Why Apple and Samsung could be losing billions of dollars a year

Follow The Smartphone Money Trail Find out where the money is going and where it's getting lost Smartphones may be smart, but the processes to get them shipped and sold aren't making the grade. As customers receive their first bill from that holiday smartphone purchase, they aren't the only ones watching their money slip away. Deloitte estimates that 2013 will mark the first year the industry as a whole will ship out From the components inside the phone through the journey to the store shelves, there's a complex chain of cash changing hands and even slipping through the cracks. Here's where the money goes and how it's lost along the way. 1 billion smartphones across the world. IDC predicts that smart device shipments are on track to top 2.1 billion 2016, units in with a market value of $796.7 billion When It's Sold worldwide. Along the route from the manufacturer to the consumer, there are all kinds of deals, incentives, rebates, chargebacks, marketing dollars, and other fees that are passed between the various players who touch the smartphone - all managed by contracts. Contracts Here's what the convoluted distribution chain looks like and where revenue is lost in transit. Contracts IACCM Contracts estimates that 000 companies can improve revenue by 9 percent through more efficient contracting processes. Contracts You Retailer What is revenue leakage? Earned revenue can be lost through inefficient processes along the chain before it can be turned into hard cash. Causes include mismanagement of contracts, pricing agreements, and rebates which can lead to both overpayment and underpayment of incentive agreements, putting revenue at risk. Distributor Manufacturer When It's Built Think that's complicated? There's even more to the story. The smartphone itself is a complex web of hardware from multiple manufacturers around the world, and each component represents a winding path of patent, cross-licensing, and royalty deals. And there's a mountain of revenue leakage here, too, as money changes hands between manufacturers, license owners, and patent holders. NAND flash: Combo-chip (WiFi/BT/FM): PMIC: DRAM: Samsung. Toshiba, Qualcomm, SanDisk, Micron Samsung. Hyrix, Elpida, Micron Broadcom, Texas Instruments, Texas Instruments, ST Ericsson, Maxim, Marvell GPS: Dialog Semi Texas Instruments, CSR, Broadcom, Battery: Simplo, u-blox Dynapack RF and FEM: Skyworks, Gyroscope/Accelerometer: STMicroelectronics, RF Micro Devices, InvenSense, Analog Devices TriQuint, Avago Touch Controller: Atmel, Broadcom, Cypress, Synaptica, Texas Instruments HDI PCB: Ibiden, Unimicron, AT&S, SEMCO Applications Processor: Qualcomm, Baseband: Texas Instruments, Qualcomm, MediaTek, Samsung, Nvidia Intel, ST Ericsson, Broadcom, Marvell Speaker: Touch Panel: AAC Technologies Nissha Printing. TPK, Young Fast, Holdings, NXP Power Amplifier: Wintek Display: Skyworks, TriQuint, Avago, Anadigics, Screen: Image sensor: Samsung. Corning Japan Display, LG Display, Sharp, Omnivision, Samsung. RF Micro Devices Aptina, Sony, Toshiba Chimei, AUO So what would this mean for the top smartphone manufacturers? 1-2% According to Gartner, on average 1-2 percent of gross revenue could be lost to inefficient revenue processes. 9:41 AM Apple Samsung In the case of Samsung, which reported quarterly revenue (Q4 2012) of With quarterly revenues of $54.5 billion (fiscal 2013 first quarter), Apple could be exposed to as much as $52 billion,* if not properly managed, it could be leaking as much as $1,090,000,000.00 in lost quarterly revenue if not properly managed. $1,040,000,000.00 of revenue per quarter. How is this all managed? Believe it or not, 64 percent of companies in the U.S. use spreadsheets or other manual solutions to perform finance functions. PwC estimates that spreadsheets with more than 200 lines have about 100 percent probability of an error. 3 Smart phones. Not-so-smart accounting! revitas Find out more about revenue leakage and the art of Enterprise Revenue Dynamics at www.revitasinc.com/smartaccounting. contracts · pricing · compliance *Samsungs Q4 2012 revenue converted to dollars on January 25, 2013. http://www.digitaltrends.com/mobile/2013-may-mark-the-first-year-1-billion-smartphones-are-shipped-worldwide/ http://www.businesswire.com/news/home/20121210005216/en/Worldwide-Smart-Connected-Device-Market-Led-Samsung http://seekingalpha.com/article/657891-component-makers-stand-to-profit-from-smartphone-growth http://www.engadget.com/2012/03/02/apple-name-drops-corning-as-iphone-glass-manufacturer-we-feign/ IACCM. "ROI." March 2012. Gartner. "Emerging Technology Analysis: Economy Fueling Wholesale Distributors' Interest in Chargeback Management." November 4, 2010. http://www.apple.com/pr/library/2013/01/23Apple-Reports-Record-Results.html http://www.samsung.com/us/aboutsamsung/news/newslrRead.do?news_ctgry-irnewsrelease&news_seq-20358. http://www.cfoworld.com/accounting/34940/even-if-spreadsheet-fading-its-still-excel-world PwC. "The Use of Spreadsheets: Considerations for Section 404 of the Sarbanes-Oxley Act." July 2004.