Despite Sales Downturn, Apple Captures 103 Percent of Smartphone Profit in Q3 2016

Apple, the tech titan and maker of the iconic iPhone, has been facing stiff competition in smartphone sales against rivals like Samsung, leading many to anticipate a dip in profits. Intriguingly, Apple continues to rake in profits that defy the norm, a financial phenomenon that leaves many in awe.

In 2015, Apple astonishingly hauled in 92% of the total income generated by the world’s eight top smartphone manufacturers, a staggering 27% jump from the preceding year. By the third quarter of 2016, this figure had climbed to an unprecedented 103 percent.

BMO Capital Markets analyst Tim Long, according to an Apple Insider report, sheds light on this surprising trend. He estimates that Apple’s share of the global handset industry’s operating profits soared to a record-breaking 103.6 percent during the most recent quarter. This super-preneurial performance is largely due to losses posted by other major vendors during the same period. Samsung, Apple’s closest rival, manages a paltry 0.9 percent share of profits, while both HTC and LG are in the red. In the same quarter last year, Apple had a 90 percent share of profits, even though it only accounted for 14.5 percent of total volume.

Statistics show that iOS’s dominance in global smartphone shipment has dipped slightly, standing at 12.1 percent at the end of September 2016, down from 13.6 percent for the same quarter in 2015. While Android has gained ground, increasing its share from 84 percent to 88 percent, Apple still leads the profits chart. One major reason for this is that Apple doesn’t share its mobile operating system with any other phone manufacturer. Additionally, over the years, Apple has successfully marketed its devices at premium prices while maintaining relatively low manufacturing costs.

Diving into the cost breakdown for an iPhone 6S Plus, it’s apparent how Apple maintains high profits. The manufacture of key components such as the screen, main camera, and storage falls significantly below their resale value. For instance, the cost to Apple per iPhone 6s Plus includes: screen – $52.50, main camera (12 mega pixels) – $22.50, and 16GB of storage – $5.50.

In the wake of this, Apple has pivoted to focus more on services-based revenue, with services like the App Store, Music, and iTunes experiencing significant growth. This shift towards service-oriented revenue streams marks a strategic attempt to diversify income, future-proofing Apple against potential downturns in device sales and maintaining their position at the forefront of the tech industry.