Apple and Samsung, in the midst of an ugly patent war that they’ve been waging against each other in court, have at least something to be happy about—according to Raymond James analyst Tavis McCourt, both companies accounted for all the mobile industry profits in Q1. Apple took the lion’s share of the profits with 80 percent, while Samsung mopped up with the remaining 20 percent.
Both companies are expected to continue their domination of the mobile market in 2012—UBS analyst Maynard Um anticipates the two companies to combine for 90 percent of all the mobile profits this year, and it would come as no surprise if they continue to clean up in 2012 with a new iPhone and the highly anticipated Galaxy S3 coming out later this year.
These impressive figures should draw the envy of other handset makers attempting to turn a healthy profit in an ever increasing competitive space, and now it begs the question of which companies will be able to survive with Apple’s and Samsung’s dominance.
McCourt had this to say:
“It is getting increasingly hard to understand where the rest of the device vendors will get the capital to fund necessary R&D and sales and marketing investments to continue to compete with Apple and Samsung.
With essentially all of the other hardware vendors besides Apple and Samsung struggling to find profits to reinvest into R&D, Microsoft and Google have to be wondering who their hardware partners will ultimately be. Neither wants to be in a position where they have to take on more of the R&D burden, and neither want to have to initiate bidding wars to give Samsung an incentive to focus on its platform. Our assumption is that both Huaweii and ZTE will be courted heavily over the next few quarters by both Microsoft and Google as they look to strengthen their stable of sustainable hardware partners.”
Limited revenue or even losses will squeeze the budgets of competing handset makers, which will make it more difficult for them to continue to innovate and battle the behemoths of the industry. Companies like HTC, Motorola and Nokia certainly won’t just just dry up and vanish—at least it doesn’t seem likely in the immediate future—but things won’t get easier for them if this trend continues, and they have an uphill battle ahead of them if they want to grab a share of the profits. The demise of some of the more prominent handset makers not named Apple or Samsung are far from becoming a reality at this juncture, but with the way the markets are shifting, it certainly doesn’t bode well for them.
However, even Samsung and Apple aren’t guaranteed to rule the market forever—they need not look any further than Nokia and RIM as examples of how the once mighty can fall—but it won’t be easy to topple either company at this rate.