uploads///Smartphone industry operating profits

Apple Has the Biggest Slice of Smartphone Industry Profit

Puneet Sikka - Author
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Nov. 20 2020, Updated 11:36 a.m. ET

Apple accounts for 92% of smartphone industry operating profits

Apple (AAPL) is a premium smartphone player. As a result, it simply dominates the smartphone industry’s operating profits. According to a report from the Wall Street Journal, citing Canaccord Genuity managing director T. Michael Walkley, Apple accounted for 92% of the industry’s operating profits in the first quarter of 2015.

As the chart below shows, Samsung (SSNLF) accounted for 15% of the profits, which means other players experienced operating losses. This is indeed the case. BlackBerry (BBRY) just about broke even while Lenovo and Microsoft (MSFT) each suffered operating losses.

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Apple’s average selling price is much higher than that of competitors

Apple’s operating margins obviously benefit from selling iPhones at a premium to competing smartphones. Apple boosted its ASP (average selling price) with the launch of iPhone 6 and iPhone 6 Plus. According to Apple’s filings, the iPhone’s ASP increased from $637 in 1Q14 to $687 in 1Q15.

Apple benefited from selling the iPhone 6 Plus models at a $100 premium to the iPhone 6 model. Likewise, the company also benefited by selling higher-capacity 64 GB and 128 GB models at a higher price. Read Why new iPhones could help Apple boost its average pricing to understand the pricing behind Apple’s iPhone 6 and iPhone 6 Plus models.

According to a report from the Wall Street Journal, citing market research firm ABI Research, the ASP of Google (GOOG) Android-based smartphones declined by $100 in 2014 over 2013 to only $254. The situation was even worse for Microsoft. Its ASP was only $45 in 4Q14. Declining ASP is the main reason why these smartphones are struggling to remain profitable.

Apple makes up about 18% of the Technology Select Sector SPDR Fund (XLK). The company is XLK’s top holding.

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