Apple Makes Profits, Everyone Else Fights for Scraps

The Wall Street Journal reports Apple earned 92% of the profits in the smartphone market last quarter:

Apple Inc. recorded 92% of the total operating income from the world’s eight top smartphone makers in the first quarter, up from 65% a year earlier, estimates Canaccord Genuity managing director Mike Walkley. Samsung Electronics Co. took 15%, Canaccord says.

Well of course they did! Apple is doing the same thing they’ve been doing in the PC market for years. They’re only making high-margin devices, those devices happen to be the best (arguably), and they let everyone else fight over the low-end, low-margin market. This has been their strategy and they’re doing quite well with it.

Apple’s cheapest laptop is $900, which is shocking when you could walk into any department store and buy a $300 Windows or Chrome OS laptop that is relatively capable. And yet that $900 laptop (and it’s even more expensive models) is selling incredibly well. Any tech pundit worth their salt has given up the idea of Apple releasing a cheap laptop.

All the while, Apple is told they are going to feel the pressure from cheap Android phones. They say companies like Xiaomi are coming to the United States and are going to eat Apple’s lunch with their high end, relatively cheap phones. Based on how the PC market has shaken out, I expect Apple to continue making premium smartphones and continue to charge premium prices for them. Low-end phones will continue to disrupt the market, but it’s Android OEMs like Samsung, HTC, and LG who need to worry about staying relevant with their iPhone-priced phones.

Apple will be able to sell their brand image, tightly integrated services that “only Apple” can do, and boast iOS’s great qualities. Samsung has a harder sell when a $199 Xiaomi phone does all the same things as their phones since they both run Android. Once they can get 1080p screens and great cameras into sub-$200 phones, the current high end Android phones are going to feel quite the pinch.

Bottom line: the laptop industry is a shitty business to be in unless you’re Apple. The smartphone market is shaking out to be just as shitty a deal.