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Breaking Down How Amazon Makes Money

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‘Tis the season for shopping.

For many of us, that means buying things online – and if you are like most internet denizens, you’ll be picking up at least one item this holiday season through the the world’s largest e-commerce giant, Amazon.

The company’s sales numbers are growing at a staggering pace. Last year, Amazon had $136 billion in sales, and the company is projected to finish at the $177 billion mark this year.

What are the exact sources of Amazon’s revenue, and how does it all break down?

How Amazon Makes Money

Today’s infographic comes to us from Sellbrite, and it dives into the company’s success, and how Amazon makes money:

Breaking Down How Amazon Makes Money

To the chagrin of many investors, Amazon has traditionally spent a lot to make a little.

In 2016, for example, the company brought in $136 billion in net sales, but it spent $131.8 billion on operating expenses. That gave the company an operating income of $4.2 billion.

However, that high-growth strategy seems to be paying off.

During the same period, e-commerce revenue jumped 25%, AWS revenue increased 55%, and net income skyrocketed 302%. The growth has continued through 2017 and it’s why Jeff Bezos is now the richest person in the world.

A Closer Look

Here’s how Amazon makes money, according to the company’s last annual report for 2016:

Revenue StreamNet Sales (2016)% of Total Revenue
Retail products$91.4B67.2%
Retail 3rd party sellers$23.0B16.9%
Amazon Web Services (AWS)$12.2B9.0%
Subscriptions (Amazon Prime, etc.)$6.4B4.7%
Other (ads, co-branded credit cards)$3.0B2.2%
Total Revenue$136.0B100.0%

Which areas of Amazon’s business are growing the fastest – and where is the company investing in the future?

Here are just a few directions in which the Jeff Bezos Empire is expanding:

Ads
In 2017, the size of Amazon’s advertising business (forecasted at $1.65 billion) has already surpassed those belonging to Twitter ($1.21 billion) and Snapchat ($642 million). Of course, Amazon is still a longshot from impacting the Google and Facebook ad oligopoly, but the two leaders would be wise to take the emerging threat seriously.

Why would Amazon ads work well? The company has a vast database of user info to allow for effective targeting, as well as high margins.

Prime Video
In 2017, Amazon is spending $4.5 billion on creating original content. It has fewer dollars allocated to content than Netflix, but it’s still more than double what HBO spends each year. By the way, Amazon Prime Video is now live in an impressive 200 countries.

International
With 65% of U.S. households having access to Amazon Prime subscriptions, a focus on international sales is the biggest lever that Amazon can pull for future growth. The company is eyeing obvious countries, but less obvious ones as well. In India for example, Amazon’s marketplace is the fastest-growing in the country.

B2B
Amazon is also leveraging its strong logistics platform to provide goods for small businesses, rather than just consumers.

Shipping and Logistics
Fulfillment by Amazon (FBA) is already a booming business that allows small businesses to tap into the scale of Amazon. Investing in shipping also betters the customer experience – a key objective for Amazon. However, it’s still possible that the company could take shipping and logistics a step further: domination in the $200 billion parcel shipping market would be a strategic and attainable prize.

With many other ways for the e-commerce giant to grow, it’ll be interesting to breakdown how Amazon makes money in 2018.

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Ranked: Largest Semiconductor Foundry Companies by Revenue

Most of the 10 largest semiconductor foundries in the world, are headquartered in just three Asian countries, accounting for 90% of the entire industry’s revenue.

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A cropped chart showing the largest semiconductor foundry companies by their percentage of global revenues in Q1 2023.

Ranked: Largest Semiconductor Foundry Companies by Revenue

They’re in our phones, cars, planes, and even fridges.

Semiconductor chips have become critical for the modern way of life, and the biggest semiconductor foundry companies rake in billions of dollars from widespread demand.

This chart shows the largest semiconductor foundry companies by their percentage of global revenues in Q1 2023, using data sourced from Trendforce.

ℹ️ We highlight data for companies that only operate foundries (fabrication plants) that manufacture chips for clients, also known as a “pure-play” foundries, as well as companies that design and manufacture their own chips, known as integrated device manufacturers. “Fabless” manufacturers that only design and don’t manufacture their own chips are not included.

Semiconductor Foundry Companies by Revenue

At the top of the list and dwarfing every other company by revenue share is TSMC which earned 60% (or nearly $17 billion) of the entire industry’s revenue in Q1 2023.

Founded in 1987, TSMC is a pure-play foundry that has become Taiwan’s largest company and manufactures products for a host of clients including Apple, NVIDIA, and AMD.

RankCompanyCountryRevenue
(Q1 2023, USD)
1TSMC🇹🇼 Taiwan$16,735M
2Samsung🇰🇷 South Korea$3,446M
3GlobalFoundries🇺🇸 US$1,841M
4UMC🇹🇼 Taiwan$1,784M
5SMIC🇨🇳 China$1,462M
6HuaHong Group🇨🇳 China$845M
7Tower Semiconductor🇮🇱 Israel$356M
8PSMC🇹🇼 Taiwan$332M
9VIS🇹🇼 Taiwan$269M
10DB Hitek🇰🇷 South Korea$234M
Other$556M
Global Total$27,860M

Note: Revenue based on the following conversion rates: USD 1 = WON 1,276; USD 1 = NTD 30.4.

Well behind TSMC in foundry revenues is integrated device manufacturer Samsung, the biggest company in South Korea, which made $3.4 billion (12.4% of the industry’s revenue) from its semiconductor manufacturing business.

GlobalFoundries from the U.S., UMC from Taiwan and SMIC from China round out the top five, with each taking home around 6% of industry’s revenue share in Q1 2023. The former spun out from AMD’s manufacturing arm when the company went fabless in 2009.

Industry concentration is apparent in semiconductors. For example, the top 10 semiconductor foundry companies account for 98% of the entire industry’s revenue. Furthermore, 90% of the market is dominated by companies in just three Asian countries: Taiwan, South Korea, and China.

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