According to Counterpoint research, with maximum per unit profit of $151, Cupertino-based Apple has earned five times higher per unit profit than Samsung and approximately 14 times higher than the average per unit profit of Chinese brands in the third quarter of 2017.
Counterpoint’s Market Monitor report states that Samsung with its global presence has one of the highest number of models across price bands and its profit per unit was $31 in Q3 2017.
Chinese brands such as Huawei, Oppo and Vivo have an almost similar performance in terms of profit per unit, each with an average per unit profit of $15, $14 and $13 respectively. As compared to other Chinese brands, Xiaomi’s per unit profit is lower ($2), as it plays on very thin margins.
Owing to strong performance of Samsung and Chinese brands, global mobile handset profits grew 13 per cent year-on-year in Q3 2017.
‘This is the first time ever when the cumulative profits of Chinese brands crossed US$1.5 billion for the first in a single quarter. Usually all the profits have been shared by just two brands Samsung and Apple, however, Chinese brands have made inroads here as well’, said Tarun Pathak, Counterpoint Associate Director.
Apple captured nearly 60 per cent of the total profits generated in mobile handset segment followed by Samsung. Apple’s profit share declined by 30 per cent year-on-year mainly due to increased mix of previous generation iPhones. The average selling price of iPhone remained flat year-on-year while the shipments increased three per cent year-on-year.
In Q4 2017, Counterpoint estimated that the total profits of Apple will improve, driven by its iPhone X sales. Apple exited the quarter with some iPhone 8 inventory due to softer than expected demand compared to the iPhone 7 series.
‘Apple continued to command lion share of mobile handset industry profits capturing almost 60% share. However, this is down from 86% share in the same quarter last year when Samsung had to gulp up a loss due to the Galaxy Note 7 debacle. The Korean vendor though with relatively stronger demand for Note 8 and mid-tier high-scale J series have been able to capture almost a fourth of the global mobile handset industry profits’, commented Neil Shah, Research Director, Counterpoint.
‘Apple still generates more than US$150 profit per iPhone sold and this will continue to grow into the holiday season quarter buoyed by the high price iPhone X series. Our recent channel checks across key Apple markets showed, the demand for the 256GB version of iPhone X is higher which will boost Apple’s profits even higher’, added Shah.
Samsung made a strong come back in the third quarter with its Note 8 series while S8 series continues to perform on par. The profit share reached 26 per cent as compared to its loss during Q3 2016 due to Note 7 fiasco.
China’s Huawei witnessed highest profit growth of 67 per cent year-on-year in Q3 2017 due to its portfolio expansion across price bands. Driven by its Mate and P series, the average selling price of Huawei’s smartphone grew by six per cent year-on-year. Oppo and Vivo captured fourth and fifth spot in global handset profit share mainly driven by their performance in China, the report noted.
While Xiaomi has made a strong comeback with handset profit growth of 41 per cent year-on-year, it is still behind the market leaders. For Xiaomi, offline distribution is the key to reaching OPPO or Huawei’s scale, but most of Xiaomi’s sales are still skewed towards lower-end models.
Counterpoint believes that Xiaomi needs premium flagship like Mi Mix 2 or Mi 6 series to scale and drive higher profits also to offset the offline expansion costs. Xiaomi is rumoured to be in pre-IPO phase and instilling investors’ confidence that it can scale and make more money next year.
Expansion of Chinese players outside china will have an impact on the profit margins of Chinese players which they would like to mitigate by increasing the mix of mid segment devices in markets outside China.
‘The growth of Chinese brands can be attributed to the diligent efforts in streamlining the supply chain with rising mix of mid to high end smartphones in their portfolio. Even in the premium segment, players like Huawei are positioning their flagship models just below the premium offerings from Apple and Samsung. This strategy is designed to penetrate premium market while maximizing revenue and profit’, Pathak emphasised.
