updated 11:00 pm EST, Thu February 2, 2012
Now at 74 percent of industry earnings
A new report from analyst firm UBS shows that while Apple is neither the largest cellphone maker nor the majority leader in phone platforms, it nonetheless dominates the entire industry in terms of revenue from phones, now taking 36 percent of all cell phone revenue (feature or smartphone) as of the end of 2011, even though it only sells nine percent of the world's cell phones. By the industry yardstick Earnings Before Interest and Taxes (EBIT), Apple takes in 74 percent of the industry's earnings.
In part, this is due to Apple's focus on only smartphones, which sell to carriers for very high prices compared to "feature" phones, but its EBIT score is due to its profit factor on iPhone sales. Competitor Samsung, for example, generally sells more actual units (even in just smartphones alone) than Apple, but saw its EBIT share percentage drop by half in the fourth quarter compared to the previous quarter, to about 18 percent of the industry's EBIT compared to Apple's 74 percent.
Nokia, which similarly dominated the cell phone industry when the iPhone was introduced in January of 2007, went from a high EBIT of 65 percent in late '07 to a 4 percent share in the most recent quarter. The chart (below) that UBS created to show the change over time depicts Nokia and Apple effectively swapping places over time, with Samsung maintaining an overall average of around 20 percent with a spike in Q1 2009 and Q3 2011 that saw its EBIT rise to over 30 percent temporarily.
Apple has become so important to the industry that when its sales are combined with the others, the handset market grow 29 percent year-over-year -- but without Apple's figures, the rest of the industry saw small declines in revenue and volume growth in 2011. In the smartphone market alone, Apple accounts for 25 percent of all revenues.
Apple reported record-breaking sales of the iPhone in the fourth quarter, which enabled it to jump from 49 percent of industry EBIT to 74 percent. It's previous high had been in the second calendar quarter at 61 percent. Apple's overall phone revenue also jumped on the massive holiday sales, from 20 percent in the previous quarter to 36 percent.
Analyst Maynard Um said that smartphones now account for 30 percent of the total mobile phone market, and rake in 75 percent of the revenue. His charts show that the market was now effectively a two-horse race between Apple and Samsung, and the two companies account for 55 percent of all sales and 90 percent of industry EBIT. Samsung, which sells both smart and feature phones, has 26 percent of the overall market (compared to Apple's nine percent) and more than 50 percent of the Android sales in Q4.
Looking towards the future, Um believes that handset sales overall will actually be down in 2012, cutting his forecast slightly to 1.69 billion units thanks to the slow deterioration of the feature phone market. Thanks to the higher cost of smartphones, however, Um says revenues in 2012 will still grow, predicting nearly $243 billion for the year. "Our checks show most industry participants expect smartphone growth of 30-35 percent," he wrote, "... increasingly driven by midrange/entry smartphones."
Android continues to lead in the smartphone category with 44 percent of all smartphones compared to Apple's 27 percent, but in terms of ability to make money off the handsets, the industry has a clear leader. [via Barron's, charts courtesy UBS]