Farhad Manjoo, writing for the New York Times:

In many fundamental ways, the iPhone breaks the rules of business, especially the rules of the tech business. Those rules have more or less always held that hardware devices keep getting cheaper and less profitable over time. That happens because hardware is easy to commoditize; what seems magical today is widely copied and becomes commonplace tomorrow. It happened in personal computers; it happened in servers; it happened in cameras, music players, and — despite Apple’s best efforts — it may be happening in tablets.

All this is true.

Instead of killing Apple, commoditization caused something stranger — it hobbled Apple’s main competitor in the smartphone business: Samsung, which until last year was gaining a creeping share of the profits in the smartphone business. At its peak in mid-2013, Samsung was making close to half of every dollar in the smartphone business, according to the research firm Canaccord. (Apple was making the other half.)

But the rise of low-end, pretty great Android phones made by Chinese upstarts like Xiaomi — and the surging popularity of Apple’s large-screen iPhones — put Samsung in a bind. In July, Samsung reported its seventh straight quarter of declining profits. Canaccord’s latest estimate shows Samsung making 15 percent of profits in smartphones, with Apple making 92 percent. (The numbers add up to more than 100 because everyone else in the smartphone industry loses money, so their share of the profits is negative.)

You can expect Apple’s proportion to grow. As analysts at Credit Suisse explained in a note last week, only about 30 percent of the world’s 400 million iPhone users have upgraded to the large-screen models Apple introduced last year. Apple is bound to reap more money as the majority of its users inevitably jump to big phones over the next few years. In other words, for the foreseeable future, Apple stands virtually alone: It may be the only company making any money selling phones.

Cream rises to the top. Continued innovation (and a strong, well-protected ecosystem) protects Apple from commoditization.