Apple has cannibalized the profits of the entire cell phone industry in just three years

Apple has cannibalized the profits of the entire cell phone industry in just three years
It's been an ongoing trend ever since the first iPhone got introduced in 2007, but now it is glaringly evident that Apple is doing to the cell phone industry what it did to the music player market. For three short years, Apple's share of the profit pie in this business, has grown from zero, to the staggering 39% for the first two quarters of this year, analysts say. It is not clear if they are talking net profit, or operating margins here, but nonetheless this figure is shocking enough.

To put this industry mauling in perspective, we'd just say that Nokia, Samsung and LG - the top three cell phone manufacturers worldwide - have managed to squeeze 32% of the roughly $6 billion operating profits up for grabs in this industry combined.

Nokia is the biggest loser here - just three years ago it held most of the industry profits hostage. Now Apple makes almost double what the Finns do, with only 3% of the total market share in numbers of handsets shipped.

Manufacturers are getting the lesson that it is the vertically integrated service that Apple offers, which brings the most profits, not hardware specs. It makes the iPhone experience an extremely high barrier to entry, and one that is very hard to replicate. Companies are trying to come up with their own solutions, mainly based on Android, but it will take time to catch up, and encroach on Apple's soul-crushing profit margins. Until then, Cupertino might operate in a vacuum, and, who knows, it might even move on to something else in a few year's time.

via Fortune



1. Stoli89

Posts: 333; Member since: Jun 28, 2010

Apple's tightly integrated ecosystem, user friendly experience, brand image and loyal fan base have all combined in seamless execution to turn networks into pipes. AT&T is a two-way traveling to the consumer in one direction, money traveling to Apple in the other. AT&T is enjoying a captive audience and a slice of the pie...but it isn't a very big slice relative to the size of the pie. The US market is relatively peculiar in that even with an imminent loss of iPhone exclusivity, AT&T's most serious competitor uses incompatible hardware (CDMA). Most iPhone 3GS and 4 owners have too much invested in their phone to switch carriers near-term. Nevertheless, Apple's closed ecosystem presents a dilemma for carriers over the longer term. IMO.

3. gridlock

Posts: 31; Member since: Jun 10, 2010

True. Android can be bent and broken by the carriers to suit their own needs, and the iPhone makes them just a delivery boy, but it signs up record new customers, so it is indeed a dilemma what to do about it... not much IMHO.

6. dmberta

Posts: 25; Member since: Dec 30, 2009

That there lies the reason for Apples initial success too. I believe that the Iphone would not have been as widely popular had ATT been allowed to monkey with the phone in the same way they do with every other subsidized phone. Apple negotiated a deal that was extremely unusual for the US market. If they open themselves up thought o multiple carriers, they may not be able to sustain that for ever OR The rest of the cell phone manufactuers will begin demanding similar perks. Who knows?

9. JeffdaBeat unregistered

I think the manufacturers should get the same perks. That's the one thing I love about the iPhone. If AT&T wants a certain application on the iPhone, it has to go through the same approval process that any other developer does. I can't tell you how much bloatware that was in every single Windows Mobile Phone I've used, to the point where I customized it to get rid of most Sprint stuff and leave the phone at it's bare. In the future, not having carrier specific software will mean you can take your iPhone or any phone from carrier to carrier without reflashing the software and voiding warranties. This will also force carriers to focus more on providing more on coverage and less on providing cool phones with media features. I kind of like the idea of carriers mostly being focused on coverage while having a team of developers offering the services instead of pushing cool phones.

10. whocares111 unregistered

very interesting take

11. whocares2222 unregistered

now if only apple would open up its ios to support some of the things that androids support such as widgets, speech to text, free turn by turn gps navigation, and a competitive app market without limitations than watch out for apple.

12. ilia1986 unregistered

Won't do that. Not by it's own. There is one thing that Apple doesn't do - and that's imitating others. So they will have to find something else to add to iOS. You want widgets, openness and all the other stuff - you go to Android. You want to have limited stuff that just works out of the box - you go to Apple.

13. really unregistered

Are you serious??? thats all apple does is imitates others, they just put thier twist on it and call it inovative and ppl flock to it

14. ilia1986 unregistered

Of course. And Android is a pure creation of genuineness. I mean - it even goes beyond that. Mac OS X obviously imitated windows with it's features and not the other way around, right? And the iPod? It must have imitated the same-capacity-sized MP3 players that came.. of wait! After the iPod. And of course the iPad is a total imitation of things like Galaxy Tab, the "Rim Tablet" And many other similar devices..

16. dasanman69

Posts: 14; Member since: Sep 11, 2009

Wrong. There were portable players way before the iPod, touchscreen phones before the iPhone and tablets before the iPad. Apple just polished them up. And SJ stole Xerox's OS.

17. ilia1986 unregistered

Yeah. But that "polishing up" kinda changed the entire industry every time they did that. Guess that must be a very strong polish.

18. dasanman69

Posts: 14; Member since: Sep 11, 2009

I'll agree SJ is a genius at it. Making the iPod plus iTunes was a great idea. Surprised Sony didn't do it.

