Apple’s revenue in Q3 2019 includes 32 percent of the overall handset revenue. The brand also grabbed 66 percent of industry profits, dominating the global handset market. Meanwhile, overall global handset profits declined 11 percent (year-on-year) to USD 12 billion, according to a report from Counterpoint Research.

An increased mix of entry to mid-tier products led to the decline. It was assisted by a fall in revenues for key smartphone original equipment manufacturers (OEMs). Among the top ten brands, only Samsung and Huawei managed to increase their revenue on an annual basis, said the report.

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Apple revenue relying on strong user base?

“The loyal premium user base in the major markets like the US, the EU and Japan is one of the reasons that Apple can still operate at a profit level that its competitors can only wish for,” said Karn Chauhan, a research analyst with Counterpoint. Apple’s overall ecosystem is strong. It can guarantee it a steady inflow of revenue in the coming years. That is, with a strong service strategy.

“In the immediate future, we believe that Apple’s profit for the holiday season will increase with the new line up of iPhones gaining good traction,” Chauhan added.

Recent hardware features have been unable to offer an attractive reason to upgrade. Hence, the replacement cycle for premium smartphones has lengthened. Samsung took 17 percent of the overall handset industry profits. The positive start of the Galaxy Note 10 Series was the key reason for the growth. It was enhanced by an increased variety of Galaxy A-series smartphones.

“Chinese smartphone brands operate at low-profit margins, but better than in previous years, even though they are expanding outside China and also penetrating high-tier price bands,” the report mentioned.

Chinese brands are looking beyond just smartphones

Some Chinese brands are now looking at monetizing their user-base by launching financial services. These include Xiaomi and Realme. Brands like Oppo are also investing in IoT products

“However, it is becoming a challenge for Chinese brands to increase their smartphone average selling prices (ASPs) margins due to a combination of longer consumer holding periods and Apple lowering pricing on some key SKUs, which has limited the headroom that Chinese vendors had used to increase their ASPs,” Chauhan elaborated.

In the coming quarters, the adoption of 5G will drive some upgrades. For instance, Huawei, Oppo, Vivo and Xiaomi will gain from aggressive 5G pushing in China. They will also use this opportunity to increase their ASP, said the report.

(Written with IANS inputs)

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