Apple, Samsung Capture All Of Industry's Smartphone Profits (zdnet.com)

Continuing to operate on razor thin margins, smartphone manufacturers other than Samsung and Apple are bleeding money. Apple accounted for 75 percent of the smartphone's profits in the second quarter this year, down from 90 percent a year ago, according to Canaccord Genuity. Samsung, which has reported strong sales thanks to its Galaxy S7 series of smartphones, accounted for more than 30 percent of the industry, the research added. ZDNet reports: While this tale could revolve around Apple vs. Samsung the larger question is this: Why would any company want to make smartphones? Let's get real. All the profits go to Apple (high end) or Samsung (high end and scale). The rest of the players in the market don't make money and get disrupted by whatever vendor is flavor of the month? Remember that Xiaomi was supposed to be the next big thing in China and elsewhere, but is now being disrupted by Oppo and Vivo. A quarter from now Oppo and Vivo will be thumped by some smartphone manufacturer we haven't heard of yet.

Comments

Stop chasing the shiny

[TWX]

So buyers need to start asking themselves what they actually want this thing that they're carrying around eight to sixteen hours a day, and often sleeping next to the remaining eight, to do.

Then they need to ask themselves what device accomplishes these tasks, and then start comparing extra features that cost more along with various price points.

After they've done all that, basically identified needs, wants, what's superfluous, then they're in a positon to actually make a choice.

We tend to be a bit conservative with our spending, using devices until they stop working, and in some cases doing a bit of home repair to keep them going when there are problems. I used an HTC Dream until the "A" key quit. We used Galaxy SII phones until her power button kept getting stuck where it was engaged, fixed that a couple times before having enough, and I used my SII until something failed and it no longer recognized SIM cards or that it had a WIFI chip. She didn't feel a need for more functionality than the SII so we replaced it with a Galaxy Core Prime, and I wanted durable without needing a case so I went with the Kyocera DuraForce XD. She spent around $200, I spent around $400, both a far cry from the $700 phones that are so common, and I expect these will give us many years of good service.

Replace the electronics when it's actually dead or doesn't meet your needs, not just because it's not as shiny as it once was.

Re:Stop chasing the shiny

[MitchDev]

"Replace the electronics when it's actually dead or doesn't meet your needs, not just because it's not as shiny as it once was."

While practical and intelligent, that is not the American Way (according to Madison Avenue and big corporations)! That's communism! Forget thinking and comparing and saving for the future and choosing wisely, just spend spend spend!!!!!!!!

Re:Stop chasing the shiny

[tomhath]

that is not the American Way

Nor is it the European Way. Or the Asian Way. Or anywhere else.

Re:Stop chasing the shiny

[TWX]

Now we use them as VR systems, which will drive the need for faster phones with better displays and better positional tracking for years to come.

Is this a need, or is this a want?

Is this something that you need with you all of the time? Is this something that you need your communications device to do?

Re:Stop chasing the shiny

[OzPeter]

So buyers need to start asking themselves what they actually want this thing that they're carrying around eight to sixteen hours a day, and often sleeping next to the remaining eight, to do.
...
Replace the electronics when it's actually dead or doesn't meet your needs, not just because it's not as shiny as it once was.

I look at the phone industry and think .. hmm this is looking like how the car industry plays out. Aside from actual safety and engine improvements, is there any real benefit to continually changing styling every year - aside from trying to convince buyers that "new is better"?

Sort of related anecdote. Back in the 80's or 90's I saw the motorcycle industry basically go from shiny chrome to matt black and then back to shiny chrome. With both transitions being heralded as "great new styling".

Re:Stop chasing the shiny

[swillden]

Now we use them as VR systems, which will drive the need for faster phones with better displays and better positional tracking for years to come.

Is this a need, or is this a want?

That question is irrelevant. If I want to have a device that does something, and I want it enough to shell out the money for it, why in the world shouldn't I?

Your whole premise is that people are somehow wrong if they want a shiny new phone every year. Who are you to tell people what they should want?

Re: Stop chasing the shiny

[karmatic]

The biggest advantage to buying new cars is consistency and ability to plan.

I've been running the same car since 2012. It had a catastrophic engine failure, just a little past the warranty. It cost me $8,000 to fix.

With a leased car (or a new car), I know exactly what my costs are, and if it breaks (like mine did on occasion during the warranty period), it's not my problem - it's theirs.

Re:Stop chasing the shiny

[jon3k]

Replace the electronics when it's actually dead or doesn't meet your needs, not just because it's not as shiny as it once was.

New high end smartphone is $200 on contract in the US. That's about $17/mo to have the latest, fastest phone with all the newest features. For a device that I use constantly and carry around eight to sixteen hours, that is essentially nothing. That's between one and a half and three cents per hour.

I understand everyone has a different set of financial circumstances, but for a device that useful, that we spend that much time using, why NOT have the latest and greatest, if it's well within your financial means? I'm not talking about buying a $100,000 car here. We're talking about $100/year for a device that most people use very frequently.

Re:Stop chasing the shiny

[ranton]

Who are you to tell people what they should want?

Someone with more brain than money?

More likely just someone without either. These phones are obviously discretionary purchases so anyone being asinine enough to differentiate between need and want in this discussion is either not very bright or biased enough in some way to limit their rational thought. Obviously any feature someone "needs" in their smartphone is actually a "want" from a survival or overall life enjoyment standpoint, but that doesn't change the fact the device may need to have a feature for them to buy it.

Swillden was absolutely correct that the need vs want question was completely irrelevant to what is being discussed here. I can't remember the last time I purchased any good or service because I needed it, outside of health care related services that is.

