Smartphone wars: 'We're only dancing' as Samsung v Apple share the floor

Samsung has beaten Apple [AAPL] in the smartphone market -- this at least is the headline du jour, but are we watching the fall from grace of Apple, or is this Samsung's last dance before its own demise? Put it this way: don't sell your AAPL stock just yet. Here's why:

screen_shot_2013-07-26_at_15.35.02.png

[ABOVE: Strategy Analytics says how it sees it.]

Samsung's victory

In a series of early morning press releases, Strategy Analytics struck the division bell on the Apple versus Samsung story, declaring the Korean firm a temporary victor in the smartphone war.

"According to the latest research from Strategy Analytics, Samsung became the world’s most profitable handset vendor in Q2 2013. Apple slipped into second position, as margins have been hit by lackluster iPhone 5 volumes and tougher competition in China," the analysts said within one release.

The big take away from the analysts is that Apple has not kept pace with industry growth within the smartphone sector:

  • Samsung's marketshare grew 56 percent annually;
  • Apple's climbed 20 percent;
  • The industry grew 47 percent from 156.5 million units in Q2 2012 to 229.6 million in Q2 2013 -- the largest number of smartphones ever shipped in a single quarter.

Apple did not match trend.

Apple's fall

In other words, the wheels appear to have fallen off the iPhone 5. Consumers still appear to be gravitating to the still available 4-versions, presumably driven by cost of purchase and ownership. Otherwise they are choosing one of the pantheon of Samsung's available (and in some markets heavily subsidized) devices.

The suggestion that price is a big concern for consumers in the middle of a recession government economists continue to stretch facts to disguise isn't so outlandish. ZTE and Huawei delivered good results with their relatively low cost alternatives, according to the analysts.

What's open to question is if Apple can regain the initiative.

We have an inkling of what it plans to do to regain market momentum:

What we don't know is if these new products will capture consumer imagination with the same success its previous major releases have seemed to.

budget-iphone-bondi-blue-2.jpg

[ABOVE: Might this be the iPhone mini? A product idea rendering from Nickolay Lamm and MyVoucherCodes.co.uk.]

The playbook

We know Apple has multiple advantages in its attempt. Its retail stores act as ambassadors for a brand that's already seen as the world's finest (Harris Interactive). It has a reputation for excellence and -- recent patents show -- has been working hard to harness new processes and technologies. Not only this, but existing users express high degrees of satisfaction with their Apple devices.

Is this enough?

We don't know.

We do know that the problems faced in Maps dented Apple and the iPhone 5's reputation in consumer markets. This suggests Apple needs to ensure every aspect of its new devices are thoroughly tested before release -- it must avoid such reputational tarnish if it seriously intends regaining leadership.

Should the company achieve these aims, it will then be facing Samsung across a wider field of battle. The premium iPhone will compete at the top end of the market, the lower end model will compete in the mid-range. iWatch may (possibly, depending on whether this is a companion or a stand-alone device) compete at the lower end of the market.

This will give Apple a more equal battle. Consumers will gravitate to the model that most suits their individual preference at a price they can afford.

There's a lot being said concerning some decline in Apple's fortunes in the Chinese market. Apple saw revenue in the territory fall, with Tim Cook admitting to being uncertain why this had taken place.

I'd argue that Chinese consumers are waiting on two things:

Come dancing

We are watching a dance.

Apple's big sales take place in the quarter or two subsequent to a new product release. Samsung offers more products. This gives the latter company an advantage in that its devices address a broader field of consumers, but they are also refreshed in different cycles. This helps the firm build the perception of always having something new to offer. Apple then suffers because its devices are updated only once or perhaps twice each year.

In this dance, Apple needs to find a way to match the breadth and depth of Samsung. In doing so, it must avoid something Samsung doesn't have to worry about: it must avoid allowing its devices to become commoditized. By this I mean that it isn't enough to offer a range of devices, it must also ensure that each system within that range has its own unique identity, advantages and selling points. It must maintain its status quo as being a premium brand.

This will be difficult to achieve. The biggest challenge for those in Cupertino is the fundamental difference in philosphies between the firms. Samsung shifts boxes. Apple (at its best) sells dreams.

Summing up, it remains too early to say Samsung has won the smartphone war. Given the reputation of the firm its up against this new position at the top of the tree indicates an intensification of the conflict. I suspect these two firms will dance together for a while.

A lot will depend on how effectively Apple has read consumer demand, and, of course (to quote Steve Jobs) if its next-gen iPhones sail to where the puck is going, or simply match where it has been.

There's a lot of risk in this analysis. And a great deal of opportunity. I look forward to when the new iDevices begin to fall this Fall, when I'll finally call it for what it is. Until then, I'm unwilling to join the exaggerated chorus line in its declaration of Apple's demise.

Got a story? Drop me a line via Twitter or in comments below and let me know. I'd like it if you chose to follow me on Twitter so I can let you know when these items are published here first on Computerworld.

From CIO: 8 Free Online Courses to Grow Your Tech Skills
Join the discussion
Be the first to comment on this article. Our Commenting Policies