IPhone share of phone market: 5% volumes, 20% revenues, 55% profit

http://www.asymco.com/2011/05/16/iphone-share-of-phone-market-in-q1/

by lotusleaf1987 • 15 years ago

74 39 15 years ago

ljlolel• 15 years ago

This is a very interesting data point. Although Nokia sells over a billion phones a year, this proves that you can target a narrow sliver of a huge market with futuristic innovation and still gain the majority of the profit available in the whole market.

Moreover, you create real value by innovating and pushing the future forward, reaping the reward from that. Nintendo has similar strategies.

raganwald2• 15 years ago

Agreed, although I suggest that Apple has already proven that "you can target a narrow sliver of a huge market with futuristic innovation and still gain the majority of the profit available in the whole market." Macintosh systems account for 7% of the PC market and 35% of the profit.

More insanely, Apple has a 90% share of the revenue for PCs costing more than $1,000. Although smaller than the market for PCs costing less than $1,000, that's still a huge market and Apple has cornered nearly all of the money in it.

joebadmo• 15 years ago

I think an important part that is perhaps underemphasized is that Apple has proven that Apple can do this. It's Apple's singular focus on quality that enables it, and it's surely the hard way to do it.

And Apple can do it precisely because it's hard. If it was simply a matter of targeting the high end, everyone would be doing it.

Fighting for market share and making infinitesimal margins across a large market share is the relatively easy and obvious way to do things, and it involves relatively easy and obvious processes of copying/iteration.

ignifero2• 15 years ago

I thought sports car makers, fashion designers, wine makers, jewellers etc have already proven that centuries ago.

bane2• 15 years ago

Nintendo has similar strategies.

Another interesting point about the Nintendo model, their approach is not only more innovative, but it's not cutting edge, and it's cheaper than the competition.

cube13• 15 years ago

Nintendo also makes a profit on every single console sold from the moment that they are released.

Steko2• 15 years ago

It's also interesting that Nintendo and Apple often innovate with similar technologies. The central innovations of the DS and wii -- touchscreen and motion controls respectively -- would up being tentpoles of the iPhone.

Four years later and Nintendo's been first to mass market with a 3D device and the central innovation for the wii 2/HD appears to be advanced haptics, something we've seen a number of Apple patent applications for. It will be interesting to see if Apple again catches the rest of the phone industry napping with their implementations of these technologies.

ben1040• 15 years ago

Although Nokia sells over a billion phones a year, this proves that you can target a narrow sliver of a huge market with futuristic innovation and still gain the majority of the profit available in the whole market.

Apple even pointed this strategy out in the original 2007 MWSF keynote where the iPhone was announced. They showed their math, pointed out the global annual sales volume of phones was almost 1 billion devices. They then said 1% of that would be a great starting point because that's still ten million phones out the door and it's a good place to carve out a high value niche.

c23• 15 years ago

Personally I think the claims of Apple's innovation are way overblown. They aren't innovators, they are generally executors. They execute very well, and market very well.

The only innovation I can really find where they were truly leaders is the concept of the app store - which admittedly has been huge - but outside of that they sell an extremely well executed smart phone and tablet.

Aside from that, Nintendo's strategy is miles away from Apple's.

c23• 15 years ago

I expected disagreement, but didn't expect it would be so strong as to lead to down votes without discussion.

I am not trying to 'troll' anyone here, but I think if you look at the truly innovative business processes, technologies, and sheer inventions, Nokia as a company has Apple beat hands down over the last few years.

Yes, in some sense, building a better mouse trap is innovation, and no one can deny Apple's success as a company especially over Nokia's, but I would still strongly contend it has more to do with sheer execution and market positioning over sheer innovation.

c23• 15 years ago

Reminds me a lot of Porsche's situation a few years ago in the sports car market.

natmaster4• 15 years ago

In other words, you are paying for the brand, not the product.

lotusleaf19874• 15 years ago

In other words, you probably didn't read the article and would have made this conclusion despite whatever facts were presented.

natmaster4• 15 years ago

It's not really an article, just a presentation of data. I was labeling the data.

seanalltogether• 15 years ago

How is profit being calculated?

Stormbringer2• 15 years ago

How were they calculating operating margins?

Lots of Apple bashers love screaming about how Apple has huge margins because the cult will buy any old iPoo, yada yada reality distortion field.

But on the Apple financials call they pretty consistently come in just under 30% on their product margins, and these guys (asymco) have them peaking at almost 50%.

Is this based on some backyard analyst's estimated component cost breakdown? In which case it is a worthless guesstimate, or is it based on official numbers?

batiudrami• 15 years ago

It wouldn't surprise me though. In Australia I can get a Nexus S for AU$29 a month, while the absolute cheapest I can get an iPhone 4 is AU$47/mo (same plan/inclusions, both over 24 months), with a total cost difference of AU$432.

Internally, they're essentially the same phone. The iPhone is a better built phone to be sure, but I find it hard to believe that it costs that kind of difference. But hey, people still buy them so I can't see the pricing structure changing for the moment.

ikono• 15 years ago

I think the number you're referring to is Apple's gross margin where as this number being quoted by asymco is iPhone gross margin.

IPhone share of phone market: 5% volumes, 20% revenues, 55% profit

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