As we look forward to the release of the Galaxy S5 in the next few months, and our opportunity to feast our eyes on it for the first time later this month, now is a good time to assess a related issue. In technology terms, 2014 can really be viewed as a battleground between Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) and Apple Inc. (NASDAQ:AAPL) with the Korean manufacturer very aggressively signalling its intent by stating that it believes that it will usurp the world’s number one brand in the smartphone market by the end of the year. Apple will naturally have other plans entirely; but who do we expect to come out on top?
While both the Korean firm and the company founded by Steve Jobs are keen to emphasize the global nature of their business, and emphasize sales figures which reflect their growing market position, in reality the worldwide smartphone market is rather more nuanced than that. Apple Inc. (NASDAQ:AAPL) owns the North American market and is equally predominant in Europe. At this point in time, Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) is yet to be considered as prestigious within these territories, and it’s incredibly difficult to see this impression changing in the short to medium-term.
Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930)’s market share globally has stood up incredibly well against the iPhone given some of the frenzied scenes that we’ve witnessed when the latest Apple Inc. (NASDAQ:AAPL) handset is released. But there is no doubt that the iPhone rules North America. Incredible, nearly 45 percent of adults aged over 18 in the United States own an iPhone. This is a quite phenomenal market penetration, which can only be matched by mass consumer items such as cheeseburgers and soft drinks. You just don’t get technology in these incredibly competitive times being owned by 45 percent of the adult population. It simply doesn’t happen.
Nonetheless, Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) has established itself as a credible rival to Apple Inc. (NASDAQ:AAPL). If the maker of the iPhone is unquestionably the Muhammad Ali of the smartphone market, Samsung must at least be George Foreman. While Apple’s position as the undisputed heavyweight champion is not likely to be under threat any time soon, Samsung has nevertheless established itself in clear second position, selling just over half the number of smartphones that Apple has shifted in the US.
While this might sound rather underwhelming, as with all statistics context is important. Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) may be a significant distance behind Apple Inc. (NASDAQ:AAPL), but it has motored away from Motorola, selling over there times the number of handsets in the United States. In fact, Samsung sells more units of the Galaxy in the US than the next three manufacturers – Motorola, LG and HTC – combined.
Consequently, Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) will be partly basing its prognostication that it can bite into Apple Inc. (NASDAQ:AAPL)’s market lead on the premise that it will increase its sales in the US on the back of the increasing popularity of the Galaxy. While Americans may greatly identify with the Apple brand, it is also an extremely demanding consumer market, and if Samsung deliver the sort of quality device that the Galaxy S5 is looking to be then they may achieve their aim here.
Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) already rules the roost in East Asia, with Asian consumers not quite so impressed by the Apple branding as their North American counterparts. Apple Inc. (NASDAQ:AAPL)’s strategy for 2014 will undoubtedly encompass breaking into the East Asian market more decisively, but with Samsung offering greater spec at a lower price, and having local heritage, Apple will have their work cut out.
What is also intriguing about Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) and Apple Inc. (NASDAQ:AAPL) is that loyalty has become one of the most valued commodities in the market. Apple greatly rely on having the most exalted name in the smartphone market, and this is critical in a sector in which fashion counts for a great deal. While Samsung has been all about growth and attempting to penetrate new markets, figures recently reported on by Forbes indicate that Apple has more chance of snatching buyers away from Samsung than vice-versa.
Brand loyalty a key factor for Apple and Samsung
While 81.4 percent of current Apple owners intend to buy from the company again when they make their next smartphone purchase, the brand loyalty related to Samsung appears to be less decisive. Only 71.3 percent of Samsung consumers intend to stick with the Korean manufacturer. Of course, Apple Inc. (NASDAQ:AAPL) has more to lose, particularly in the United States, as they have more customers. But if Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) are to achieve their aims then they’ll need to snatch customers from Apple, and these figures suggest that this will be no easy task.
However, the difference in price between the company’s products means that, according to Forbes, the nearly 20 percent of Apple users who aren’t considering another Apple purchase represents a $160 to $630 million at risk for Apple Inc. (NASDAQ:AAPL) over the next six months. It must be said that this figure pays no need to how many Samsung owners may be willing to jump ship.
So, as 2014 begins, both Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) and Apple Inc. (NASDAQ:AAPL) have challenges and opportunities ahead of them. Samsung must create the impression that their brand is as valuable as Apple, and Apple must justify their premium pricing and reputation. It will be a battle worth keeping an eye on, and one that will ultimately benefit smartphone consumers.
