Apple continues to crush the competition in the smartphone industry, despite a decline in overall industry profits by 11% in Q3 2019. This decline in profits is attributed to lower-priced smartphones influencing buying decisions, and also an increase in costs for flagship devices.
As per Counterpoint Research's report, Apple has a strong lead in terms of both profits and revenue in the industry. Apple is earning 66% of industry profits and 32% of revenue of the smartphone industry.
Apple dominates the global handset market by capturing 66% of industry profits and 32% of the overall handset revenue. The loyal premium user base in the major markets like the USA, EU and Japan is one of the reasons that Apple can still operate at a profit level that its competitors can only wish for. Now with a strong service strategy, Apple’s overall ecosystem is strong enough to guarantee it a steady inflow of revenue in the coming years. In the immediate future, we believe that Apple’s profit for the holiday season will increase with the new line up of iPhones gaining good traction.
Compared to Apple, Samsung is positioned at a distant number 2 position, with just 17% share of industry profits. Compared to Q2 2019, this 17% number is a result of growth in profits for Samsung. Counterpoint Research credits this increase to the success of Samsung's Note 10 and cheaper Galaxy A series smartphones.
Meanwhile, Chinese brands like Xiaomi and Huawei have been unable to move the needle. Because the primary focus of these smartphones is to sell cutting edge hardware at low prices, the average selling price (ASP) takes a hit. This ultimately reduces the profit margins on each device sold. This practice is in stark contrast to what Apple does. The company avoids selling cheaper iPhones, despite knowing that they will sell a lot of units, to maintain a high average selling price.
The cheapest iPhone in Apple's line-up is the iPhone 8, which costs $449 for a 64GB model. iPhone 8 is more than 2 years old and looks dated, despite shipping with a processor that still puts the competition to shame. For its $449 price, the camera lags behind the competition as does the display. However, Apple continues to sell it because the cost to produce iPhone 8 would have also gone down with time. The company would still be selling it for a reduced ASP, compared to flagship devices like iPhone 11 and iPhone 11 Pro.
iPhone SE 2 (or iPhone 9), will likely replace iPhone 8 next year in Apple's smartphone line-up. Knowing Apple, we are sure that the features for iPhone 9, and storage capacities, will be dictated by the company's eagerness to maintain its lead in profits and revenue. This puts an OLED display, Face ID and other such high-end features out of the equation.