Apple’s $100 surcharge gives it nearly all the smartphone profits

The latest smartphone industry profit numbers from Strategy Analytics show Apple is cleaning up like never before, and no wonder.

As if being able to count on millions of people to pay a $100 dollar surcharge on smartphones of similar spec to Android equivalents (32GB iPhone 7 – $649, 32GB Galaxy S7 – $549) wasn’t enough, Apple can now count in its biggest competitor scoring own-goals of epic proportions.

As a result Apple accounted for $8.5 billion of the $9.4 billion total profit earned by the global smartphone industry in Q3, with the next most profitable company – Huawei – clearing a mere $200 million. Samsung, thanks to the Note7 debacle, was relegated to a distant ninth on the list.

“Apple dominated and captured a record 91 percent share of all smartphone profits worldwide,” said Linda Sui of SA. “Apple’s ability to maximize pricing and minimize production cost is hugely impressive and the iPhone continues to generate monster profits. Huawei, Vivo and OPPO are the next three most profitable smartphone vendors globally this quarter, but they are still a long way behind Apple.”

Telecoms.com spoke to Neil Mawston, who heads up the handset team at SA, and asked if there was any prospect of Android closing the gap. “The global Android smartphone market today is very crowded and hyper-competitive, so the chances of any Android vendor making Apple-like mega profits are slim,” he said.

“As soon as a new Android model is launched, a wave of copycats swiftly emerge at lower prices or higher specs and quickly nullify any competitive advantage. Note 7 aside, Samsung makes reasonable profits from Android due to its scale, but Samsung’s operating margin is half that of Apple’s and is unlikely to be as large anytime soon.

“Samsung will fight back with new flagship models next year, Google Pixel is being marketed aggressively to premium buyers, while Huawei, OPPO and Vivo continue to promote iPhone-like models at lower price-points. Apple will get a boost from its 10th-anniversary iPhone launch next year and this should be enough to ensure Apple keeps on delivering relatively huge profits.

All this profiteering is even more impressive considering Apple’s smartphone wholesale average selling price fell to $617 from $669 a year ago thanks to the launch of the cheaper iPhone SE, according to Mawston. This implies Apple makes similar profits on that as it does the more expensive ones – impressive indeed.