Does it matter if Samsung is gaining on Apple in mobile profit share? Nope - here's why!

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

Chris Umiastowski

Chris was a sell side financial analyst covering the tech sector for over 10 years. He left the industry to enjoy a change in lifestyle as an entrepreneur, consultant, and technology writer.

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Does it matter if Samsung is gaining on Apple in mobile profit share? Nope - here's why!

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Thought that was weird how they said there's no profit left for anybody else. Didn't blackberry just report 100 million profit on 3 billion in revenue. Since when is millions of dollars not worth mentioning lol. Damn, wish I had a company doing that well. In a growing market as long as your there making profit its safe to expect growth.

"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."

Uhh, no. They would not be gaining market share. They would simply decreasing their loss of market share.

For example, let's say that Apple currently has 20% of the worldwide smartphone market, and Samsung has 40%. Just as hypothetical numbers, for the sake of discussion. Now, say 1 billion dumbphone users convert to smartphones. If they all buy Android phones, then Apple's market share drops to, say 15%. But, if some of those people buy iPhones, then Apple's market share still drops, just not all the way to 15%. Of course, if enough of those people buy iPhones, their market share would go up, but I agree with you that that is not going to happen. MOST of that next 3 billion smartphone users are going to be getting cheap Android phones.

My first smartphone is an iPhone 4 when it came out, I upgraded last year to Samsung s3 and I'm glad I did. I would never pay for another iphone. It's too expensive and does not lead the way anymore.
I prefer the openness of android it has much more functionality. Apple products are too locked off, if they truly want to compete then they need to follow suite and allow people to do what they want with their purchase.

Also, the Android phones are the ones that see more innovations and feature richness. I got a GS3 after its release and she waited for the iPhone 5. She's peeved now that she didn't get the GS3 instead because of what it can do and what it can do better, that the iPhone 5 can't. The antenna is a big one. Not only does the GS3 seem to get better reception (which pales in comparison to what a Motorola phone can do) but it also can run voice and data at the same time on either VZW's 3G and 4G networks with it's dual-antenna design (basically running voice over 1x with data over which ever is greater and available for 3G/4G).

cheap android phones? the top tier android phones are $600-700 per device. Unless you are talking about subsidies on contracts which you sign a 2 year agreement and basically pay a down payment of $2-300 for it and basically pay it off over 2 years. Even the Nexus phones through google play are $450 because they don't add on the carrier's cut to the phones. BTW Samsung makes the parts for iphones, so I guess iphones are cheap too, if you were referring to quality standards and not monetary standards on your definition of cheap.

sound like neverending Palm story..... Palm is the best, webOS is the most user friendly OS... but in this story the main protagonist is Aple... the fact is that both of them are looser...

I personally do not care who gets the lion's share of the profits. As long as my preferred maker (Apple) takes in enough money to invest healthily in R&D to make me better stuff, I am happy.

However, most Apple sites, including this one, have beaten the profit share drum for years. Virtually *every* mention of Android market share is met by the retort that profit share, not market share, is the metric that matters. Here, there is a separate tag for articles on profit share [ http://www.imore.com/tag/profit-share ]; a typical comment by an editor reads: "32.9% market share is cool. Know what's really cool? 50% profit share." [ http://www.imore.com/iphone-market-share-profit-share-2#comments ]. Over the past 5 years you can find several articles with the same basic thrust as this one, titled: "Reminder: Apple's All About Profit Share NOT Market Share" [ http://www.imore.com/reminder-apple-profit-share-market-share ]

I agree with your central premise that Apple should not worry about this, as there is plenty of profit to go around, and goodness knows Cupertino still sees a *ton* of it. However, the difference in messaging suggests profit share mattered when Apple is recognized as the undisputed king, but not so much when there is a suggestions of a challenger to that throne.

Exactly. The main concern with Apple is what's being done with the profits. Because let's face it, this is their primary business. Samsung does so many other things that it doesn't matter.

smartphone market share is irrelevant in the long term. All phones will be smart and the dumb phone industry will be gone. <- That's the stupidest sh1t I've ever heard. Dumbphone market share won't matter since it will be gone, but smartphone market share is booming, so that's the share you want!

I wasn't surprised to see this article was written by an (former?) "analyst." Take that as you will.

I completely disagree with this article. Of course it matters. Samsung is coming out the gate with various innovative products every other week. The attention of the public will reflect this in due time. Step up, Apple or have a seat... lol

Innovative products every other week? Since when is different screen sizes at different price points innovative?

As far as innovations go...Apple is definitely at the bottom of that list. Samsungs motion features are by far more innovative than anything Apple has done in the past few years. Whether you find them "cool" or "useful" is up to you...but the implementation of those features are definitely innovative and fresh. Apple unfortunately has been the same ole same for the past 3 or 4 years. Not knocking the iPhone though. I love my iPhone 5 and my iPad. But to be completely honest...they're not doing anything new or fresh. They seem to be complacent in what they have. Lets see if this year brings any change.

"Whether you find them "cool" or "useful" is up to you..."

I think that's the thing. Apple only focuses on what's generally considered useful because if it's not useful, there is no purpose to have it taking up space.

I dunno. Ask the engineers, designers & critics what's so special about the iPad mini. btw I have a 2011 iPad and a mid-2012 Macbook Air

That is an exaggeration, but you get the point. It's more than just screen sizes- but for Apple it would be a great start.

Actually....that Apple makes more money than Samsung tells me they are charging way too much for their product. I LOVE my iPhone, don't get me wrong, but damn.....an additional $100 for doubling my storage from 16 to 32 and then 32 to 64?

Puh-LEASE!

"... they are charging way too much for their product."

That would be true if nobody was buying them up. But since people are buying these products up, they are not charging "way too much". Maybe they just charge more than YOU like. I personally don't care in this particular case. Flash storage is still pretty expensive, and what Apple utilizes is pretty damn good quality. I also don't mind supporting a company's healthy profit margins, as long as what I'm buying into isn't too over-the-top, like their RAM. I was able to get better performing RAM from OWC. I upgraded my MBP for $160 to 16GB from 4GB. Apple wanted somewhere around $300.

it do not matter who has the biggest market share, who makes the most money is the bottomline. iphone is selling more expensive than android so yeah they are going to make more money.

Here's a little something to keep in mind. Samsung has a habit of including their tablets in with their Smartphone profits, inflating this number. Add iPad profits (which Apple tends to report with their computer sales) in with the iPhone figures, and you will have a much different story. It's one thing for companies to lead the discussion with their numbers. It's quite another for analysts to look the other way and not clarify what information they are using.

Ehh... so the - from LG and motorola should subtract only from the + of Blackberry and HTC? Why not subtract it from Samsung instead? Did I misunderstand something or is that a truly ***** way of misrepresenting numbers?

And why do I get the following: "This post has been automatically been marked as spam ... and include a copy of the comment"

when using words like **** and **** , quoting the original article

What on earth is that automatic spam-detection doing? C-mon!

The more I look at it the more baffled I am with the incredible lack of (something) the author of this article has in the act of addin ONLY the Apple and Samsung numbers to 100%.