Apple TKO's Android, the Goliath of the Smartphone Industry

        

On Tuesday Patently Apple posted a report titled "For Six Quarters Straight Apple's iPhone has taken 91% or more of the Smartphone Industry's Profits." 

 Despite declining iPhone sales this year, Apple was still able to maintain a mesmerizing hold on smartphone industry profits throughout the year. It's a factoid that should go down in business history books to be sure. Despite Android holding the mantle of being king of volume shipments with a whopping 85% market share, it's truly a statistic only the walking dead could appreciate. There could be no pride in owning 85% market share of the smartphone industry and yet only muster 9% of its profits. It's the David and Goliath story of our times. Android is definitely the Giant that's been taken out by little Apple, quarter after quarter where it counts: Profits.

Apple's stranglehold of industry profits makes Samsung's Note7 all the more painful for Samsung. Huawei, who was ranked the number three smartphone vendor in Q3 was the number one Android vendor for profits that amounted to …. Drum roll …. 2%. Evidently that puts Samsung into a hole for the year that's so deep that it could be described as a bottomless pit.

Funnier yet is Xiaomi, the little darling of Industry tech pundits and analysts for being the Apple of China got wiped off the top five global smartphone chart last quarter and in fact fell off the list for all of 2016 altogether. They were upended in January by China's Oppo and Vivo (or BBK Communications).

Instead of being embarrassed by the news of Apple's killer smartphone profits this week, Xiaomi's VP of International marketing jumped up and down to openly confess that they proudly make no profit for their smartphones because it reflects their business model. And what business model would that happen to be? Yes of course, the Razor/Razor Blade business model where they give away the product/smartphone in the hopes of gaining profit from their branded services be it for apps, games, movies, appliances and other tech toys.

Yesterday "Xiaomi's global vice-president Hugo Barra said the company's business model was not based on money made from handset sales per se and that it did not need to raise more funds or see any point in doing so at a valuation of less than $46 billion.

"Basically we're giving [handsets] to you without making any money… we care about the recurring revenue streams over many years. We could sell 10 billion smartphones and we wouldn't make a single dime in profits."

Xiaomi, which discloses little of its profit and revenue figures, has increasingly emphasized its range of home appliances such as air and water purifiers, and rice cookers as key earnings drivers.

When there's no profit for a major device that a company is known for, it boils down to selling pure marketing spin.

Patently Apple posted a report earlier this month titled "Xiaomi's New 'Mi Mix' Premium Smartphone is out to steal the Industrial Design Spotlight away from Apple" which clearly showed that Xiaomi desperately wants in on where the profits are, the premium smartphone segment.

The company pulled out all of the stops recently to show that they're serious about smartphones that could make a profit by hiring the designer that worked on Steve Jobs yacht Philippe Stark as noted in the graphic below.