The worldwide smartphone market generated more than $9 billion in profits during the third quarter, according to fresh data from Strategy Analytics. And Apple raked in 91% of that sum.
“We estimate the global smartphone industry realized total operating profits of $9.4 billion during Q3 2016,” Strategy Analytics Director Linda Sui said in a press release. “Apple’s ability to maximize pricing and minimize production cost is hugely impressive and the iPhone continues to generate monster profits. Huawei, Vivo and Oppo are the next three most-profitable smartphone vendors globally this quarter, but they are still a long way behind Apple.”
Indeed, while Strategy Analytics pegged Apple’s smartphone operating profit at $8.5 billion, those three Chinese vendors each saw an estimated operating profit of $200 million during the quarter. The operating profit of all other vendors combined was also $200 million, according to Strategy Analytics.
Apple’s soaring profits come despite plateauing sales of the iPhone. Apple sold 45.5 million iPhones during the latest quarter, the company said last month, down from 48 million during the same period in 2015. And iOS captured only 12.1 percent of smartphone sales in the third quarter, Strategy Analytics said previously, down 5.2 percent year over year and marking its lowest level since 2014.
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Margins in the mobile hardware industry are notoriously razor-thin, but Apple continues to produce healthy profits due to its supply-chain management and its high-profile brand. The 32 GB iPhone 7 retails for $649, for instance, yet a report from IHS Market indicated materials for the phone cost roughly $220, and assembling the device costs only $5 more.
The looming question, of course, is whether Apple can continue to generate big margins in a smartphone industry where many major markets have reached saturation and upgrade cycles have lengthened significantly. The company appeared to disappoint investors last month with its outlook for the current holiday quarter, and Google is making an aggressive play for the high end of the market with its Pixel.
Meanwhile, competition is ramping up from Chinese vendors targeting relatively untapped markets across Asia.
“Three of the world’s top four most profitable smartphone vendors are currently Chinese,” said Sui. “Huawei, Vivo and Oppo have not only improved their smartphone product lineups this year, they have also enhanced their operational abilities and kept a tight lid on expanding distribution costs.”