This year has been good for some smartphone makers like Apple. The numbers also show the same. According to Couterpoint’s “Global Handset Industry Profit Share” report, Apple captured 66% of industry profit and 32% of overall handset revenue in 2019. After Apple, Samsung made the list, capturing 17% of the handset industry’s overall profits. . The research agency notes that among the top ten brands, only Samsung and Huawei managed to increase their revenue on an annual basis. “The increased mix of the Galaxy A series along with the positive start of the Galaxy Note 10 series were the main reason for the growth,” notes Counterpoint.
According to the Counterpoint report, overall global handset profit fell 11% to $12 billion in the third quarter of 2019, compared to the same period last year. The reason for the decline is said to be “due to an increase in the entry-level product lineup and lower revenues from major smartphone OEMs.” The decline is also likely due to longer replacement cycles for high-end smartphones, as this year’s hardware features failed to offer consumers a reason to upgrade to a new smartphone.
After the first two companies, Apple and Samsung, in the list are Huawei, Oppo, Vivo and Xiaomi. Speaking of the low profit margins of Chinese smartphone companies, the research agency notes: “Chinese smartphone brands are operating with low profit margins, but better than in previous years, even as they expand outside of China and enter also in the higher price ranges. ”
“Chinese brands are offering attractive propositions to mature smartphone users with new feature-rich flagships at affordable prices. Some of these Chinese brands are also planning to monetize their user base by launching services such as financial services, IoT products and others. However, it is becoming difficult for Chinese brands to increase their smartphone ASPs and margins due to a combination of longer holding periods for consumers and Apple’s price cuts on some key SKUs, which which limited the leeway that Chinese vendors had used to increase their ASPs,” the report further states.
Apple tops the list
Like last year, Apple tops the list with maximum profit share this year. And that’s clearly down to the company’s latest “not-so-expensive” iPhone 11, which launched in September this year. The iPhone 11 has received a great response from consumers around the world, including India. As early as last year, with the launch of the iPhone XR, Apple changed its strategy by positioning itself in the “affordable” segment. The same strategy was continued this year with the launch of the iPhone 11, making the phone accessible to a wider range of consumers. The positive response helped Apple top Couterpoint’s “Global Handset Industry Profit Share” chart.
The research agency notes that “the loyal premium user base in major markets like the US, EU and Japan is one of the reasons Apple can still operate at a profit level that its competitors can only wish. Now, with a solid service strategy, Apple’s overall ecosystem is strong enough to guarantee it a steady influx of revenue for years to come. In the immediate term, we expect Apple’s holiday season earnings to increase as the new line of iPhones gain popularity.”
5G will bring changes
The coming year, 2020, will see some changes when it comes to the smartphone industry. This is due to the arrival of 5G on the market. Several OMEs like Xiaomi, Samsung, Vivo, Oppo among others have already started working on their 5G smartphones to be launched in the coming year. The adoption of 5G would lead to some upgrades among consumers. “While revenue growth is likely, bill of materials (BoM) costs will also tend to increase, so profit margins may not benefit to the same extent,” the report notes.