Samsung Earns 95 Percent of Android Phone Profits

Some things did not change in the global smartphone industry in the first quarter of 2013. Apple has been dominating actual smartphone profits for some time, but Samsung has captured the great bulk of Android device profits. And that trend seems to be continuing.

Global Android smartphone profits crossed $5 billion in total during the first quarter of 2013, and Samsung captured 95 percent share of all Android smartphone profits, totaling $5.3 billion, according to Strategy Analytics.

The Android platform accounted for 43 percent share of the entire smartphone industry’s operating profits, which reached $12.5 billion worldwide in the first quarter of this year. Apple basically earned the rest of industry profits.

LG, at second place, took 3 percent global profit share.

In recent years, Apple’s profit has amounted to perhaps 70 percent of all global profits in the smartphone business, mirroring Apple’s ability to wring profits out of the PC business as well.

Apple and Android are the top smartphone operating systems as well. In the fourth quarter of 2012, for example, some 92 percent of all smartphones shipped globally were either Apple iPhones or Android devices.

According to Strategy Analytics, global smartphone shipments grew 38 percent annually to reach 217 million units in the fourth quarter of 2012, and Android and Apple iOS together accounted for 92 percent share of all smartphones shipped worldwide, representing the largest market share the two firms ever have had.

Global shipment growth slowed from 64 percent in 2011 to 43 percent in 2012 as penetration of smart phones began to mature in developed regions such as North America and Western Europe,” says Neil Shah, Senior Analyst at Strategy Analytics.

Of course, those successes also point to coming issues.

As U.S. and other developed nation smartphone markets saturate, growth prospects will shift to developing regions. And that will pose a key margin profit challenge, especially for Apple and Samsung, both of which reported record profits in the fourth quarter of 2012.

The reason for the threat to profit margins is the need to create and sell lower-cost smartphones in developing regions. Lower-cost units typically earn slimmer margins.

Separately, AT&T sold a record number of smart phones in the fourth quarter of 2012. Verizon reported record smartphone sales as well in the fourth quarter of 2012.

But each additional sale brings closer the time when smartphone sales will slow and become a replacement market.

So both Apple and Samsung will have to further tweak manufacturing costs to maintain margins as sales volume shifts to developing regions.

Global Android Smartphone Profit Share in Q1 2013

source: Strategy Analytics