Samsung tops Apple to become the most profitable handset vendor in the world

Samsung Smartphone Profits Q2 2013Image Source: Nan Palmero, Flickr

Apple may still be the most profitable consumer electronics company in the world, but Samsung’s successful Galaxy S4 launch helped the South Korea-based giant top Apple in the second quarter to become the world’s most profitable handset vendor. Samsung on Friday posted second-quarter results that included a record operating profit of $6.9 billion on $51.7 billion in sales. Market research firm Strategy Analytics crunched some numbers to determine that Samsung’s results include $5.2 billion in operating profit from its handset division while Apple’s $9.2 billion pre-tax profit included an operating profit of $4.6 billion from its iPhone line. The result, as Strategy Analytics notes, is a changing of the guard.

“We estimate Samsung’s operating profit for its handset division stood at US$5.2 billion in the second quarter of 2013. Samsung overtook Apple for the first time, which recorded an estimated iPhone operating profit of US$4.6 billion,” Strategy Analytics analyst Neil Shah said. “With strong volumes, high wholesale prices and tight cost controls, Samsung has finally succeeded in becoming the handset industry’s largest and most profitable vendor.”

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Shah’s colleague and Strategy Analytics’ executive director Neil Mawtson added that Apple’s reign as the world’s most profitable handset vendor lasted nearly four years, from the third quarter in 2009 though the end of the first quarter this year.

“Apple’s profit margin for its handset division has been fading recently due to lackluster iPhone 5 volumes and tougher competition from rivals,” Mawtson noted. “Samsung is performing well in the US market, while Huawei, ZTE and other local brands are growing vigorously in China. Apple is now under intense pressure to launch more iPhone models at cheaper price-points or with larger screens to fend off the surging competition and recapture lost profits in the second half of 2013.”

Apple’s dramatic dethroning comes nine months since the company last released a new iPhone model, but Apple is expected to lunch the flagship iPhone 5S this fall alongside a new entry-level plastic iPhone model that will address new demographics and regions.

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