There’s no end in sight to the war between Apple and Samsung. In all likelihood, competition between the two will be healthier than ever this year, thanks to a resurgent iPhone 8 and a non-explosive Galaxy Note 8.
But even though neither company is teetering on the brink, Apple is most definitely winning the current battle. Its earnings for the crucial holiday season were above expectations, and one analyst has pegged Apple at widening the gap where it matters the most.
According to data from Counterpoint’s Monthly Market Pulse, Apple has significantly increased its lead over Samsung in the premium smartphone market ($400+) since the launch of the iPhone 7. Over the summer, Apple was selling just over 50% of the global premium smartphones, and Samsung was selling just under 25%. By December 2016, those numbers had grown to 70% and 17%, respectively.
Although premium smartphones make up a minority of global smartphone sales by volume, they provide the bulk of the profit. The reason why Apple makes so much money off smartphones is because each iPhone it makes costs somewhere around $200 to make, and is sold for over $600. The profit margins are far better for premium smartphones than nearly any other segment of electronics, so Apple ends up making more money on a $600 iPhone than it does on a $2,000 MacBook.
That’s why it’s so significant that Apple is widening the gap on Samsung with premium smartphones. For the past five years, Samsung has been the only other smartphone company to give Apple real competition in the premium smartphone market. Other Android manufacturers have made great flagships, but they haven’t sold well, and sales of $300 smartphones haven’t been enough to support HTC, Sony or Motorola.
The only thing that separates Samsung Electronics from the laundry list of failed smartphone companies is the premium devices. Samsung can’t get by selling the S6 Mini for $250 unlocked to a bunch of teenagers. It needs people buying the Galaxy S8 and the Galaxy Note 8 instead of the iPhone 8, or the profits will wither and die.
According to Counterpoint, it’s really a battle for survival between Samsung and Apple. Their respective shares of premium smartphone sales are a “zero-sum game;” when one company loses its share of the profitable smartphone sales, the other gains. Samsung’s at a real low point after the Note 7 fiasco, and it’s going to take a big 2017 to seriously challenge Apple again.