Samsung May Have Edged Out Apple

Samsung’s first quarter earnings suggest that it has reached a significant milestone: It could be the world’s largest mobile phone manufacturer, topping Apple in market reach.

In this case, “suggest” is the operative word.

“As you know, Samsung doesn’t give their cellphone shipment numbers,” Azita Arvani of the Arvani Group told the E-Commerce Times, “and analysts have differing opinions on how many Samsung smartphones were actually shipped.”

Apple is still be the top smartphone vendor in the global market, according to some analysts, while others proclaim that Samsung has overtaken it.

In short, it is not clear that Samsung has become the No. 1 smartphone vendor, Arvani said, “but it doesn’t really matter much, as clearly Apple and Samsung take the top two spots.”

Nokia, once the dominant provider in both standard phones and smartphones, has just as clearly lost its claim to the top perch.

Stellar Earnings

A look at Samsung’s earnings illustrates the company’s growth trajectory. It posted a record US$5.15 billion quarterly profit, bolstered by a 22 percent increase in sales, compared with the same period last year.

Meanwhile, a third iteration of the Galaxy S is coming out this week, which should solidify — and possibly improve — Samsung’s position.

Product Differentiation

One reason for Samsung’s ascendency has been its savvy product development strategy, Arvani said.

“Samsung offers several models of smartphones and stretches some of the iPhone features just enough to make a differentiation for its smartphones. So, on the high end, the screens are a bit bigger, and they already support 4G/LTE on some models.”

Apple, on the other hand, is more reliant on its integrated and user-friendly smartphones with unique features such as Siri, she said. Also, its brand equity is much higher.

The bottom line is that neither can become too complacent, Arvani said, as the other one is breathing down its neck.

Focus on Competition

Samsung also gets kudos for its focus on the competition, Charles King, principal of Pund-IT, told the E-Commerce Times.

“Samsung has systematically gone after any number of competitors and taken them out,” he said. “It seems to be one of the few vendors that actually has a working strategy, in which they targeted Apple and RIM.”

When Apple tried to hit back, usually via patent litigation, Samsung swung back immediately, King added.

Also, Samsung has been lucky in that it has been able to benefit from competitors’ missteps — excluding Apple, he noted. RIM’s faltering market share and HP’s mismanaged acquisition of Palm were boons for both Samsung and Apple.

Android: Help or Hindrance?

Another factor that has clearly helped Samsung is the growing popularity of Android, King continued.

“Samsung hitched itself to Android, recognizing almost immediately the value it could provide,” he said.

Samsung’s reliance on Android, though, could prove to be a dual-edged sword.

“Samsung hitched its wagon to Android and has designed and delivered attractive devices and those consumers looking for non-Apple phones have gravitated towards Samsung,” N. Venkat Venkatraman, a business professor at Boston University, told the E-Commerce Times.

However, there are uncertainties on the horizon that could impact Samsung, he added.

“What could Google do with Motorola? Venkatraman wondered. “Will Motorola get preferential treatment or will it be hands-off even if it stays as part of Google? Should Samsung even entertain Windows Phone as an option or stay true to Android?”

A company that is as big as Samsung needs to go beyond being seen as a device manufacturer that is dependent on someone else’s software, he concluded.

“That is where Sony failed,” said Venkatraman. “I think Samsung should build its software ecosystem for the long term, while in the near term working with Google and Microsoft, because it has the power and scale to design and deliver devices for both.”

The Content Challenge

Another challenge looming for Samsung is content integration for its devices, with a cloud storage component, according to Arvani.

“They are certainly trying, but we’ll see how successful they will become,” she said.

Samsung did not respond to our request to comment for this story.