What makes a business more successful – the number of units sold or net profit? Most people will pick net profit as the defining parameter, and Mr. Tim Cook will surely be one of them. The reason being that despite a drop in iPhone sales, Apple continues to dominate the global smartphone profits. In fact, in 2018, Apple raked in 73% of the profit generated by the entire smartphone industry!
The Premium Smartphones Market
As impressive as the profit numbers sounds, Apple’s market growth is actually worse than the previous year. In 2017, Apple captured 58% of the international premium smartphone market. However, in 2018, the company’s market share shrunk to 51%, all thanks to the rise of Chinese brands. Numbers say Huawei and Oppo are doing well in their native country, and OnePlus has set a strong dominance in the European and Indian smartphone market.
In the overall smartphone market, the premium smartphone segment grew by 14% year-over-year. With higher profits margin, smartphone makers are keen to make inroads into this segment.
The Profits Game
75% of the total profit generated by the smartphone industry in 2017 was earned by Apple. Unfortunately, this profit percentage declined to 73% in 2018. Similarly, Samsung saw a decrease in profit margin from 14% to 13%. Interestingly, Chinese brands made most of it and earned themselves an increased profit margin by 3%.
The ASP (average selling price) of Chinese smartphones also increased by 14%, signifying the consumer interest in premium smartphones. Features like pop-up selfie cameras, in-display fingerprint sensors, and more add to the value of these Chinese brands. Their ability to better read a market helped them to better cater to consumer needs. And hence, expanding their international reach.
A fair warning to Apple: The slow but steady rise of Chinese brand is on the verge of eating Apple’s market share. The company needs to do something before it’s too late. Foldable iPhones anyone?