Tuesday, July 30, 2013

Apple Loses its Magic

Samsung's flagship Galaxy S4 smartphone has sold well compared with Apple's iPhone 5. Photo: Kim Hong-Ji/Reuters

Apple has lost its status as the world's most profitable maker of mobile phones, with strong demand for the Galaxy handsets pushing Samsung Electronics into the financial lead for the first time.

Korea’s Suwon-based company reported a record quarterly profit boosted by growing smartphone sales and a surge in earnings at its display panel division. Net profit was 7.8 trillion won ($7 billion; £4.5 billion) in the April to June quarter, a 50% jump from a year ago. 

Compare this with Apple which made an estimated $3.2 billion (£2.1 billion) profit from iPhone sales in the second quarter of 2013, according to the research firm Strategy Analytics, a marked drop from $4.6 billion in 2012.

The success of Samsung’s smartphone business has seen the company displace Nokia as the world's biggest mobile phone maker. Its market share in the sector has risen sharply. According to research firm Strategy Analytics, Samsung accounts for almost 95% of the Android smartphone sector's profits.

Of course, critics may say that this is nothing great really since Apple makes only a few devices compared to Samsung’s constant flood of new smartphones in different formats, but it does indicate that Apple will have to work some magic into their next iPhone and iPad to go back to (and stay at) the top again.

However, the Korean multinational warned that the pace of growth of the smartphone business, a key driver of its recent success, may slow down.

And interestingly, the next growth chapter will move away from the developed markets and that itself, can be disadvantageous for Apple.

After five years of explosive expansion, sales of high-end smartphones have now hit a plateau and the flourishing $2 trillion (RM6.35 trillion) industry – telecom carriers, handset makers and content providers – is buckling up for a bumpier ride as growth shifts to emerging markets, primarily in Asia. I predict prices will continue to slide. Then perhaps, I will finally get myself a smartphone too.

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