Blog
Smart Phones - Smart Money for Apple and RIM
25th July 2009
Feature rich smart phones such as the iPhone and Research in Motion’s Blackberry account for a disproportionate share of the operating profits of mobile phone manufacturers.
According to new research by Deutsche Bank, Apple and Research In Motion were responsible for 3% of all cellphones sold in the world last year but 35% of operating profits. In 2009 the figures are forecast to be 5% of the global market in unit terms but 58% of total operating profits. Together Apple and RIM had about 32% of the smart-phone market. Nokia dominates the basic mobile phone handset market where operating margins are much thinner.
The key to understanding the huge profits of smart phone makers is the subsidy offered by the mobile phone network providers who tend to treat mobile handsets as loss-leaders. They are happy to sell a phone for £60 or less because they can recoup the money and more through lucrative monthly call plans where the bulk of users (consumers) are locked in through minimum length of service contracts.
Palm Inc is trying to break into the cell-phone market and take some of the supernormal profits available.
Geoff Riley
Geoff Riley FRSA has been teaching Economics for over thirty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD conferences in the UK and overseas.