Apple is sitting on top of all the Smartphone manufacturing brands by capturing 66 percent of industry profits and 32 percent of the overall handset revenue in the third quarter of 2019. Overall global handset profits, on the other hand, have declined to 11 percent to $12 billion a new report from Counterpoint Research said on Thursday.
The main reason behind such a decline was an increased mix of entry to mid-tier products and a fall in revenues for key Smartphone original equipment manufacturers (OEMs).
Within the top 10 brands, only Huawei and Samsung were the only brands that had managed to increase their revenue on an annual basis, as per the report.
“The loyal premium user base in the major markets like the US, the EU and Japan is one of the reasons that Apple can still operate at a profit level that its competitors can only wish for,” said Karn Chauhan, research analyst with Counterpoint.
With a strong service strategy to its name, Apple’s ecosystem is strong and capable enough to guarantee the brand a steady inflow of revenue in the future.
“In the immediate future, we believe that Apple’s profit for the holiday season will increase with the new line up of iPhones gaining good traction,” Chauhan added.
Other than that, the replacement cycle for premium smartphones has elongated. The reason being, the recent hardware features are unable to offer a well-favored reason for any further upgrade.
Apart for Apple, Samsung, on the other hand, took 17 percent of the overall handset industry profits. The key reason for this growth is increased mix of Galaxy A Series along with the positive start of Galaxy Note 10 Series.
“Chinese Smartphone brands operate at low-profit margins, but better than in previous years, even though they are expanding outside China and also penetrating high-tier price bands,” the report mentioned.
Some Chinese brands like Xiaomi and Realme are also planning on monetizing their user base by launching services like IoT products, financial services, and many more.
“However, it is becoming a challenge for Chinese brands to increase their Smartphone average selling prices (ASPs) margins due to a combination of longer consumer holding periods and Apple lowering pricing on some key SKUs, which has limited the headroom that Chinese vendors had used to increase their ASPs,” Chauhan elaborated.
In the coming times, we can expect that the adoption of 5G will drive some upgrades. For example, in China, Huawei, Oppo, Xiaomi, and Vivo will gain from aggressive 5G push and use this opportunity to increase their ASP, said the report.