With the recent announcements of 2nd quarter earnings, some incredible data has been released. The cell phone handset industry has sold over $65B in the last 6 months. Of that, 9.7% was pocketed by the companies. It was recently announced that Apple received 32% of the total handset market's profits, equivalent to a whopping $2,038,000,000, all from selling the iPhone. Prior to paying expenses, the net revenue Apple earned from the iPhone is over 5 billion dollars. These figures astounded us, so we did a little more research. The graphic below visualizes what these numbers actually mean by comparing operating profits, operating margins, and net revenues.
The biggest handset manufacturers are (in no specific order):
- Apple
- LG
- Motorola
- Sony
- RIMM
- Nokia
- Samsung
And just in case you didn't know…
Operating Profit: The money earned from a company's core business operations before earning interest or paying tax. It's simply the revenue minus the expenses.
Operating Margin: A ratio of the operating profit to the net revenue. It shows how efficient a company is in turning revenue into profit, and is measured before interest is earned or taxes are paid. If a company's operating margin is 41%, it means they profit $0.41 on every $1.00 of sales.
Click image to enlarge:
note: image below has been updated to fix some minor issues
Click image to enlarge or click here for the full resolution image.
see also:
A Look At The Smart Phone Industry's Market Growth
iPhonocomics: The iPhone's Lucrative Financial Cycle
As you can see, Apple does not have the highest revenue. It is trumped by LG, Samsung, Nokia, and RIMM. However, Apple has the highest profit margin – 40%. The second highest operating margin is RIMM with 20.7%…almost half. It's pretty impressive on Apple's part to be showing these kind of numbers, considering the fact that all the other companies in the race have been in the business for much longer.
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In context Apples share isnt nearly as large as the graphic shows when considering the whole picture. The bottom line is that Apple only supports one general phone compared to the myriad selection of the other manufacturers. The development variables surrounding the iPhone (R&D, hardware, software, manufacturing) are comparatively small in scope while at the same time being supported by disproportionate popularity. Apple, newly entering the field with no ties or obligations, took a risk none of the other manufactureres can currently bet on.
great read from wired on how Apple built iphone
http://www.wired.com/gadgets/wireless/magazine/16-02/ff_iphone?currentPage=all
sources estimate it costed Apple over $150 mil to implement.
its interesting to see who is able to make money on the phones vs. making money solely on contracts. I think you buy a lot of brand when you get an iPhone. You still get a fair amount of features but the cost really is daunting. speaking on diversity I think apple has done well to stick with their business model of homogeneity in product lines. it makes everything from manufacturing to tech support so much easier and cheaper no wonder they are able to nail down a 40% margin. its interesting that apple created this sort of demand so well. its as if some people want iphones just to fit in with everyone else, not because it has the features or contract price they need. well done on your business strategy apple, you are still not my cup of tea however. I dont want you turning off my programs because you dont like them.
I appreciate this kind of detailed look at industry revenues versus profits. Good research here. But please, please, please be more careful when you try to ‘visualize’ this data. The bubbles here use completely inconsistent scaling to the point that it’s difficult to accurate compare the companies.
No. Apple has simply always had much higher margins then their competitors. It’s not just about the iPhone it is Apple.
For example, Bluetooth is the area that I know. Most of the other cell phone companies have supported Bluetooth standards. Standards are rather difficult but they are very good for your customers.
With OS3, Apple showed their Bluetooth strategy. Naturally they invented a proprietary licensing scheme that would make them more money though it would hurt their customers by preventing interopability and raising prices for peripherals. But that’s Apple.
good suggestion, we noticed that bubble are not to proper scale after we were done, I guess it’s a part of the creative process.
Sorry, that’s not part of the “creative process” at all. Either you are deliberately trying to misrepresent the data (in which case why should I trust you analysis?), or you are too stupid to realise you are misrepresenting the data (in which case… Why should I trust your analysis??).
Given this graphic has now been splattered across the blogosphere, I trust you’ll be updating it with the proper proportions? Unless of course you ARE aiming to deliberately mislead people?
Old data, bad analysis (the fact Apple’s cellphone profit share has been growing fast is not a new observation). Pure and simple.
The company nets an estimated $80 for every $399 iPhone it sells, and that’s not counting the $240 it makes from every two-year AT&T contract an iPhone customer signs.
I think you misspelled RIM.
What Saket and Jon Tseng said.
Pay attention to it.
Still appreciate the figures though. Having said that id take them with a grain of salt giving your visual misrepresenting of the facts. Where are you getting your data from?
Thanks, gonna fix it
As a fan of infographics I am appalled at the complete and utter misrepresentation here.
Do not try and palm off “creativity” as an excuse. Seriously.
Does this mean Sony is not getting any revenue?
Losing $0.185 for every $1 product they sold?
Then why are they still in business? =.=