23. remixfa

Posts: 14605; Member since: Dec 19, 2008

apple stole from windows who stole from xerox for a "windowed GUI". digital MP3 players existed years before Ipod. Ipod added easy DL options through itunes that didnt exist before. touch screen phones have existed since the 90s, with true multitasking picture messaging, video, email/calander sync and web. iphone didnt even do picture texting till last year or video till the iphone4. very innoative of them. ipad is not the first tablet. windows introduced tablets years ago running windows CE, ME, and XP. try to be less of a dillhole next time... lol everyone borrows from each other, dont be so nieve.

2. wellthen unregistered

So why don't you tell us what you think the dilemma is, rather than just spouting off some rhetoricto make yourself sound intelligent.

4. remixfa

Posts: 14605; Member since: Dec 19, 2008

the only dilemma that they could possibly be talking about would be apple's demands on how they get cuts of profits and such. VZW turned them away the first time because they demanded special deals and more control than any other manufacturer had. ATT took the deal to stay in 2nd place, and they have been complaining about it ever since. It would be interesting to see if VZW gave into the same deal, or Apple backed off a bit so they could vastly increase their user base. CDMA is not a "dilemma", its a radio. GSM is on half the world's carriers.. guess what the other half is? CDMA. In america there are more CDMA users than GSM users. (VZW+Sprint+metro+virgin+boost,on and on) vs (tmobile + ATT) because CDMA gives you better over all and in building coverage. So its not a dilemma, its simply making adjustments to grab a huge untapped audience.

5. XxVerbalxX unregistered

"Apple's closed ecosystem presents a dilemma for carriers over the longer term" ...

19. Fanboykiller unregistered

U wrong GSM is use by the 70% carriers worldwide and outnumber CDMA users by a ton, only china mobile and vzw are the big dogs of that obsolete tech, nobody else does....HSPA is way superior......!!!

20. Fanboykiller unregistered

VZW CEO once said very clear " Apple never came to us, an iphone on VZ never was never will " so who's the liar....??? The guy who run the company or a lousy fanboy like you....???

21. networkdood

Posts: 6330; Member since: Mar 31, 2010

GSM is on more than 50% of the world's carriers and AT&T is not complaining about their 5 yr deal with APPLE...

24. remixfa

Posts: 14605; Member since: Dec 19, 2008

70% of carriers doent mean 70% of the population. Its a near 50/50 split. your arguement has no merrit. Especially in the US where CDMA is dominant, which is what we are talking about. How am i a fanboy? because i correct silly people like you? lol. Im on a GSM network rockin HSPA+. CDMA is far from obsolete though. GSM needs more towers to cover the same area and doesnt penetrate buildings like CDMA, which is why VZW and sprint have the 2 biggest networks and the fewest dropped calls. Is gsm faster? Sure. but LTE is going to disolve that for everyone. In the end its preference. Do you need the coverage most or are u willing to give it up for faster speeds and more phones to play with?

25. Fanboykiller unregistered

Yeahh blah blah blah, same bullcrap and stupid facts from a fanboy, is that all you have...??? Dude the most advanced cell tech is not in the US nor Sprint or VZW, you see that's why Europeans and Japanese treat us like morons because of fanboys like you...get overwith stop sucking balls from Slow-rizon.....!!!!

26. remixfa

Posts: 14605; Member since: Dec 19, 2008

ahaha your an idiot. even in my post i tell ya im not on verizon, i use a Vibrant, figure it out. It doesnt mean im going to lie about one tech over another. U are the dumbest fanboy on the thread so far that i can see. If anyone disagrees with your "facts" (or lack there of) you just throw out attacks. you havent said one thing of merrit yet. As well as you keep trying to flip your arguement about like a fish out of water because u keep losing point after point. So whats the most advanced cell phone on the market in the US? Iphone? GalaxyS? palm? what? tell me oh master of baseless opinions. In my opinion its the Galaxy S by far, and the hardware is hard to dispute. But yet, the galaxy is on every carrier... as well as around the world, so i dont think ur arguement holds water. the sign of a lost arguement? go on the attack!! lol

7. jogutier

Posts: 324; Member since: Feb 12, 2010

All from a phone that comsumer reports still to date won't reccomend people to buy this phone. I can't do this, I can't do that "iPhone". WOW, we have millions of desperate people in this country.

8. ilia1986 unregistered

Of course. And everywhere else in the world.

15. dasanman69

Posts: 14; Member since: Sep 11, 2009

If they ever make a porn movie for how Apple has a 39% profit margin. It'll be called "The violation of ATT". No other carrier pays a maker per unit than ATT pays Apple for an iPhone. Without ATT subsidy a iPhone would cost just as much if not more than an iPad. I'd like to see how many iPhones Apple can sell if ATT said "F U Apple we have millions locked onto a two year contract and will no longer subsidize the iPhone" How many iPhones do you think Apple will be able to sell? I imagine their profit margin will drop to the same rates as everyone else if not lower.

22. networkdood

Posts: 6330; Member since: Mar 31, 2010

The IPHONE is like a drug and the millions of sheep with AT&T will find a way to get another iphone, one way or another...

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