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Samsung overtakes Apple in phone profits but others grow sales even more

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Samsung topped Apple(s aapl) last quarter in terms of smartphone profits, but both companies didn’t see sales growth realized by most other handset makers: LG, Lenovo, ZTE and others picked up more market share around the world over the past year.

The operating profit figures come from estimates at Strategy Analytics. On Friday, the research company shared its data for the second quarter of 2013:

“We estimate Samsung’s operating profit for its handset division stood at US$5.2 billion in the second quarter of 2013. Samsung overtook Apple for the first time, which recorded an estimated iPhone operating profit of US$4.6 billion. With strong volumes, high wholesale prices and tight cost controls, Samsung has finally succeeded in becoming the handset industry’s largest and most profitable vendor.”

It is a win of sorts for Samsung, although it could be short-lived. The company introduced its Galaxy S 4 during this quarter, while Apple had no new phone of its own.

Galaxy S 4 featured

And Apple is still selling many older iPhones, such as the 4 and 4S models, which actually brings down the average selling price of Apple’s handsets. When the next iPhone model arrives, it’s likely that Apple retakes the profit crown.

While these two industry Goliaths are doing battle for smartphone profit supremacy, however, there’s a host of Davids waiting in the wings tackling  smartphone market share. Annual data from IDC shows that other handset makers are growing sales faster as Samsung and Apple have actually lost market share over the last 12 months:

IDC smartphones 2Q2013

I suspect these saw larger growth because in some sense, they’ve “caught up” to Samsung with regards to hardware build, design and features that most people want in a smartphone. And they all have one thing in common when it comes to software: All of these companies offer Android phones that are lightly skinned, offering a desirable alternative to Samsung’s “in your face” TouchWiz user interface.

18 Responses to “Samsung overtakes Apple in phone profits but others grow sales even more”

  1. fredhstein

    Kevin, what did Neil say about the “divide by half” point? AppleInsider provided detail that Neil should have addressed, mainly that iPhones and iPads are more profitable and account for slightly more than half the revenue. If SA just says “i’ve been doing this since 2007”, that’s not an answer.

  2. Thanks to several commenters pointing out the Apple Insider detailed breakdown of figures.

    I have a few questions into Neil Mawston, Executive Director, Global Wireless Practice, at Strategy Analytics on the firm’s estimates and will update the post once I hear back.

    I think Dan put some great effort into breaking down the numbers although I do wonder about Samsung’s IM division. It appears to include much more than mobile (PCs, networking gear, etc….) but I suspect the bulk of profits do come from mobile. Hard to say without more forthcoming data from Samsung.

    If SA did simply divide Apple’s total profits by half as Dan suggested, then I think that was a mistake. Let’s see what SA has to say.

    • I had an email conversation with Neil and he says that only handset sales were used in Strategy Analytic’s estimates. He also mentions that SA has been tracking quarterly handset profits since 2007 for modeling and estimation purposes.

  3. i am a APPLE fan , everything i have its apple
    But i knew the day Steve Jobs passed , that was the end of apple
    i told all my friends but the lough at me
    to me there is no apple with out steve jobs
    and the truth is steve did not passed away ,,,wake up do the math

    • Based on the Strategy Analytics client page, I suspect most of the companies they cover are clients:

      “Our customer base includes more than half of the world’s largest mobile operators and most of the leading infrastructure and device vendors, 13 of the top 15 handset OEMs, five of the top 10 semiconductor companies, two-thirds of the top twenty global operators, eight of the top 10 global automobile manufacturers, the top 10 electronics-focused tier one suppliers and the top 10 automotive semiconductor vendors.”

      • Yes, Kevin, most of the clients they cover are most likely clients. However, I strongly suspect that Apple is not. Given that, and given the fact that neither Apple nor Samsung report phone profits separately, I would also strongly suspect that Strategy Analytics might tend to skew their report in the direction of someone who is a client.

        • shm224

          Samsung’s mobile devices are made by Samsung IM — Internet & Mobile — division. While the same division also handles tablet, laptop, etc, their share of the division sales / profit is miniscule. So SA’s estimate is not far off.

          According to Samsung’s recent 2Q report:

          IM Sales : 35.44
          Mobile : 34.58

          IM Profit : 6.28

          * KRW

  4. Laughing_Boy48

    You can’t blame Samsung for this. Blame Tim Cook and Apple. It’s plain to see that Apple doesn’t really care about competing against other companies. Apple will easily give up market share to smaller rival companies. Apple would rather just accumulate reserve cash than use it to crush rivals. Apple was in a very strong position to easily hold onto its iPhone empire, but decided to coast instead of accelerating sales.

    That’s something I really don’t understand as an Apple shareholder. Apple should know well enough if it loses market share the company’s shareholder value will quickly collapse. Investors would rather not invest in companies who easily give up without a fight. Apple is such a company. Samsung did everything possible to walk right in a take over the smartphone industry while Apple sat back and did next to nothing.

    I honestly don’t blame Samsung because they want to win at any cost. It’s a money-making business to them. They want to dominate the smartphone industry and acquire the wealth and power it brings. Apple does not. It’s plain to see in everything Apple does they are not interested in dominating any industry. They’re happy to take the high-end and leave the rest. The high-end is only 20% to 25% tops which leaves 75% for any other company to take for itself. Apple shareholders will never see the wealth that Apple could potentially capture if it operated far more aggressively. That’s the reason why Apple will forever be seen as a doomed company with a doubtful future. Apple has brought that upon itself.

    • pkadam

      The operating profit figures come from estimates at Strategy Analytics. On Friday, the research company shared its data for the second quarter of 2013:

      This said it all guesswork by a research company.

      Yes same as the guesswork of how many kindles sold by amazon and whatever.

    • Laghing_Boy48, Apple is all about take it or leave it. No choices. If you want a smart phone it will have a screen that is X inches. It will not have NFC. It will not have a removable battery. It will not have a USB power source. The only choice you can have is buying prior generation products.

      It’s not that Apple is not trying to win, it’s that they’re trying to push what they want down the consumers’ throat rather than giving the consumer what they want. If they can maintain margins they can make just as much money doing that as doing what other companies do. But to do what you want they would have to totally change their relationship with consumers.