AAPL vs. Samsung – uneasy co-existence to date. Nomura is out with a report on the Samsung Galaxy S4 and how the phone will help it gain an edge over Apple Inc. (NASDAQ:AAPL). Much has been made of the rivalry between AAPL and Samsung, yet most of this has played out in newspaper headlines and patent disputes. Nomura also notes in the report that on a product level, the two companies have an uneasy co-existence for two reasons. The reason for this view is based on the following:
– Apple Inc. (NASDAQ:AAPL) and Samsung’s share gains were so eased by failings at rivals that a direct head-to-head rivalry has not been needed
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– Samsung has prospered in the mid-range smartphone market, where Apple has no presence. Of Samsung’s 206m smartphones sold in 2012, Nomura estimates that 116m were mid-range and low-end devices
However, this uneasy co-existence appears to be shaping up into a full scale battle.
To date, the competition between the two players appears to have been benign at a product level given the dynamics detailed above.
Head-to-head pressure may start to build
Going forward, Nomura believes that Apple and Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) may increasingly have to drive growth at the others’ expense.
Apple Inc. (NASDAQ:AAPL) and Samsung now collectively control 65-70% of the Western European and North American smartphone markets. Penetration in these markets is approaching 65-70% as well. This means that growth in the coming years in developed markets will increasingly become reliant on market share gains.
With BlackBerry, HTC, LG, Nokia and Sony all showing some positive product momentum, the period of easy share gains at the expense of weaker rivals may also be coming to an end.
Samsung’s product portfolio – from low to high end price points – enables it to fully capture the smartphone cycle in emerging markets as well as developed. Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) has shown particularly strong growth in emerging markets. While Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930)’s share gains in APAC seem modest, Samsung had a 26% share of the APAC smartphone market in 2012, double Apple Inc. (NASDAQ:AAPL)’s 13% share.
Going forward, the competition between Apple and Samsung may increase. Early indicators of this include:
– AAPL moving into lower price points with a mid-range iPhone, which many believe is likely in July or August this year
– Samsung stepping up its marketing activities in North America, as shown by a 3 fold increase in 2012 to a level just above Apple’s spending.
Galaxy S4 impact likely to increase the pressure on Apple
If the Galaxy S4 and Galaxy Note sell 35-40m units a quarter, then Samsung would likely overtake Apple Inc. (NASDAQ:AAPL) in high-end as well as overall smartphone shipments.
While slipping to number 2 may not cause Apple to lose much sleep, it does give Samsung a large platform that may allow it to fragment Android yet still attract significant developer support to drive the success of its own innovations.
While the Samsung Galaxy S4 was just unveiled last week, the real battle may just be beginning.