Counterpoint: Apple is still sucking up most of the smartphone profits

"Handset revenues as well as profits are largely driven by Apple."

From "Global Handset Market Operating Profits Grow 6% YoY in Q2 2022 Despite Declining Revenues" posted Wednesday by Counterpoint Research:

Global handset market revenues declined for a second consecutive quarter, falling 2% YoY and 15% QoQ to $95.8 billion in Q2 2022, according to the latest research from Counterpoint’s Market Monitor service. A fall in global handset shipments due to factors including Chinese lockdowns and ongoing geopolitical uncertainty caused the revenues to decline despite the average selling price (ASP) going up by 6% in the same period. Consequently, the annual operating profit growth of 6% corresponded with ASP growth rather than shipment decline, reaching $13.1 billion in Q2 2022.

Cue the full charts:

Given that handset revenues as well as profits are largely driven by Apple, as can be observed through the disparity in revenue and profit share in the chart above, we expect a growth in both the aspects in the second half of the year.

Associate Director Jan Stryjak said, “Revenue growth in the second half of the year, when compared to the first half, is a near certainty due to the cyclical launch of the highly profitable and relatively economic downturn-resistant iPhone. But with geopolitical uncertainty worsening, inflation levels rising and fears of recession growing, the handset market is bound to get impacted and may take longer to return to the trajectory predicted prior to the pandemic.”

My take: Apple is doomed.


  1. Horace Dediu said:
    The more uncertainty, the more people clutch their iPhones(*). Did Covid teach us nothing? Apparently so.

    (*) For obvious reasons: it’s the primary (only) connection to information, people and resources for physical and mental health.

    September 29, 2022
    • David Emery said:
      Yup. I suspect that with economic pressures, people will pay for the best device they can get and then hold onto it longer. Apple CLEARLY has an edge in that approach, with products that have longer useful lives than competitors. Near term, this could explain the shift of purchases to 14 Pro.

      September 29, 2022
    • Kirk DeBernardi said:
      Best-of-breed in industry profits (for how many years running?) and the “Dediu-Apple” meme of Android swap-out and a constant and steady user base growth. .

      Apple IS doomed…

      …for a great future.

      September 30, 2022
  2. Roger Schutte said:
    My favorite is the bottom one. Do you think they have the same for laptops, tablets, watches and headphones? Or would they just relabel the bottom one and call it good? ElOhEl

    September 29, 2022
  3. Daniel Epstein said:
    I would take all these charts and numbers with a big grain of salt. Somehow I think the growth in profits and revenue if any is coming from Apple and little from anyone else. This is masking the decline of the competition Apple has been facing. Throw in troubles with Covid in China, Ukraine mess and the macro environment and it is hard to judge the cell phone market comparisons from previous years. And do we really trust any one else’s numbers besides Apple’s (which only reports revenue publicly)? I think there is likely a wide margin between the truth and these numbers. And Apple still looks good so what can we say about the others?

    September 29, 2022
    • Bart Yee said:
      @Daniel While I agree that Android competitors have been hit with declines in units sold, at least contracting entire market shipments and subsequent revenue declines, Apple’s numbers can be determined with some reasonable accuracy through study of the 10Q reports and 10K annual reports.

      For example, for revenue and profits.
      Q3 2022
      Apple iPhone revenue (pg. 15)
      3 mo. $40.7B 9 mo. $162.9B
      Products gross margin (pg. 17)
      3 mo. 34.5% 9 mo. 36.8%
      This would give gross or operating profits as:
      3 mo. $14.0B 9 mo. $60.0B

      Samsung Mobile (MX) Q2 2022 Rev.
      3 mo. $28.0T KRW = $19.4B USD
      9 mo. $28T+31.2+27.7 = $86.9T KRW = $60.3B USD
      Operating profit directly reported
      3 mo. $2.62T KRW = $1.83B USD
      9 mo. $2.62+3.82+2.66 = $9.1T LRW = $6.3B USD
      Gross margin Mobile
      3 mo. = $1.83B/19.4B = 9.4% vs.18.2% total Samsung Electronics
      9 mo. = $6.3B/60.3B = 10.4%

      Given overall smartphone Q2 revenue = $95.8B USD
      Apple’s Rev. $40.7B = 42.5%
      Samsung Rev. $19.4B = 20.3%, difference of 22.2%, pretty close to 24% in revenue chart.

      Given overall smartphone Q2 profits = $13.1B, it’s unclear how Apple’s $14.0B and Samsung’s $1.8B ($15.8B total) work out unless we find that many other vendors LOST money / profits. Which actually wouldn’t be too surprising given many who saw double digit declines in sales.

      September 29, 2022
      • Robert Stack said:
        Upvoted – thanks Bart! While I fully recognize the “wobble” in your numbers, nonetheless they do provide really useful insights. Re the profits of other smart phone makers (Samsung excluded of course), it would not surprise me if they are slim or even operating at a loss. (I seem to recall some of Horace’s past asymco posts that concluded pretty much the same thing.) Anyway, I just wanted to say that I really appreciate the effort you put into these kinds of analyses, and I’m sure others do as well.

        September 29, 2022
  4. Robert Paul Leitao said:
    From a profit perspective, Apple is the smartphone market. What’s not included in the analysis (I’m not faulting the firm) is the robust global market for pre-owned iPhones which supports new iPhone pricing and profits. Additionally, Apple is now effectively monetizing services. Looking at iPhone profits alone is only part of the profit “story.” Apple’s strong customer relationships and the value of the global eco-system are, in my view, often discounted in valuations. To start, I believe analysts should consider that Apple has a wide (and widening) economic moat because switching platforms has a real and rising cost for consumers and enterprises.

    September 29, 2022
  5. Robert Stack said:
    And in other unrelated news, Google to shutter “Stadia”, it’s online gaming service, in January 2023:

    cnbc [dot] com/2022/09/29/google-to-shut-gaming-service-stadia-in-latest-cost-cutting-effort.html

    Add another one for the “Google Graveyard”…not much spaghetti seems to stick to their wall these days. I do wonder how Arcade is doing, but don’t doubt that Apple is in it for the long haul.

    September 29, 2022
    • Bart Yee said:
      Yep, another 3 yr and done Google project. Joins the now 274 shuttered programs. How can a company work this way and still survive? Even chronicled here:


      September 30, 2022

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