They still have a long way to go before they can dream of margins enjoyed by Apple and Samsung
Chinese brand mobile handsets’ profit crossed US$1.5 Billion for the first time in a single quarter i.e in Q3 2017 but the margins enjoyed by them continue to be miniscule as compared to Apple and Samsung. The global smartphone profits too grew impressively in the third quarter. According to the latest research from Counterpoint’s Market Monitor program for Q3 2017 (July-September), global mobile handset profits grew 13% YoY in Q3 2017 due to strong performance of Samsung and Chinese brands.
Counterpoint Associate Director Tarun Pathak highlighted, “This is the first time ever when the cumulative profits of Chinese brands crossed USD 1.5 Billion for the first in a single quarter. Usually all the profits have been shared by just two brands Samsung and Apple, however, Chinese brands have made inroads here as well.”
Mr Pathak further added, “The growth of Chinese brands can be attributed to the diligent efforts in streamlining the supply chain with rising mix of mid to high end smartphones in their portfolio. Even in the premium segment, players like Huawei are positioning their flagship models just below the premium offerings from Apple and Samsung. This strategy is designed to penetrate premium market while maximizing revenue and profit.”
Counterpoint’s Research Director, Neil Shah, added, “Apple continued to command lion share of mobile handset industry profits capturing almost 60% share. However, this is down from 86% share in the same quarter last year when Samsung had to gulp up a loss due to the Galaxy Note 7 debacle. The Korean vendor though with relatively stronger demand for Note 8 and mid-tier high-scale J series have been able to capture almost a fourth of the global mobile handset industry profits.”
more than USD150 profit per iPhone sold and this will continue to grow into the holiday season quarter buoyed by the high price iPhone X series. Our recent channel checks across key Apple markets showed, the demand for the 256GB version of iPhone X is higher which will boost Apple’s profits even higher.”
- Apple captured nearly 60% of the total profits generated in mobile handset segment followed by Samsung
- Apple’s profit share declined by 30% YoY mainly due to increased mix of previous generation iPhones. The average selling price of iPhone remained flat YoY while the shipments increased 3% YoY.
- In Q4 2017, we estimate that the total profits of Apple will improve driven by its iPhone X sales.Apple exited the quarter with some iPhone 8 inventory due to softer than expected demand compared to the iPhone 7 series.
- Samsung made a strong come back in the third quarter with its Note 8 series while S8 series continue to perform on par. The profit share reached 26% as compared to its loss during Q3 2016 due to Note 7 debacle.
- Huawei witnessed highest profit growth of 67% YoY in Q3 2017 due to its portfolio expansion across price bands. Huawei’s smartphone ASP grew by 6% YoY driven by its Mate and P series. • Oppo &Vivo captured fourth and fifth spot in Global Handset profit share mainly driven by their performance in China.
- While Xiaomi has made a strong comeback with handset profit growth of 41% YoY, it is still behind the market leaders. For Xiaomi, offline distribution is the key to reaching OPPO or Huawei’s scale, but most of Xiaomi’s sales are still skewed towards lower-end models. Xiaomi needs premium flagship like Mi Mix 2 or Mi 6 series to scale and drive higher profits also to offset the offline expansion costs. Xiaomi is rumored to be in pre-IPO phase and instilling investors confidence that it can scale and make more money will be key next year.
- Expansion of Chinese players outside china will have an impact on the profit margins of Chinese players which they would like to mitigate by increasing the mix of mid segment devices in markets outside China.