Apple Smartphone Bus. Model: 92% of the Profits, <20% Market Share? How?

Interesting that between Apple (92%) and Samsung (15%) they take the entire profits in the smartphone industry.  The result is the continued demise of smartphone competitors like Microsoft, Amazon, and likely BlackBerry.  Its interesting that with all the talk about China and low cost smartphones the majority of the profits are still going to Apple.  Apple, with less than 20% of smartphone unit sales.  How do they do it?

My guess is Apple succeeds on a number of fronts:

• Early entrant and defined —  the smartphone market
• Created an eco-system —  that connect music, apps, computing, and the cloud
• Design over features — Samsung may add more features, but you can't find a better design (outside of HTC) for a smartphone
• Business Model — Product Sales vs. "Long-Tail" customer building

This success likely comes at the expense of component suppliers, ODMs and other value chain members.  They are being asked for continued cost reductions and manufacture of new models.   

Business Models: Smartphone sales or invest in the "Long-Tail" 

At issue also is the business model for Apple which gets the majority of its revenue and profits from selling smartphones.  Others like Microsoft and Xiaomi are hoping to make profits form paid app downloads, phone accessories and other add-ons.  I'm guessing similar to many internet companies who follow the "long-tail" model of getting millions of customers by virtually giving the product away and hoping they convert to a advertising or later profit model.  Lets see in the next few years how many of those companies just "giving away" product to build customer numbers survive.  Watch-out internet companies...

See:  WSJ - Apple Gets 92% of Smartphone Profit