Roughly 1,000 companies make smartphones. Just one reaps nearly all the profits.
Apple Inc. recorded 92% of the total operating income from the eight top smartphone makers in the first quarter, up from a 65% a year earlier, estimates Canaccord Genuity managing director Mike Walkley. Samsung Electronics Co. took 15%, Canaccord says. Apple and Samsung together account for more than 100% of industry profits because other makers broke even or lost money.
Events last week highlighted the lopsided financial picture. Apple is asking suppliers to make a record number of new iPhone models. Meanwhile, Samsung forecast disappointing profits, HTC Corp. reported a quarterly loss, and Microsoft Corp. wrote down 80% of the value of the smartphone business it acquired from Nokia Corp. last year.
Apple’s share of profits is remarkable given that it sells fewer than 20% of smartphones. The disparity reflects Apple’s ability to command much higher prices for its phones. Its rivals mostly use Google Inc.’s Android operating system, making it harder for them to distinguish their offerings, and prompting many to compete by lowering prices. Moreover, Samsung and HTC have made missteps in recent years.
Neil Mawston, executive director at market researcher Strategy Analytics, said many Android vendors are stuck between low-cost, high-volume brands such as China’s Xiaomi Corp. and Apple’s premium smartphones.
“There is that danger that you get trapped in the middle,” Mr. Mawston said. He estimates there are about 1,000 smartphone brands, including several hundred in China.
Even Samsung, which for a time found success making…