Feeds

Apple and Samsung mobile monsters: 'We only eat RAW CASH'

Go on Microsoft, feed the beast

Security for virtualized datacentres

Open ... and Shut For years, Apple dominated mobile industry profits, charging a premium for tightly integrated hardware-to-software-to-data centre mobile solutions. It turns out, however, that this magical formula for industry profits can be replicated, as Samsung is showing. It's also increasingly clear that it isn't cheap.

Apple and Samsung combined account for 98 per cent of mobile industry profits, according to research from analyst firms Asymco and VisionMobile. Perhaps not surprisingly, Samsung is catching up with Apple in terms of profits by copying its playbook, as VisionMobile analyst Stijn Schuermans notes:

The only handset maker apart from Apple who has built such a unique value chain today is Samsung. The electronics giant not only assembles handsets, but also makes a lot of the most expensive components, notably screens and chipsets. This allows the company to capture profits across the value chain, where its competitors can only capture the value of assembly.

That playbook isn't cheap to assemble. Asymco principal Horace Dedieu tracks the capital expenditures of the major mobile industry players, and clearly shows a two-horse expenditure race that matches the industry's profit race.

The companies involved are investing in different "infrastructure," with Samsung spending heavily on semiconductor and display manufacturing, and Apple adding to its services back-end. But overall it points to a central fact: the most profitable, successful mobile companies are also those with the highest capital expenses the most on capital infrastructure.

In other words, the mobile industry is not for the faint of pocketbook.

Asymco graph

Asymco shows a two-horse spending race between Apple and Samsung

This isn't to suggest that lots of money ipso facto translates into lots of market share or even lots of profit. Research in Motion can't seem to buy a friend, much less market share. And Intel has spent heavily on x86 even as the world has continued to move to ARM.

But it's telling that not just Apple, but also Samsung, have both proved that owning the value chain is essential to win market share and profits in mobile. Microsoft has increasingly moved in this direction, and Google is heading there, too, what with its acquisition of Motorola Mobility. By definition, not all of these can win, and it may well be that those two companies that were willing to bet biggest on capital expenses, earliest, will hold their lead. But it does seem clear that serious capital expense is the ante to even get into this mobile game in earnest. ®

Matt Asay is vice president of corporate strategy at 10gen, the MongoDB company. Previously he was SVP of business development at Nodeable, which was acquired in October 2012. He was formerly SVP of biz dev at HTML5 start-up Strobe (now part of Facebook) and chief operating officer of Ubuntu commercial operation Canonical. With more than a decade spent in open source, Asay served as Alfresco's general manager for the Americas and vice president of business development, and he helped put Novell on its open source track. Asay is an emeritus board member of the Open Source Initiative (OSI). His column, Open...and Shut, appears three times a week on The Register. You can follow him on Twitter @mjasay.

Protecting against web application threats using SSL

More from The Register

next story
Brit telcos warn Scots that voting Yes could lead to HEFTY bills
BT and Co: Independence vote likely to mean 'increased costs'
Phones 4u slips into administration after EE cuts ties with Brit mobe retailer
More than 5,500 jobs could be axed if rescue mission fails
New 'Cosmos' browser surfs the net by TXT alone
No data plan? No WiFi? No worries ... except sluggish download speed
Radio hams can encrypt, in emergencies, says Ofcom
Consultation promises new spectrum and hints at relaxed licence conditions
Blockbuster book lays out the first 20 years of the Smartphone Wars
Symbian's David Wood bares all. Not for the faint hearted
Bonking with Apple has POUNDED mobe operators' wallets
... into submission. Weve squeals, ditches payment plans
This flashlight app requires: Your contacts list, identity, access to your camera...
Who us, dodgy? Vast majority of mobile apps fail privacy test
prev story

Whitepapers

Providing a secure and efficient Helpdesk
A single remote control platform for user support is be key to providing an efficient helpdesk. Retain full control over the way in which screen and keystroke data is transmitted.
WIN a very cool portable ZX Spectrum
Win a one-off portable Spectrum built by legendary hardware hacker Ben Heck
Saudi Petroleum chooses Tegile storage solution
A storage solution that addresses company growth and performance for business-critical applications of caseware archive and search along with other key operational systems.
Protecting users from Firesheep and other Sidejacking attacks with SSL
Discussing the vulnerabilities inherent in Wi-Fi networks, and how using TLS/SSL for your entire site will assure security.
Security for virtualized datacentres
Legacy security solutions are inefficient due to the architectural differences between physical and virtual environments.