An interesting look at the different challenges faced by Apple and Samsung in the smartphone market by Ben Thompson at Stratechery.com;
Samsung is being challenged by lower-cost competitors; the company’s average price per phone fell by $30 last year, and its share of >$400 phones slipped from 40 percent to 21 percent. This kept up Samsung’s volume – they now account for one in three smartphone sales – but the result was their first profit decline in nine quarters.
Apple had the exact opposite problem: the iPhone’s average selling price jumped from $577 to $636 quarter-over-quarter, and was only down $6 year-over year. Apple also increased its share of the >$400 market from 35 percent to 65 percent. Growth, though, was meager: a mere 7%, despite the addition of NTT DoCoMo and a much earlier China launch for the iPhones 5S and 5C as compared to the iPhone 5. According to Tim Cook, this was compounded by stricter upgrade policies amongst North American carriers.
He makes the point that with Samsung's Android devices, there is no meaningful software differentiation — iPhone competes with 'everything else', but only playing at the high end of the market. Samsung are competing with 'everything else' across the spectrum — but running the exact same Android OS (and therefore applications and services.)
It brings to mind something I mentioned in a recent post;
A recent episode of the Cubed podcast talks about Microsoft's leadership position changing over time – Ben Evans talks about the 'old' PC market, where a dozen or so PC makers ran low margin businesses, outsourcing their industries' innovation to Intel and Microsoft.
In the PC world, the actual experience on the cheapest vs the most expensive laptop in the shop is not massively different — the fact that a Windows user knows how to use any Windows computer is one of its strengths. But from the point of view of a hardware manufacturer, the difficulty in differentiating one product/brand from another is a significant challenge.
With the growth of Android, the comparison between Android vs iOS and Windows vs Mac is drawn quite regularly (where Microsoft dominated the market, Apple were relegated to a niche part of the market and almost driven out of business), leading to the forecast that history will repeat itself.1
Its an interesting twist that for Samsung — probably Apple's strongest competitor in the Smartphone market — the analogy probably isn't a welcome one.
The fact that Apple came out of it as the most profitable computer company in the world is usually left out of the comparison, as it doesn't really fit the narrative. ↩