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Apple Captures Record 91 Percent of Global Smartphone Profits: Research (cnbc.com)
Apple has captured a record share of profits in the global smartphone industry in the third quarter, according to new research, despite grappling with falling iPhone sales. From a report on CNBC:Third-quarter smartphone operating profit reached $9 billion globally of which Apple took 91 percent of the share, Strategy Analytics said in a note on Tuesday. This amounts to $8.19 billion for the U.S. technology giant. Apple has the highest profit margins in the smartphone industry thanks to a loyal brand following and the ability to price its iPhones at a premium. And the figures come even after Apple reported three straight quarters of iPhone sales declines. Sat a long way behind Apple is China's Huawei which managed to grab 2.4 percent of global operating profit share in the smartphone market, accounting for $200 million, according to Strategy Analytics. Chinese start-up brands Vivo and OPPO are in third and fourth place, both capturing 2.2 percent of global smartphone profit each.
Actually, their market share has been running in the 15% range, not 40 (http://bgr.com/2016/05/23/smartphone-market-share-q1-2016/).
This implies that they are making on the order of six times as much profit on each phone. This isn't a cost efficiency due to size issue. Their hardware is simply cheaper to make.
So, yeh, people are paying a whole lot for pure vanity.
Apple keeps its costs down by burning out its engineers. Its a very abusive work environment. Also it uses Foxconn and other very abusive contract manufacturers to do its manufacturing. All the time charging a a high price premium by pretending to be a premium product while they are using the tech industry equivalent of sweatshops. Its a model well executed by luxury brands like Gucci who pay a child laborer 5 doallars to make a bag and then sell it for 500 dollars. Whether that is sustainable or not in the long term depends on how much Apple's manufacturing processes and Engineering processes come under scrutiny. At some point the economy will recover fully from the 2008 tech crash (we still havnt gone back to 2007 levels of tech employment) and Apple will start having problems as they wont have quality people. Problems will start appearing in the phones. (Already the innovativeness is gone and now we are getting execution defects as well . Till now the marketing has covered up for it but for how long). When the inflection point comes and people stop looking at Apple products as premium products the change away from Apple will be drastic. Think Sun Microsystems. Just like Sun a company which made its money selling premium workstations when people stopped wanting them the company went belly up. Apple has shown the same kind of hubris by expanding into Hardware design (always a capital intensive and tough business) as well as trying to get Swift to be the next Java (I would say Sun would have survived if they had not spent so many resources on Java). Apple is walking a very thin rope. yes it has 200 billion in offshore tax havens but since it doesnt want to bring the money back it also has billions in US loans to pay for all the expansion. If things go south Apple could survive on the cash pile if they retrench but what is likely is that they will blow the cash pile on newer and newer projects trying to get the next iPhone but by that time the smart engineers would have seen the writing on the wall and left and only the political animals would be around and the political animals while great at claiming credit cant innovate even if they have cash thrown at them.
Learn about whitespace, moron. No one wants to wade through an solid wall of text.