Apple has lost its status as the world's most profitable maker of mobile phones, with strong demand for Samsung's Galaxy handsets pushing the South Korean multinational into the financial lead for the first time.
The California company made an estimated $3.2bn (£2.1bn) profit from iPhone sales in the second quarter of the year, according to the research firm Strategy Analytics, a marked drop from $4.6bn a year ago and less than Samsung's estimated $5.2bn haul from both its basic models and smartphones in the same period.
While the high-priced iPhone was the engine that propelled Apple to become the world's most valuable company, its customers are no longer bent on owning the latest model.
Healthy demand for the three-year-old iPhone 4, which is cheaper than the latest iPhone 5, has reduced the average selling price of its blockbuster device.
As smartphone ownership trickles down the income brackets in both western and emerging markets, Apple's margins have taken a hit. The company's latest financial results showed that the average selling price of an iPhone has fallen to $581, down from $613 in the first quarter.
The same trend has squeezed Samsung's handset profits, which are down from an estimated $5.6bn in the second quarter of 2012, but the strong performance of its flagship Galaxy S4 has, at least for now, put an end to Apple's four-year reign as the world's most profitable phone-maker.
"With strong volumes, high wholesale prices and tight cost controls, Samsung has finally succeeded in becoming the handset industry's largest and most profitable vendor," said Neil Mawston at Strategy Analytics.
"Apple is now under intense pressure to launch more iPhone models at cheaper price-points or with larger screens to fend off the surging competition and recapture lost profits in the second half of 2013."
Rather than producing new budget phones, Apple has relied on sales of its older models to reach more cost-conscious shoppers. But a change of strategy is rumoured: the chief executive, Tim Cook, is said to be considering a brand-new budget iPhone as part of a revamp of the company's product range planned for this autumn.
Across all brands around the world, the average price of a smartphone has plunged to $375 from $450 since the beginning of 2012, the research firm IDC estimates. With mobile phone networks cutting subsidies on handsets in the depressed economies of southern Europe, cheaper models by companies including LG and Sony are proving popular.
In China's fast-expanding smartphone market, homegrown brands including ZTE and Huawei are selling well.
The trend has helped Samsung widen its lead over Apple in the overall volume of handsets sold.
Apple's global smartphone market share has fallen from 17% to 14%, its lowest level for three years, while Samsung's edged up to 33%, Strategy Analytics' research shows. Samsung sold 76m smartphones in the quarter to June, more than twice Apple's 31m iPhones, and up from 49m in the same period a year ago. LG, ZTE and Huawei have all roughly doubled their worldwide shipments by unit.
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