Bernstein Research analyst Toni Sacconaghi estimates Apple took home 32 percent of the profits generated by the smartphone market in the first half of this year, even though the iPhone accounted for only 8 percent of the industry's revenues. Apple is estimated to have an operating margin of 40 percent on its handset business, which is almost 6x the industry's average.
Quite an achievement considering that the iPhone is just two years old. How did Apple manage it? According to Sacconaghi, Apple succeeded by claiming a first-mover advantage in an expanding high-end market.
“With the iPhone and its Apps Store, Apple has established a formidable smartphone ecosystem, which history suggests is very difficult to overcome,” the analyst explains. “In fact, Apple has the potential to become a de-facto standard of sorts in the consumer smartphone market, much like it became in the portable media player market with iPods, due in large part to its first mover advantage and tight software and hardware integration.