Apple Inc. & Samsung is the world largest & second largest tech companies respectively. Both these companies have huge followers & loyal customers. The interesting part is that both these companies are at war & it is a zero sum game, as the winner will lead to the loser. This war doesn’t know any limits & is being fought at every level – Courts, Share market, marketing and at every other possible front.
This Year & Last Year
Apple is planning to launch new smart watch along with iPhone 8. While the iPhone 8 is said to be feature packed, the smart watch will work on it’s on cellular networks & will be partly independent of phone. Though new features of iPhone products create sensation each year, this time it is expected to be bigger. Another side, Samsung had to pull back Galaxy 7 due to faulty designs which dented its image. Though, the S7 & S7 edge was quite successful. This year Samsung will also launch both of its premium products galaxy 8 & S 8. This year will be crucial for both players & can decide the outcome of this decade old war.
Apple market share reached a record high on 08 Aug 2017 at 156$, despite low sales. This is mainly because of new launches planned in coming weeks. Last year Apple saw $217 billion in sales, $45 billion in profit, $331 billion in assets and a market cap of $752 billion.
Samsung took second place, with $174 billion in sales, $19 billion in profit, $217 billion in assets and a market cap of $254 billion. As the visible gap is quite wide, the concern for Samsung here is that Samsung communications revenue is slipping continuously.
It’s the premium Phones which Matters
The difference between Apple & Samsung communications is that Apple caters only premium phone market where as Samsung caters the full range. This makes the Samsung a clear cut winner sales point of view. But if we look at the revenue side – Samsung communications revenue is half of that of Apple & is continuously slipping. From a peak of $128 Billion in 2013, Samsung revenue stands at $81 billion in 2016. Whereas, Apple’s revenue rose from $126 Billion in 2013 to $156 billion in 2016. The peak was in 2015 at $177 Billion.
Despite the premium phone sale is small compared to overall feature phone market, it is the premium phone market which matters the most. The catch here is the profit on the premium phones. Apple’s cost for a phone is around $200 but sells them around $600 thus making a profit of around $400 per phone. In 2015, the premium phone market share of Apple was at around 50% & that of Samsung at 25%. By the end of 2016, this difference came to 76% & 17% respectively. Therefore, even after the launch of 10 times more phone than Apple, Samsung revenue is half to that of apple.
The premium service offered by Apple to its customer is way ahead of Samsung. The difference is also because of products range. Every Samsung customer enters the same service center no matter, whether they have a $150 phone or a $500 phone. This means that even if a consumer buys a premium phone from Samsung, the chances of a premium service is rare.
Though, it’s surprising but true that there is a separate page on Wikipedia for the legal feud between the two tech giants. This only tells the level of heat in this war. The first claim came of patent infringement came from apple in 2010. Though, Apple didn’t sue Samsung immediately. This was because of strategic partnership, Apple had invested billions in Samsung for product development. First such legal case started in 2012 & since then the companies are fighting legal cases in more than 7 countries and for many different patent infringements. Recently US court has reopened the case in which Samsung is accused of copying the design of iPhone for its Galaxy S series phones.
With millions spent in this legal war what at stake is not the penalty but the tech leadership and future prospects of design patents. The outcome of this legal war will affect the whole of the tech industry. This is why there are lot others who are directly or indirectly involved in this legal war. More than a hundred designers and educators support Apple, whereas many Silicon Valley companies have support for Samsung, including Google, Facebook and many other big names including Intellectual property professors from Ivy League colleges.
Who is a Winner?
A premium phone has to be a premium in all sense – features, technology, service, security and anything else which matters to a premium customer. From this perspective, so far Apple is a winner. Samsung has only the tag of largest Mobile manufacturers with it.
But as said earlier, it’s the revenue which matters & Samsung is losing on that front. This year will be a crucial year for Samsung.