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Apple continues to dominate with high profit

Mar 09,2017
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Apple took up nearly 80 percent of global smartphone makers’ profit last year, showing it still dominates the world market with its ability to make high profit while minimizing cost.

While global smartphone makers altogether reaped $53.77 billion in operating profit last year, roughly $45 billion was from Apple, accounting for 79.2 percent, according to data released by market research firm Strategy Analytics on Wednesday. The U.S. tech giant’s largest competitor, Samsung Electronics, followed with $8.31 billion, about 14.6 percent of the industry’s total profit.

Samsung shipped 309.4 million smartphones last year and Apple sold 215.4 million, but the Korean company still lagged behind in profitability. The result translates to a 32.4 percent operating profit to sales ratio for Apple and only a third of that, 11.6 percent, for Samsung.

Industry analysts point to Apple’s narrow portfolio of high-end phones as a major contributor to such high profitability. Compared to Samsung, which owns a broad portfolio, from high-end phones like the Galaxy S and Note series to cheaper phones like the Galaxy A, C and J, Apple only produces high-end iPhones, with a larger variation, the iPhone Plus. Focusing on the iPhone has cut manufacturing costs for Apple, many analysts say. It has also trimmed R&D costs while granting high profitability.

Samsung, on the other hand, had to bear higher costs to manage a wider range of products that usually lack in profitability compared to its high-end series. On top of cost disadvantages, the fiasco last year involving the fire-prone Galaxy Note7 incurred massive losses and dragged down company profit. The Note7’s void following its discontinuation knocked down Samsung’s third-quarter profits to a mere $7 million last year.

Still, Samsung is ahead of its Chinese competitors, which are rapidly expanding their presence in the global smartphone market by banking on cheaper products.

Huawei, which recorded $929 million in profit last year, accounted for 1.6 percent of global smartphone profit, while Oppo followed with $851 million and Vivo with $732 million, each accounting for 1.5 and 1.3 percent. Xiaomi reaped in $311 million, making up 0.5 percent.

Even after combining the profit of all four leading smartphone makers based in China, they only made up about a third of Samsung’s profit.

“As Samsung also makes televisions and home appliances, a cheaper phone lineup is a strategy by the company to enhance brand recognition overall,” IT specialist Park Yong-hoo told the JoongAng Ilbo. “It will have to adjust its smartphone lineups at a point where it can maximize profitability and brand recognition.”


BY KIM JEE-HEE [kim.jeehee@joongang.co.kr]