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Koreans nabbed nearly all the Q1 profits – more even than Google

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Android may now be the bestselling smartphone OS in the world, as Google pointed out in its Wednesday morning I/O conference keynote, but a new report says most handset vendors aren't actually making much money off Android – with one notable exception.

According to a study by market research firm Strategy Analytics, the global smartphone industry brought in operating profits of $12.5bn in the first quarter of 2013, and 43 per cent of those – or $5.3bn – came from sales of Android phones.

But although there are more than a dozen handset makers shipping Android mobes today, most of them aren't getting much of a slice of that profit pie, the analysts say.

That Samsung led the pack shouldn't surprise anyone. What might be surprising, however, is just how much bigger its take was than those of its rivals. By Strategy Analytics' estimates, the South Korean firm raked in a staggering 94.7 per cent of all profits in the Android market during the first quarter.

Samsung's local rival LG brought in the second-largest share of the spoils – if you can really describe it as such. It pocketed just 2.5 per cent of the total profits.

Even more boggling is that all of the remaining Android phone vendors – including HTC, Huawei, Motorola, Sony, and ZTE among others – were left squabbling for the scraps, dividing a paltry 2.7 per cent share of the profits between them.

According to the report, those also-ran smartphone makers have a long way to go before they can hope to catch up to Samsung's success.

"An efficient supply chain, sleek products and crisp marketing have been among the main drivers of Samsung's impressive profitability," Strategy Analytics senior analyst Woody Oh said in a statement. "LG delivered a small profit during the quarter, but it currently lacks the volume scale needed to match Samsung's outsized profits."

In an email to El Reg, Neil Mawston, the firm's executive director, noted that it was also the other vendors' weaknesses, and not just Samsung's strengths, that contributed to the discrepancy.

"Weak product portfolios, small marketing budgets, unexciting sub-branding, limited distribution channels, inefficient component supply, and limited volume scale are among the major causes of most Android vendors' modest profitability," he wrote.

In fact, says Mawston, Samsung is now believed to generate both more revenue and more profits from Android than even Google does. That could prove to be a problem in future, he said, particularly if the Korean firm starts using its enormous market leverage to edge out its competitors.

"Samsung has strong market power and it may use this position to influence the future direction of the Android ecosystem," Mawston said. "For example, Samsung could request first or exclusive updates of new software from Android before rival hardware vendors."

To catch up, he said, the other vendors are going to have to step up their game in terms of product design and marketing, in order to compete against sleek products such as the Samsung Galaxy S4 – 6 million units of which are already thought to have shipped since it launched on April 26.

But more importantly, he said, other vendors need to improve their supply chains and expand their distribution channels into more countries. As long as the Android market remains fractured – with LG selling well in the US but not in China, for example, while Lenovo is big in China but almost nonexistent in the US – Samsung will have a clear advantage.

"Samsung is the only truly globalized Android smartphone player today," Mawston told El Reg. ®

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