Smartphones: Units, Revenue, Profits – Update

Back in October 2008, I wrote about a blog post of David Wood, who is part of the Symbian leadership team, where he said that while smartphones only account for 10-15% of sales units, the sales revenue is between 20-25% and profits may even exceed 40%. Now Moco News reported similar numbers being given by Deutsche Bank analyst Brian Modoff in an article in the Wall Street Journal.

His numbers are as follows:

  • Apple and RIM together only have 3% of the mobile phone market share but make 35% of the total profits.
  • Nokia manufactured 46% of the mobile phones sold last year (I heard 38% somewhere else) and made 55% of the profits. Note: It would have been interesting to see the split in profits between their smartphones and the rest of the phones they produce. Do they give these numbers in their quarterly reports?

That makes me wonder why there is so much profit in smartphones vs. the rest!? Granted, their price is much higher than that of ordinary phones and thus if the profit percentage is similar, the profit per device is also higher. However, that can't explain it all. Less competition then maybe? Also a bit doubtful as the smartphone market seems to be quite competitive with manufacturers like Nokia, Apple, RIM, HTC (G-phone, WinMob), etc. vying for market share. What do you think?

3 thoughts on “Smartphones: Units, Revenue, Profits – Update”

  1. It really just comes down to higher profit per device, but expect that to come down as time goes on and more reference platforms are available, as well as cheaper components.

    Smartphones have traditionally been associated with high end, and that always = double digit, over 30% margins, some times even over 40%, on hardware.

  2. In the US, you are tied to a service provider, who charges monthly fees for internet access (a key feature of the smart phone). I believe Apple gets a cut of this monthly fee, in addition to getting a cut from the sales of apps for the smart phone. Since smart phones are subsidized (you get them at about half price with a two year contract), I suspect the profits come from the recurring expenses of the smart phones.

  3. Agree with Stefan. Smart phones definitely have much higher margins than regular phones. When you consider Apple and RIM have nothing but smart phones, it kinda makes sense. This is not the case with Nokia, Sony Ericsson and Motorola etc. They have broader portfolios in order to grab more market shares.

    BTW I think for a smartphone, it’s unacceptable to have a margin that’s less than 30%.

    Perhaps that also explains why these high end devices do not have good penetrations in markets that don’t subsidize, like India. At least one of the reasons (Brand recognition would make it up, though)

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