Operating Profit Ratio

Apple accounts for 83.4 percent of US$12.21 billion (13.71 trillion won) of the total operating profits made by global smartphone manufacturers while Samsung Electronics posted US$1.58 billion (1.77 trillion won) taking up 12.9 percent.
Apple accounts for 83.4 percent of US$12.21 billion (13.71 trillion won) of the total operating profits made by global smartphone manufacturers while Samsung Electronics posted US$1.58 billion (1.77 trillion won) taking up 12.9 percent.

 

Apple captured the most share of operating profits generated from global smartphone sales in the first quarter this year.

According to market research firm Strategy Analytics on June 4, Apple’s smartphone business recorded an operating profit of US$10.18 billion (11.44 trillion won) in the first quarter. It accounts for 83.4 percent of US$12.21 billion (13.71 trillion won) of the total operating profits made by global smartphone manufacturers, up from 79.8 percent at the same period a year ago.

Apple's operating profit ratio in relations to sales in the smartphone business came to 30.7 percent in the first quarter. It is rare to post an operating profit to sales ratio of 30 percent in the manufacturing industry.

Samsung Electronics posted US$1.58 billion (1.77 trillion won) in operating profit in the first quarter, taking up 12.9 percent of the total. The figure showed a sharp decrease from 21.9 percent in the first quarter a year ago. The company's operating profit ratio in the smartphone business came to 9.7 percent in the first quarter, a third of Apple’s. It is the first time for Samsung Electronics to see its smartphone business’ operating profit fall short of 10 percent except for the third quarter last year when the company narrowly escaped running an operating deficit due to the discontinuation of the Galaxy Note 7.

As the smartphone market had been saturated and the margin of devices had been fallen, Samsung Electronics’ smartphone business operating profit rate kept decreasing from 22.1 percent in 2013, 16 percent in 2014 and 11.1 percent in 2015, and then slightly increased to 11.6 percent in 2016.

In addition, the market landscape among Chinese smartphone producers has changed. Huawei had higher sales with US$6.47 billion (7.26 trillion won) than OPPO with US$5.41 billion (6.08 trillion won) in the first quarter, but OPPO had higher operating profits with US$254 million (285.24 billion won) than Huawei with US$226 million (253.8 billion won). It is the first time for OPPO, which has emerged as a new strong market player, surpassed Huawei, which has the third largest sales in the global market, in terms of operating profit, boosted by the success of its premium phones in the global market, including the R9s. Recently, Huawei has been also strengthening its high-end product lines.

Chinese smartphone makers lag far behind Apple and Samsung in terms of smartphone business operating profit rate in the first quarter – OPPO with 4.7 percent, Huawei with 3.5 percent and Vivo with 4.5 percent.

The reason why some major companies account for more than 100 percent of the total operating profits posted by global smartphone manufacturers is that a considerable amount of minor companies posted an operating loss, chipping away at the total operating profits. An official from the electronics industry said, “Only 10 out of 300 smartphone makers make profits. Apple is the sole leader in terms of profitability, while the market polarization has become more serious.”

 

 

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