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PROFIT RECIPE
YEAR 2, VOL. 4, APRIL 2012
The insider
view of the
mobile market
In a Nutshell The Story The Facts
The launch of the iPhone The mobile handset market is in turmoil. Since The smartphone market will reach $219 billion in sales in
Apple launched the iPhone in 2007, OEMs have 2012, according to IDC. The top ten competitors in this
fundamentally changed the basis of market are:
been seeking to jump on the smartphone
competition, eliminating players
bandwagon. Five years later, few have managed to
without a vibrant ecosystem (i.e. do so profitably. Even though more companies are
iOS or Android). Android then Vendor Total handset Operating
gaining a significant market share, only two seem to volumes margin
commoditized the production of be making a profit out of it: Apple the creator of (2011) (Q1 2012, est.)
smartphones, reducing the the market in the first place and Samsung, a fast
follower. Attractive profit margins seem elusive for Apple 93M 48%
importance of economies of scale
most of their competitors. Some are toppling from
that had made Nokia a leader in Samsung 327M 18%
their former glory (Nokia, RIM), while some new-
the past and sending market comers seem to be gaining speed (ZTE, Huawei). HTC 45M 7,5%
concentration in a plunge. But will they manage to become profitable?
LG 88M 1,4%
To sustain profitability in the RIM 52M (3,4%)
commodity smartphone market, More than 80% of handset profits
OEMs need to create a tailored are captured by two companies: Nokia 417M (5,2%)
value chain. Apple has done so by Apple and Samsung Motorola 41M (5,5%)
innovating at each point of the
Sony Ericsson 34M (10%)
value chain. Among all other
OEMs, only Samsung has created a ZTE 64M N/A
unique value chain configuration Huawei 41M N/A
by integrating across hardware Source: vendors, VisionMobile estimates
production and capturing profit at
multiple links of the value chain. Apple, despite having only a handful of smartphone
models, captures a substantial part of the market and
Together Apple and Samsung
experiences strong growth (85% in Q1 2012). It also has
capture more than 80% (and an exceptional profit margin compared to its competitors.
rising) of the profits in the handset
market. Samsung's handset division accounts for 51% of revenues
and for 73% of total profit in Q1 2012 . Operating profit
margin of the division improved to 18,4% from 11% a year
ago. In Q1 2012, Samsung ended Nokias 14-year reign as
Source: Asymco, VisionMobile estimates largest handset maker by volume.
VisionMobile Ltd. Stijn Schuermans is a Business Analyst at VisionMobile. The workshop challenges many common
90 Long Acre, Covent Garden, Stijn has more than 7 years experience as an engineer, misconceptions and provides an in-depth analysis of the
London WC2E 9RZ product manager, strategist and business analyst in agendas and strategies of key Internet players, changes
+44 845 003 8742 technology companies. He holds an MBA from Athens in the mobile handset market, mobile operator
www.visionmobile.com/blog University of Economics and Business. His particular strategies, application store economics, end-user app
Follow us: @visionmobile focus is in understanding how technology becomes usage, app monetization strategies, mobile developer
value-creating innovation and which consequences this ecosystem, the true role of HTML5 and how to
has for mobile company strategy. leverage developers as the leaders of innovation.
ABOUT MOBILE
INSIDER
VisionMobile Mobile Insider is a
monthly publication that tracks the
latest events in mobile and provides an
analysis of what lies behind the
publicized facts.
Michael Vakulenko is a Strategy Director at
Licence VisionMobile. Michael has over 15 years experience in
Copyright VisionMobile 2011. mobile telecom and wireless Internet bile. with track
All rights reserved. record of product and technology innovation. He
started his involvement in wireless in Qualcomm and
Feedback later worked for number of wireless startup companies
For more information and in Israel and in the US. Michael's broad professional
subscriptions, contact: experience spans mobile internet services, smartphone
insider@visionmobile.com software platforms, handset architectures, cellular Want to know more?
networks and wireless silicon. Send an email to
matos@visionmobile.com
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