iPhone 5s. Source: Apple.com.
The smartphone battle is as heated as ever. Apple (AAPL 0.52%) just launched its new iPhone lineup, and Samsung is already voicing its plan to quickly imitate its biggest competitor. Is Apple's first-move advantage enough to get the wheels under Apple's stock moving?
Apple's blazing chip to be mimicked
Two times faster than its predecessor, the A7 system-on-a-chip is some great technology. It's the first time -- ever -- a 64-bit architecture found its way into a smartphone.
Moore's Law isn't running out of gas yet. Just check out this chart that Apple showed at the iPhone launch.
Phil Schiller speaking at the Sept. 10 Apple iPhone event. Source: The Verge.
Paired with Apple's motion-sensing M7, the iPhone 5s is a powerful computer.
Unfortunately for Apple, competition moves fast these days, Samsung in particular.
"[O]ur next smartphones will have 64-bit processing functionality," said Samsung co-CEO Shin Jong-kyun in response to Apple's recent announcements.
Even worse, this means that Google (GOOGL -1.97%) is probably already developing a 64-bit version of its Android operating system. With Samsung's flagship smartphones, the Galaxy S4 and the Galaxy Note 3 running on an Android OS, Google would have to launch a 64-bit version of its Android OS for Samsung's next-generation smartphones to use a 64-bit chip. That means Google will lay the foundation for other original equipment manufacturers, or OEMs, to jump on the 64-bit bandwagon.
Splurging on Apple's untapped opportunity
Thanks to Google's free Android software, low-cost smartphones are taking over in China. According to IDC, Android boasts 69.1% market share in China with 73.5% year-over-year growth in unit shipments in the second quarter of 2013. The largest contributors to Android's success? Samsung.
Much of Samsung's success in China is based on an intentional strategy to go after the lower prices that Apple has expressed little interest in. Capitalizing on Apple's not-so-cheap iPhone 5c, which fails to hit a price point that would resonate with China's mid-tier smartphone market, Samsung plans to aggressively pursue this avenue.
In Shin's interview with The Korea Times, he confirmed that the company will accelerate its planned launches of Chinese-friendly devices.
Apple's saving grace
For now, Apple's the only OEM with a 64-bit processor and a fingerprint sensor. Furthermore, it has just fortified its position at the high end of the market with its launch of two new iPhone models. With key first-mover advantages on these new technologies, and on the back of its brand power and retail presence, Apple should manage to fend off competition enough to support its conservative valuation -- for now.
But the longer Apple waits to let Android get entrenched in fast-growing markets, the more it's missing out on potential lifelong customers. To stay competitive, Apple will need to respond with a lower-cost iPhone at some point. It's already happened with iPods (iPod Nano and iPod Shuffle) and iPads (iPad Mini), and it will happen with iPhones (hopefully) -- it's just a matter of time.
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