Where on earth would anyone with more than 80% market share make 3% less profit than the second competitor that has only 13% market share? Only in the smartphone market.
Android boasts of 81% market share according to data from IDC as reported by Apple Insider and broken down as shown in the table below:
Another data focusing on profitability over the same period (Quarter 3 of 2013), shows that Apple, despite having only 12.9% of smart gadgets shipped, pocketed the largest chunk of the profits at 56%, followed by Samsung who took the remaining 44%? No, Samsung took home 53% of the profits made in Quarter 3 thanks to the losses made by the other players in the market, as shown in this other table also from Apple Insider:
And that is not all, 75% of all Apps downloads came from Google Play followed “closely” by downloads from iOS platforms at a mere 18%. Sadly this too cannot make Google happy as 50% of revenues generated via Apps Downloads went to Apple. Google could console itself by saying that it’s OK we are providing mostly free Apps but we’ll get returns from ad sales but not until they realize that:
Apple has an overwhelming share of smartphone and tablet app sales, Web browser use, and ad network hits. Apple leads Android in enterprise adoption, and in retail shopping use by consumers ~ Forbes
I don’t know where else dominance in market share by a margin greater than 60% does not directly translate to dominance in revenue collection outside the Apple vs Google warfare. I honestly also don’t understand how someone who ships only 13% of all gadgets in the market climbs to grab 56% of the market’s profits unless their margins are outrageous. In the article The cost of making iPhone 5S and 5C, we calculated that Apple was making 64% profits on its gadgets, 34% higher than the industry’s standard of 30%. This means that for every iPhone 5S sold, Samsung needs to sell more than two Samsung Galaxy S4s in order to match Apples profits.
Samsung’s market share of all gadgets shipped is 40%. So Apple would only need to ship less than 20 gadgets for every 40 gadgets shipped by Samsung to match Samsung’s profits on hardware alone. But things get sweeter for Apple as Samsung doesn’t actually make any profits from software (OS and Apps). Profits from most software running on Samsung devices go mostly to Google. But Apple gets all the profits from software running on its own iOS.
The question therefore is, should Google aggressively venture into the hardware market to also get a share of the hardware profits? Probably Google’s active involvement in the production of “Made in America” smart gadgets would push Apple into reducing its huge profit margins. If the answer is yes,
Then it is upon Samsung and other OEMs that rely on free Android to also ship devices running on their own ecosystems. For instance Samsung should start shipping devices that run only on Tizen as they have indicated. The realization that despite having only 13% of market share Apple still makes more money than all Android device manufacturers combined should make Samsung accelerate the development Tizen’s complete ecosystem to avoid facing the hurdles Windows is currently experiencing with Nokia phones.
I wish I were able to sell volumes as Apple did in September even if I price my products outrageously higher than the competition, who actually have better working products.