Apple puts the big hurt on Samsung

2015 will be a challenging year for the Korean phone maker, but there are steps Samsung can take to reverse its declining market share

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To that point, Apple took several years before increasing the size of its iPhones, finally deciding on a 4.7-in. display size in the iPhone 6 and the 5.5-in. screen of the iPhone 6 Plus. Apple saw the larger-sized smartphone market trend proven repeatedly, then responded, and has reaped the benefits.

Samsung had been making larger smartphones and so-called phablets for years before Apple, especially with the Galaxy Note line. But at the same time, Samsung introduced each year what turned out to be an array of unpopular technologies, especially in its custom user interface and services, to which many Android customers have balked.

"To regain momentum, Samsung needs to have something different and appealing to the consumer around the corner," Reith said. "Possibly it's a rebranding of some sort, rather than another device with 15 different unusable technologies. It's going to be a challenging road ahead for them."

As part of buffing up its smartphone brand, Gold said Samsung has to establish a more "comprehensive user experience that creates some level of loyalty and lock-in. They haven't been able to do that and are unlikely to in the short run. They really don't have any end-user ecosystem to speak of."

nike hints apples wearable plans go beyond apple watch Apple

The Apple Watch.

By contrast, Apple has a "tremendous" ecosystem, Gold said, which translates into "brand lock-in and loyalty." Apple offers the "complete experience" with quality devices, matched with services like iTunes and an enormous App Store.

"People are basically buying a device from Samsung and not the complete experience that Apple offers," Gold said. As a result, Samsung loses out if a better device from another vendor comes along, meaning a Galaxy S5 customer might easily jump to an HTC One, or another phone.

The Apple ecosystem comes closer to what Google does with all Android services and smartphones, but Samsung can't take full advantage of the Android ecosystem because it competes with other Android smartphone vendors, Gold said.

Smartwatches and the Apple Watch

As if Samsung didn't have enough on its plate in competing with the iPhone, Apple is expected to launch its Apple Watch in April.

Samsung ought to be prepared for competition from the Apple Watch, having introduced six smartwatch models and smart fitness bands in just over a year. The latest smartwatch, introduced last August, was the Gear S, which is powered by the Tizen operating system, not the Android Wear OS that powered Samsung's previous Galaxy Gear S smartwatch.

The newer Gear S has a 2-in., curved Super AMOLED display with 360 x 480 resolution, but no camera as in earlier models. However, it is Samsung's first smartwatch with 3G cellular connectivity, allowing calls directly from the timepiece.

One big difference between the Gear S and the Apple Watch is that Apple will incorporate NFC (near-field communications) in its timepiece, which allows quick payments with Apple Pay. Kevin Harwood, a consultant for Mutual Mobile, which designs mobile products, said recently he expects the NFC in the Apple Watch to be a major selling point, and that Samsung might try to duplicate it.

The Tizen difference

With Tizen in its Gear S, Samsung is showing that it wants to find alternatives to Android. Samsung also has said it will use Tizen in its future smart TVs and recently launched the Samsung Z1 smartphone on Tizen in India.

Gold said Tizen, a lightweight operating system, makes sense from an embedded technology standpoint in TVs and smartwatches, but less sense for higher-end devices like smartphones. In the smaller devices, Tizen is more adaptable than Android and can run more efficiently with devices that have fewer or less sophisticated hardware components, he said.

Samsung has a deep knowledge of the Tizen OS and may be able to improve the user experience and performance while also using fewer hardware resources or even a smaller processor, Gold said.

But the biggest commercial benefit of the Tizen is that it gives Samsung an alternative to Android, and makes Samsung less dependent on Google. "Tizen gives Samsung differentiation, while Google will enforce much more uniformity across various manufacturers that want to use Android Wear for watches," Gold said.

Whether the Tizen difference resonates with smartwatch buyers is unclear. If Samsung can produce a smartwatch with superior battery life and at low cost with Tizen, it could be important. So far, battery life in smartwatches is limited, sometimes requiring daily recharging, depending on the model. As for cost, early-adopter smartwatch buyers have paid $300 or more, atop of the cost of a smartphone that gets paired via Bluetooth with the smartwatch.

Apple Watch legitimizes Samsung's smartwatches

The overall market for smartwatches is expected to be a small fraction of the smartphone market, but that doesn't mean it won't be an enormously important market to both Samsung and Apple.

Both companies are expected to put major marketing dollars behind their smartwatches because of the devices' connections to a wide variety of fitness and other applications, as well as to more expensive smartphones. They will be seen as the must-have fashion and gadget item for many tech-savvy buyers, and will offer either company a chance to create a greater brand connection.

On that score, Apple would seem to be the clear winner because an Apple Watch could delight its loyal Apple base eager for new technology. Some analysts have predicted as many as 30 million Apple Watches will be sold in the first year, about 75% of all smartwatch sales for the same period. About 10 million smartwatches sold in 2014, Gartner said, with Samsung taking the largest share.

Apple's big splash with its Apple Watch will undoubtedly legitimize the entire smartwatch category. Apple has said it will have 34 different models, starting at $349, which matches the initial price of the Gear S.

While Samsung might be envious of the enthusiasm for the Apple Watch, Apple's entry may help Samsung — for a time.

"Samsung's smartwatches are going to benefit from the Apple marketing machine," Burden said. "Apple has a way of legitimizing markets in the eyes of consumers, and Apple will push a rising tide that lifts all ships."

Samsung might see Apple as its biggest smartwatch competitor, but the Apple Watch marketing storm will probably push traditional watch makers, such as Tag Heuer and Swatch, to enter the market. "They'll see that the smartwatch market is not likely to go away and these vendors will want to have a stake," Burden said.

"The competition Samsung faces will only become more fierce, but Samsung should benefit from Apple's Watch launch in the short run," Burden added.

That could be small comfort, given all the disappointing news Samsung has faced on the smartphone front in recent months.

Copyright © 2015 IDG Communications, Inc.

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