The iPhone X will make Samsung a lot of money but not at the Galaxy S8’s expense
Citing estimates by Counterpoint Research, The Wall Street Journal reports that Samsung will supply $110 in parts to the iPhone X. The company will be supplying the handset’s OLED display, batteries, chips and capacitors through its various affiliates. The iPhone X is expected to make $14.3 billion for Samsung in parts delivery only but it’s not going to be at the expense of the Galaxy S8 as some have been suggesting.
Making Money Hand Over Fist
Don’t be misled by the numbers. While some news outlets are making it seem like the Galaxy S8 won’t be making any real money for Samsung, that’s really not going to be the case.
First, it’s important to understand how Samsung is going to make this $110 from the iPhone X. The money will be raked in by the company’s component affiliates which the conglomerate will add up as its total revenues at the end of the fiscal year.
The numbers don’t account for the profit margin that Samsung Electronics has on the Galaxy S8. Samsung Electronics is the division that runs the mobile business. It sources parts for the handset from Samsung affiliates as well. According to these estimates, Samsung affiliates supply $202 in parts to Samsung Electronics for the Galaxy S8.
The other major assumption is that the iPhone X is going to sell 130 million units through the summer of 2019. It’s unclear whether that takes into account the significant supply constraints that are expected well into 2018.
Counterpoint expects 50 million Galaxy S8 sales through the summer of 2019 but by then, Samsung would have already released two new iterations of its Galaxy S flagship. Fewer people will be buying the Galaxy S8 in 2019 for obvious reasons.
Samsung may only generate $10.1 billion in parts from the Galaxy S8 by then compared to $14.3 billion from the iPhone X but its new models will already be bringing in more money.
Samsung is a unique position to make money hand over first. It’s the only manufacturer that can supply the OLED displays, NAND flash and DRAM chips in quantities that Apple requires.
Moreover, it’s also rolling out Android flagships that are a class apart. Samsung’s own handsets will earn it a lot of money as well but it certainly won’t mind earning billions of dollars from its biggest rival.Join the Discussion