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Can smartphone vendors survive with Apple and Samsung dominating the industry?

Zach Epstein
February 9th, 2012 at 10:00 AM

Apple and Samsung are in the midst of a patent-fueled war with no end in site, but the pair has also inadvertently joined forces to make it increasingly difficult for other vendors to continue making smartphones. New estimates suggest Apple and Samsung combined to take in a staggering 95% of smartphone industry profits in the fourth quarter of 2011. The figures paint an even bleaker picture for the rest of the players in the smartphone business than earlier estimates; UBS analyst Maynard Um said last week that Apple and Samsung’s combined take amounted to 90% of smartphone industry profits. Read on for more.

“With the strong iPhone market share gains during Q4/11 combined with Samsung’s strong share gains within the Android ecosystem, we estimate Apple and Samsung captured roughly 95% of industry profits,” Canaccord Genuity analyst Mike Walkley wrote in a note to investors on Thursday.

Walkley continued, “Apple generated a remarkable 80% share of estimated Q4/11 handset industry operating profits (vs. 56% in Q3/11 and 48% in Q4/10) with only 8.1% global handset market share. Demonstrating the strength of the iPhone’s profit share gains during Q4/11, Samsung’s share of industry profits declined from roughly 26% in Q3/11 to 15% in Q4/11, even though Samsung’s share of Android smartphones increased from 35% in Q3/11 to 39% in Q4/11.”

As Apple and Samsung each reported blowout quarters last month — Apple’s $13 billion holiday quarter was the most profitable quarter ever recorded by a technology company — other smartphone vendors are on the ropes. Nokia posted a €1 billion loss in the fourth quarter, Sony Ericsson reported a €247 million loss, LG posted its second consecutive loss last quarter, HTC continued to slump, Motorola recorded an $80 million loss and RIM continued to slide as well.

And for these struggling smartphone companies, Walkley doesn’t see things getting better in the immediate future. “With RIM, Nokia, HTC, and Sony Ericsson all in the midst of product transitions and Motorola Mobility merging with Google, we believe Apple and Samsung will maintain dominant share positions during H1/12,” the analyst wrote. “Our January checks indicate Apple and Samsung trends remain strong versus competitors.”

Samsung is expected to launch its quad-core Galaxy S III smartphone this coming May, and Apple will then reportedly launch a completely redesigned next-generation iPhone later this year.

Zach Epstein

Zach Epstein has worked in and around ICT for more than 15 years, first in marketing and business development with two private telcos, then as a writer and editor covering business news, consumer electronics and telecommunications. Zach’s work has been quoted by countless top news publications in the US and around the world. He was also recently named one of the world's top-10 “power mobile influencers” by Forbes, as well as one of Inc. Magazine's top-30 Internet of Things experts.

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