With 8.8% market share, Apple has 73% of cell phone profits
Among the major vendors, Samsung captured 26%, HTC took 1%, and the rest lost money — FORTUNE — Asymco's Horace Dediu on Thursday updated his quarterly review of mobile phone profits, and the news for everyone but Apple (AAPL) and Samsung is not good.
Context & Ripple Effects
Apple had already shown that handset profits could be detached from shipment share: in 2011, its 4% share of the mobile market produced more than half of industry profit. The latest quarterly breakdown sharpens that imbalance, with Apple taking 73% of profits on 8.8% market share.
Samsung is the only other major profitable vendor at 26%, while HTC takes 1% and the remaining major vendors collectively lose money. That leaves nearly the entire industry profit pool with two companies rather than the largest-volume sellers.
First-order effects
- Apple and Samsung capture 99% of major-vendor cell-phone profits, while HTC and the other named vendor group operate with little or negative handset profitability.
- Loss-making vendors face immediate pressure to change their handset businesses because their market presence is not producing sustainable returns.
Second-order effects
- Apple and Samsung can compete from profitable handset operations, widening the strategic gap with vendors that must fund product, marketing, and distribution while losing money.
- Competition shifts away from market-share rankings alone: a vendor’s ability to stay in the market increasingly depends on converting sales into profit.
Third-order effects
- If this distribution persists, the handset market will be shaped by profit concentration around a small number of vendors, with scale becoming less meaningful without pricing power and margins.
The trend: Mobile handsets are becoming a market where a small share of sales can command most profits, separating volume leadership from economic power.