Samsung Now Rules Apple!!

Posted in the China Forum


New York, NY

#1 Apr 29, 2013
Apple and Samsung Swap Places in Global Smartphone Race

Apple and Samsung have traded places in the global smartphone market, with the US innovator sliding into a distant second behind the Korean usurper both in sales and image for innovation.

One sign of Apple’s continuing slide relative to Samsung is its first profit decline in nearly a decade, from $11.6 bil. last year to $9.5 bil. this year. The reason for the decline is loss of Apple’s pricing power in the face of intensifying competition. As a result Apple’s gross margin fell from 47.4% last year to 37.5% this year.

Meanwhile Samsung saw Q1 profits surge 42% over last year to a record 7.2 trillion won ($6.5 bil.) from 5 trillion won ($4.53 bil.) in 2012. While its margin per phone remains only about 60% of Apple’s, Samsung nearly lapped Apple in Q1, shipping 68 million smartphones to Apple’s 37.4 million. Samsung’s profit surge is even more dramatic in light of the fact that it reflects a $600 mil. damages payment to Apple.

Apple’s share prices have plunged from a high of $705 last September to $398 on April 17 before rebounding to around $430 today. That plunge was due only partly to expectations that Apple’s smartphone margins will continue to slide. More importantly, Apple has nothing in its pipeline that’s likely to reverse the slide in the forseeable future. There’s talk of watches and glasses but none of these speculative products are far enough along to merit even a projected release date.

Meanwhile Samsung just released its Galaxy S4. Reviews have described it as a superphone that leaves the Apple iPhone 5 in the dust in terms of its array of features. In addition to an IR blaster that lets the S4 act as a remote for your TV and a sensor that pauses videos when your eyes move away from the screen, the S4 boasts a huge 5-inch screen that makes the iPhone’s 4-incher look grossly inadequate in side-by-side comparisons. Yet the S4 has been rated as being more hand-friendly and functional than the iPhone 5.

To make the picture darker for Apple, it has resisted possibly the only strategy that can help it reverse the slide — offering lower-priced models to take back market share from competitors like Samsung, LG and HTC. One reason may be that Apple is having trouble maintaining quality control over even its pricey limited lineup. Industry rumors suggest it may begin placing its own employees on the assembly lines of Foxconn, its Taiwanese contract manufacturer, in order to ensure the quality of its shipments. Apple’s slide is catching. Foxconn too recently reported a plunge in earnings for Q1 and attributed it to disappointing sales of the iPhone 5.

Samsung’s biggest advantage continues to be its vertical integration. Not only does it develop and design its smartphones, it also supplies most of the components that go into them, including the screen, processor and memory chips. That eliminates one of the potential pitfalls of trying to keep coming out with exciting innovations in an ever-shortening product cycle as the competition continues to heat up.

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