Apple is still No. 1 in profits, Samsung will have to wait for its triple crown

Apple still at top of profit share with 53%, Samsung at 45%, others at…2%

The second quarter of this year ended again as everyone expected. Samsung dominates in volume and revenue with Apple and LG following in order. Looks like there wasn’t anything exciting except for the tiny fact that Samsung’s revenue grew compared to the first quarter while Apple’s revenue toppled. This led to the question: If Samsung tops the market in volume and value what about profit? Profit was the only category where Samsung trailed behind the market leader, Apple so far.

Apple had been so successful in demanding a premium to the mobile operators, the actual B2B value chain purchasers, that it had always enjoyed a hefty profit. But transfer prices of the iPhone dropped below $600 for the first time in 3 years and volumes also shrunk to a low point, a prime opportunity for Samsung to claim its third and final crown.
But it didn’t happen…yet. We’ve calculated that Apple was still at top with 53% profit share and Samsung held 45%, LG 1% and the rest of the industry shared a tiny 1%.

* Apple
Apple reported $35B in revenue and $9.2B in operating profit for the quarter. Of the revenue iPhone took $18B and profit-wise we calculate $5.5B. This is an average 30.5% profit margin through our bottom up methodology for iPhone revenue.
We can’t disclose all our BOM analysis here but I will argue that our calculations are consistent with previous numbers from Apple. The $18B revenue, $5.5B profit for iPhone in Q2 tells us that iPhone revenue was 50% of Apple total revenue and 60% of total profit which has been a trend for almost a year now. iPhone profit margin was 30% while all other products had an average 20% profit, a 10% point difference which has also been a continuing trend.

* Samsung
Samsung again enjoyed a record quarter. The division revenue which is called IM (IT and Mobile) had record numbers, 34.6 trillion Won which translates to $31B. In IM there are tablets, network equipment and PC revenue. If we exclude one by one based on historical numbers, we end up with $25.6B. Again applying our bottom up BOM analysis, we get 18.6% operating profit margin for Samsung’s mobile business which is higher than the 17.7% of the IM division. Samsung’s mobile operating profit is calculated to be $4.7B, definitely lower than Apple.
Our analysts were the first to start calculating profit share back in 2008 and we’d be most eager to announce breaking news if there was any but looks like it’s not time yet.

We anticipate that Samsung’s sales will grow again in Q3 2013 while Apple will have limited growth due to the late launch of new products (iPhone 5S, 5C) so it will be another close call in terms of profit for the two. To offer our predictions for the future, we think in Q4 2013, Apple sales will almost double making Apple the indisputable leader in profit once again. But in 2014 it’ll finally be Samsung’s turn to lead in profits as the scale advantage starts to kick in.

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