Q2 2018 Global Handset Profit Share: Apple Remains King. Are Chinese OEMs the Heir Apparent?

Global handset profits grew by 4% in Q2 (April-June) 2018 primarily due to Chinese brands, which are aggressively taking hold on the mobile phone market. However, Apple still remains the most profitable smartphone brand.

According to a report from Counterpoint Research, Chinese brands like OPPO, Vivo, Huawei, and Xiaomi are leading the relentless Chinese assault on the global smartphone industry, going so far as to threaten the grand masters of the industry –Samsung and Apple. Some of the innovations employed by these Chinese brands include tweaking their design language by adding new features, especially at a time when overall innovation within smartphones was already reaching its climax.

Over the last ten months, iPhone X alone generated more revenues than either Huawei or OPPO or vivo or Xiaomi did from their total smartphone sales for the same period.

With the new three models launching, Apple should be able to boost its ASPs, revenues & profits even further. pic.twitter.com/I1FtvJ8GC7

— Neil Shah (@neiltwitz) September 12, 2018

Some examples include the Vivo Nex (Ultra Full View Display with in-display fingerprint), OPPO Find X (Ultra Full View Display), and Huawei’s P20 Pro (Triple camera). Nevertheless, at a point when the overall smartphone market was beginning to saturate, iPhone X, which drove a new design language, helped Apple command a considerably higher Average Selling Price (ASP) with a 62% (65%, Q2 2017) share of the total global handset profit in Q2 2018!

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Oppo & Vivo captured fourth and fifth spot in Global Handset profit share mainly driven by their performance in China https://t.co/TW8LusEdlq pic.twitter.com/j18h6Fk4uB

— Tarun Pathak (@Tarunpathak) December 27, 2017

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Could the decline in Apple’s profit share when compared with Q2 2017 raise concern and make them take a cue from the Chinese brands? Well, they are not the only ones who suffered a decline; their biggest rival, Samsung—the South Korean smartphone giant has had a stifling quarter as well, with poor sales of their flagship Galaxy S9 smartphone having a marked negative effect on their bottom line.

As a matter of fact, Samsung’s global handset profit share fell to 17% (22.3%, Q2 2017) in Q2 2018.

"@Apple was the most profitable brand in Q2 2018 with 62% market share followed by @SamsungMobile (17%) and Chinese brands: @HuaweiMobile, @oppo, @Vivo_India and @xiaomi." @karn_chauhan

Read the full blog at: https://t.co/VtqdjigMhe #smartphones #technews #technology pic.twitter.com/4Tzn0Fzird

— Counterpoint (@CounterPointTR) September 18, 2018

Market Summary – Q2 2018

• Global handset profit grew 4% annually, capturing 11% of the total handset industry revenue in Q2 2018.
• Apple was the most profitable brand in Q2 2018 with 62% market share followed by Samsung 17% and Chinese brands: Huawei (8%), OPPO (5%), vivo (4%) and Xiaomi (3%) were the key Chinese players which grew during the quarter.
• The remaining 1% of total industry profit was distributed among more than 600+ handset brands.
• Samsung’s profit declined 21% annually due to weaker than expected sales of the Galaxy S9 series. The Galaxy S9 series shipments declined 24% in Q2 2018 as compared to Galaxy S8 series in Q2 2017.
• Xiaomi (747%), Huawei (107%), vivo (24%) and OPPO (23%) were the fastest growing smartphone brands in terms of handset profits during Q2 2018.

From the Report Summary, Samsung’s loss is the Chinese smartphone industry’s gain. The four key players– Huawei, OPPO, Vivo and Xiaomi experienced a substantial increase in their overall industry profit share. Huawei’s global handset profit share now stands at 8% in Q2 2018, up from nearly 4% in Q2 2017, over 107% YoY increase.

Vivo is second with a 24% YoY increase in their handset profits, now accounting for 4% share in Q2 2018. While, OPPO registered approximately 23% YoY increase, accounting for 5% of the total global handset profit share. The best and not least among the Chinese is Xiaomi, with a soaring profit of 747% in Q2 2018, capturing 3% of the global handset profit share!

The leading factor that is driving growth for these Chinese OEMs (Original Equipment Manufacturer) is that these brands are gradually entering new price tiers in the premium segment by improving their products features and quality. Mid-range and premium market segments typically enjoy much more generous profit margins compared to the low-end segment.

One may wonder how these companies are convincing customers to move away from popular premium brands such as Samsung and Apple and embrace the Chinese uprising, the simple answer is creativity and innovation.

What does the future have in store for Samsung and Apple as it is increasingly likely that the future of the smartphone industry may well be dominated by Chinese brands?