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


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