updated 03:26 am EDT, Wed April 17, 2013
Apple takes up majority of profits in computers, mobile devices
Two separate analyses by different companies paint a clearer picture of Apple's role both among the traditional desktop/notebook and mobile device industries: while statistics on shipments versus sales or Internet use often paint a conflicting picture, in one area the verdict is in: Apple, unlike any other manufacturer, is raking in the lion's share of profits from tablets, smartphones and computers. In the latter market, where Apple has 10 percent or so share at best, it grabs nearly half the profits -- and in mobile, it takes an even bigger bite.
In computers, Apple takes by far the largest percentage of profits of any individual manufacturer, with 45 percent of the total profit in the industry. In a study conducted by Horace Dediu for Asymco, the next nearest competitor was Dell with 13 percent of the profits. This result is way out of proportion with Apple's ranking in terms of sales -- it is in third place in the US, and just outside the top five in the worldwide market.
Dediu notes that the PC industry has traditionally had very low margins, but that it made its profits mostly through volume of sales. However, with the PC market contracting as it has done for a few quarters now, profits are also disappearing even as costs remain flat or rise. Companies that failed to compete meaningfully in the tablet or ultrabook space now find themselves squeezed -- HP, the world's largest seller of PCs, barely manages to achieve half the profit Dell does.
In the mobile arena, statistics are more varied and can be interpreted in different ways depending on what factors (shipments, cellular subscribers, app downloads) are emphasized -- unless you are talking about profits or tablets. In both of those statistical areas, Apple dominates every competitor -- including Samsung.
While the iPhone is still the top-selling single brand of smartphone, on a worldwide basis Android has a majority of sales cumulatively -- either just over 50 percent or up to 70 percent, depending on how closely one correlates "shipments" to "sales." Of the mobile competitor companies, only Apple releases actual end-user sales figures -- the others either refer to shipments (some portion of which remain unsold) or only point to vague milestones, such as Amazon.
The only reliable measure of actual sales data on smartphones available is judging from the breakout of cellular subscribers by platform, but in that scenario only data from the US is easily available. In a recent roundup of statistics from a variety of sources, Time magazine found some clarity -- at least in the American market -- on smartphone sales and which platform and companies are "winning" in the cellphone market.
Both Kantar's recent survey of US smartphone sales between November and February, as well as Comscore's MobiLens overview of all current US smartphone subscribers more-or-less agree on the breakdown: Android devices make up about 52 percent of smartphone sales, with iOS devices around 40 percent (Comscore says 37 percent among all active subscribers, Kantar sees 43 percent in recent sales figures) and the rest fighting for scraps.
When looking at shipments, Android devices of all sorts clearly outpace iOS devices by a healthy margin -- but when talk turns to profits, sales data (such as it is) from Android makers pales in comparison to Apple's numbers. In smartphones, Apple takes about 72 percent of all the profit in the industry, leaving Samsung with around 29 percent (numbers add up to 101 due to rounding). Every other company selling smartphones is losing money on them -- a trend that, if it continues, will inevitably lead to consolidation in the industry.
Another measure of real-world, end-user interaction with users' mobile devices comes from Internet use, and here again Apple obliterates the competition -- with 61.4 percent share of mobile device Internet share, compared to 24.3 percent for Android. Some have said that the discrepancy is due to the high number of Android devices that are limited to out-of-date versions of the OS, making them more often used simply as gaming machines or for other uses that don't require as much Internet interaction. If true, this percentage is likely to change dramatically over the next year or two as older devices are retired for those capable of running Android 4.1 and higher.
Android users with newer devices have already surged ahead of iOS in terms of the sheer number of app downloads, reflecting their slight majority in device sales. Android is seen to account for 51 percent of app downloads, with iOS at 40 percent, just as with sales. However, when one looks at the profits generated by the two different sets of users, the statistics again mirror Apple's smartphone profits -- apps for iOS generate 74 percent of all the profit in the industry, with Android taking only 20 percent.
A Citrix study of mobile device platforms in business again gives iOS a share much larger than its sales alone would indicate. According to a report on enterprise use from the fourth calendar quarter, iOS claims 62 percent usage compared to 35 percent for Android, leaving just three percent share for all other companies -- corporate and enterprise giants BlackBerry and Microsoft included.
With at least the US sales market platform lines drawn clearly, and worldwide profit figures undisputed, the question becomes this: which is more important for long-term survival -- profit or sales? Apple is likely to remain in second place in the latter category, perhaps even shrink as more quality competitors emerge (though both Apple and Samsung appear to have fended off any threat from BlackBerry and Microsoft). On the other hand, half of the companies selling smartphones today may be gone or out of that market in as little as two or three years, beaten or absorbed, bought out or simply exiting that market because they can't make any money from it.
Although Android -- which offers considerably more diversity in price points, feature sets and quality experiences across many manufacturers -- the most popular platform and will continue to improve, it faces its own threats. The platform is mired in litigation from Apple, Microsoft and other companies that say it is built almost entirely on copied or stolen patents and technologies, and thus far has not fared particularly well in courts around the world. Though very remunerative for carriers, Android has not been wholly successful from a profit point of view for either handset makers or Google itself, and its subsidiary Motorola continues to bleed money and struggle even to sell Android handsets.
Though Apple is well-positioned to benefit from even reduced sales by virtue of its profitability, it risks losing its edge if it doesn't stay at pace or ahead of its competitors, resolve outstanding legal issues and continue diversifying its base as some markets (such as the iPod) mature and shrink when the market reaches saturation levels. Like Google, Apple will have to look outside smartphones and computers in an effort to keep ahead of consumer desires by working where buyers want to go before they even know they want to go there.
Despite an impressive track record, Apple's path of innovation is riskier than Google's hand-in-every-pie approach. Both companies may continue to do well into the future, but so far the 21st century battles between tech rivals has borne little resemblance to the Microsoft-Apple or Mac-vs-PC battles of yesteryear.