Why iPhone X is a cash cow for Apple

As per a report, iPhone X alone generated 35 per cent of the smartphone industry profit in the last quarter of 2017.

iPhone X has been in news since its unveiling back in September 2017. The "futuristic" device announced to celebrate the 10th anniversary of the first iPhone was met with much fanfare and as a result saw the smartphone maker's other two releases for the calendar year, the iPhone 8 and iPhone 8 Plus, being overshadowed by this flagship.

Initially, this move by Apple to put all its eggs in the iPhone X basket, looked to have backfired. According to a report by research firm Kantar Worldpanel, Apple lost a good chunk of share in eight major smartphone markets around the globe during the period August-October 2017 as it worked to get its stocks ready for the grand entry of the iPhone X in early November.

Even post its launch, there was chatter that the iPhone X was turning out to be a flop for the company. According to an Apple Insider report, trusted analyst Ming-Chi Kuo of KGI Securities had predicted that Apple was contemplating discontinuing the iPhone X because it wasn't selling enough of it in major markets like China.

For a device that came with the burden of reinvigorating the future of Apple, such reports came as extremely bad new. However, looks like the fears were unfounded, as fresh data suggests that the iPhone X has indeed turned out to be a cash cow for Apple.

iPhone X generates 35 per cent of total industry profits

As per the latest research from Counterpoint, the premium smartphone market did not see much growth towards the end of last year as global handset profits tumbled by around 1 per cent year-on-year (YoY) in Q4 2017. But despite this, Cupertino-based Apple, which had been penciled in for a difficult Q4 2017, managed to emerge victorious as it captured around 86 per cent of the total handset market profits in this quarter.

Much of this was fuelled by the success of the iPhone X which alone generated 35 per cent of the total smartphone industry profits. Highlighting just how big a success the device has turned out to be for Apple, the report further goes on to add that the iPhone X alone managed to generate around 21 per cent of total industry revenue too.

Strong sales of the iPhone X also saw the company improve its performance from the same period during last year. Apple's share of the market grew by 1 per cent (YoY) in the same quarter. But as research analyst, Karn Chauhan explains this feat is even more impressive because the iPhone X helped achieve this despite only being available for sale during the last two months of the quarter.

Better days ahead

But that's not all, Chauhan also believes that the share of iPhone X is likely to grow in the near future. "The share of iPhone X is likely to grow as it advances further into its life cycle. Additionally, the longer shelf life of all iPhones ensured that Apple still has eight out of top 10 smartphones, including its three-year-old models, generating the most profits compared to current competing smartphones from other OEMs," Chauhan informed.

He also pointed out to the longer shelf lives of iPhones as a possible reason for the growth in sales figures for the iPhone X. Apple which has eight out of top 10 smartphones, including its three-year-old models, currently generates the most profits compared to current competing smartphones from other OEMs.

Despite growth Android still trumped by Apple

Another interesting takeaway from the report is that the last quarter also proved to be fruitful for Android smartphone makers which not only increased their profits, but their revenues too.  As Counterpoint's associate director, Tarun Pathak, explains, "Chinese original equipment manufacturers (OEMs) cumulative profits crossed $1.3 billion during Q4 2017. This was driven by the increased mix of mid to high-end smartphones. In fact, the average selling price (ASP) of their flagship devices also increased YoY."

However, despite this growth, Apple, and its iPhone X, still trumped the majority of the Android offerings. As per the report, Apple during this particular quarter clocked five times more profit than the combined profits of 600 plus Android smartphone makers from across the globe.

This would come as good news for Apple which of late has been battling questions over its position as an undisputed leader of the smartphone market. Apple had been desperately looking for this expensive iPhone X gamble to turn out right and looks like that despite the hefty price tag and delivery delays, the iPhone X has managed to become a cash cow for the tech giant.