Re:Stop chasing the shiny

[OzPeter]

why NOT have the latest and greatest

Have you ever considered where your old phone goes after upgrade? Here's a hint .. it doesn't just magically disperse back into its raw materials with no impact to the environment. E-Waste is a big problem, and not having the latest and greatest is an important part of tackling it.

Remember the3 R's: Reduce, Reuse, Recycle. The are actually in this order for a reason. First you reduce, then you try and reuse. Recycling is only the last step in the process after the other 2 have steps have been exhausted.

No surprises there

[TonyJohn]

So, in an established market you can't succeed big unless and until you beat the big players. You either make a loss or small profit trying to beat them, or you carve out a niche and make a more reliable profit which will never be big (so long as it remains a niche).

Re:No surprises there

[bluefoxlucid]

That depends on your definition of success.

Start a business. You take a pile of money (possibly a loan), use it to set up operations, and run for a while. Three, five years go by, and you struggle just to hold up. Your balance sheets get worse over time, until you can't keep all the creditors satisfied; then you file bankruptcy. Failure, right?

From one perspective, while in business, you supplied a valuable product or service. People bought enough that you stayed in business for five years. You didn't gouge them, probably, since you got enough business to stay in business. Maybe you couldn't keep up because the other manufactures slimmed their margins, provided better products, or otherwise changed their markets to compete with you before you got off the ground. You did something real.

From another perspective, a shitload of money flowed through your business. The jobs you provided came from your revenues, and those revenues took away from other businesses, so you stole jobs rather than creating them (not destroyed; instead of 1,000 new employees at Verizon, there were 1,000 employees at NewMobile); that's not really bad for those people, aside from the sudden disruption--which might not be a real thing, since you'll wind up selling your operations to another competitor to pay debts, and most of those people will probably not get laid off. Those who do will be replaced elsewhere--someone unemployed gets a job, or they get a job; doesn't matter by the numbers.

The one thing all that cash flowing through your business *did* accomplish is *it made your executive board friggin' rich*! Success? You started a business, paid yourself a $250,000 salary for a few years, then bailed. Your salary was something like $150-$400 per employee, so it's not like you were robbing your employees; the rest of the economy, maybe. Ethics and distant economic considerations aside, *you got rich*.

What is failure? What is success?

I somehow doubt this is accurate

[LichtSpektren]

LG's been talking about cutting their mobile division entirely, so I don't doubt how cutthroat the competition is. But it seems awfully unlikely that Samsung and Apple are the only profiteers, since Lenovo and Huawei both boast about how much money they're taking in.

Re:I somehow doubt this is accurate

[Noah Haders]

Revenues do not equal profits.

Re:I somehow doubt this is accurate

[Locke2005]

jet.com (and many other web sites) have a strategy of selling at a loss to capture "market share", then sell the company to some other sucker that doesn't realize they will lose their customer base as soon as they start charging enough to make a profit.

Mobile Phones

[JasterBobaMereel]

So Mobile phones are sold with very narrow margins, as they always have been, except for one or two premium products which are heavily marketed and sold at premium prices even though they are not much better than some of the others

Sounds like every othe industry ...

New math?

[MitchDev]

If Apple accounts for 75%, and Samsung 30%, that equals 105%... does not compute

(Yes I know, they specified Profits for Apple, poor writing by the author actually)

Re:New math?

[jeremyp]

Because everybody else together is making a loss.

Let's pretend the total profit of the entire smart phone industry is $100. We look at Apple's profits and find they are $75. We look at Samsung's profits and find they are $30. We look at everybody else and find that, in total, they are losing $5 between them.

Re:Reading comprehension

[EvilSS]

Not according to the article:

Apple accounted for 75 percent of the smartphone industry's profits in the second quarter, but that's down from more than 90 percent a year ago due to Samsung's Galaxy device lineup, according to Canaccord Genuity. Samsung's Galaxy S7 launch and the Note 7 follow-up likely indicate that profits will continue to do well, said Cannaccord Genuity analyst T. Michael Walkley in a research note. The other item that may ding Apple's industry profit is that customers are delaying purchases ahead of the iPhone 7 launch. Add it up and Samsung has captured more than 30 percent of industry profits in the second quarter.

Re:The limit of capitalism is state capitalism...

[Anonymous Coward]

No, I mean the major shareholders of Apple and Samsung.

The limit seems to be 105%

[flyingfsck]

So, between Apple and Samsung they have 105% of the market sewn up. Marketing speak indeed.

This is why I still read /. smartphone threads...

[Brannon]

because I am endlessly entertained by just how completely clueless the typical /.er is about why some electronic products succeed while others fail.

People don't buy iPhones because of benchmarks.

Re:Apple just has temporary advantage

[pastafazou]

your analysis is total horseshit. My wife switched from Apple to Samsung because of the cost savings. She thinks the Samsung is an inferior product. It glitches and crashes occasionally, and the auto-correct is horrible compared to the older Apple version she had been using. I'm sticking with Apple because: 1. I own a Mac, and the apps integrate well
2. I like my current iTunes setup, playlists, etc
3. I was impressed by the camera on the current model
4. I agree with my wife about the auto-correct sucking on her Samsung
5. All 5 of my kids own iPods, and I can text them and facetime them, my wife can't
6. I prefer iOS to Android as far as ease of use
7. I don't like the fractured Android versions market.
8. Better games in Apple store
9. Development looks easier for iOS than for Android (I haven't actually gotten around to serious development on either yet)