Samsung per phone is impressive.

Whenever I see studies like this it just makes me salivate as an Apple shareholder because a huge chunk of the market is currently NOT using smartphones, yet Apple already has 8% global share. What happens when the rest of the planet migrates over to smartphones? I’ll tell you what. Apple will gain customers. They will probably lose share in the smartphone market because on the low end more people will buy Android But they’ll still be gaining customers and therefore gaining market share in the only thing that actually matters here - mobile market share.

Remember, smartphone market share is irrelevant in the long term. All phones will be smart and the dumb phone industry will be gone.

The global adoption of smartphones is great for both companies. As an investor in the mobile market, and a shareholder in both companies, I see both Apple and Google as strong growth stories.

Source: Fortune