Which Smart Phone Manufacturers Make Money?

With so many smart phones being sold and seemingly everyone having one, it's hard to imagine that business would not be booming for most of the companies in the industry. However, when looking at the revenue of most of these companies, selecting one that actually makes money in the space is more like playing the board game Clue, but instead of Colonel Mustard in The Observatory with a rope, the winning answers are Apple in the US and China with the iPhone, and Samsung in Global and Emerging markets with the Galaxy Line.

 

            Truly the rest of the manufacturers are the victims in this analogy. Samsung and Apple really are the only people making money in the space, which is somewhat fitting since their devices are a lot better than most of their competitors' devices on average. They also sell more of them, spend more on advertising and research and development, and have higher profit margins.

            According to a report, Apple had the highest operating margin in the smart phone space at 33 percent. Samsung lagged behind in second place at 19 percent, while LG fell to 2 percent, just a touch above Sony and HTC who both have operating margins on 1 percent. Nokia, Blackberry and Google's Motorola all suffered losses of 1 percent, 7 percent and 22 percent respectively.

            Some manufacturers have decided that they might leave the space, which is what Sony is considering with their weak earnings from the sector. They still produce the camera for the iPhone and sell the Xperia Z3 which has a monster 20mp camera and is available as waterproof for up to 30 minutes and 5 meters, so there is hope yet for the company if earnings reports turn around.

            Google has decided to flip Motorola after they were not able to turn its fate around and are exploring partnerships with other companies like HTC and LG who have proven more successful in the market. Google did manage to keep its Aurora project from the Motorola deal as they explore the space of modular electronics.

            LG released the Flex last year, so perhaps their angle to break out into more profits is durable and bendable devices that are still powerful. This is an especially interesting direction for cell phone design and it should be exciting to see how LG goes about using it to create great products for us, their customers.

            The final question here is what are the profit margins that LG, Motorola, Sony and HTC getting from their phones. That's a question for another time, but remember that other companies are making excellent phones, it is not just Apple and Samsung, though advertising can easily make you believe otherwise.

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