Handset Profit Share: 72 Percent for Apple, 29 for Samsung, Zilch for the Rest

Rather astounding numbers from Canaccord Genuity analyst T. Michael Walkley:

Apple took home 72% of the profits with only 21.7% of unit sales (up from 15.4% in Q3).

Samsung’s 29% of the profits came from 28.9% of unit sales (down from 32.3% in Q3).

The press and investor community have been hammering for the last few months on the idea that Apple is in trouble because the iPhone is under increasing pressure from Samsung. They’re right about one thing: Samsung is doing well. But Samsung isn’t hurting Apple; what they’re doing is destroying all of the also-rans. Apple lives in the high-profit premium range of the market; that’s why their profit share so greatly exceeds their unit sale market share. This is the fallacy of the Church of Market Share — all unit sales are not created equal.

Samsung plays the game the traditional way, where its profit share is very much aligned with its unit sale market share — 29 percent of the units sold, 29 percent of the profits. But what Samsung has done is suck up all the oxygen in the market underneath Apple. But I would bet that the symmetry between Samsung’s market and profit shares is misleading — my guess is that Samsung makes the majority of its profits from a minority of its unit sales, the high-end Galaxy S3, Galaxy Note, etc.

Update: Lots of readers on Twitter are confused by the fact that 72 + 29 = 101. These are rounded numbers; I presume Walkley’s numbers came to around 71.5 for Apple and 28.5 for Samsung. Update 2: Or perhaps Apple and Samsung do, combined, account for more than 100 percent of the industry’s profits, because the rest, combined, are in the hole?

β˜… Thursday, 7 February 2013

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