Apple, Companies

Money-Making iPhone Owns Half the Profits With Just 4% Market Share


Android may be the most widely used smartphone platform in the world, but Apple is the number one money-making machine. The company shipped during the December quarter about 16.24 million iPhones, earning them $10.5 billion in the iPhone revenue alone.

And dispute its minuscule global handset market share, Apple enjoys a commanding lead of global handset earnings, according to research firm Asymco. 

Their survey of the December quarter revealed the iPhone accounted for more than half the mobile industry’s total profits, or 51 percent, based on about 22 percent share of revenues.

This makes Apple the biggest phone vendor in the world by revenue. Even more remarkable is the fact that such a huge profit slice comes from a company with a single-digit global handset market share.

More precisely, Asymco in a separate report estimated Apple’s share of all phones for the December quarter at about 4.2 percent (IDC says four percent), placing them fifth among global handset makers.

Although its global share is peanuts compared to industry giants such as Nokia, Apple has about 17.25 percent of the more lucrative smartphone segment, Asymco estimated. The figure echoes a similar survey by Canalys that pegged Apple’s December share of the worldwide smartphone market at 16 percent – enough to earn Apple the third slot, behind Google’s Android (#1) and Finnish cellphone giant Nokia (#2) that appears to be declining.

But how can Apple own such a huge share of profits with such a tiny slice of the global handset market? First, Apple is in the smartphone business and high-end smartphones account for the vast majority of global handset revenues and profits. And second, Apple’s high margins are the envy of the industry. For example, the average selling price of the iPhone was about $625 during the holiday quarter, an increase over $610 from the previous quarter.

While the iPhone has a tiny four percent share of the global handset market (above), it accounts for more than half the earnings (below).

Best of all, as smartphones make their way down and "the smartphone market slowly becomes the entire phone market," Asymco’s Horace Dediu wrote in a blog post, Apple is poised to grow its smartphone share up to 20 percent. That’s one fifth of the entire market for smartphones, not too shabby at all.

Let’s not forget that the Verizon iPhone, which goes on sale next Thursday, will benefit Apple significantly. Analysts expect the CDMA iPhone to pull anywhere between 11 million new users in 2011, according to conservative estimates, to as much as 25 million new subscribers, representing a significant market share growth opportunity for Apple.

Source: Asymco