Does Samsung Really Have an Edge Over Apple in Smartphones?

It wouldn't be a stretch to say that Apple (NASDAQ: AAPL  )  and Korean tech giant Samsung  (NASDAQOTH: SSNLF  ) don't exactly have the warmest of relationships.

Even as Apple still relies on Samsung to make some of the components for its smartphones and tablets, the two companies are also battling it out in the courtrooms of virtually every major economy around the world.

For some time now, Samsung has held the crown as the world's largest smartphone maker. Samsung shipped over 300 million smartphones last year, versus 150 million for Apple in its recently completed fiscal year for 2013.

However, many of Samsung's smartphone sales come from the cheap Android-based devices that are exploding in popularity in emerging markets today. As it turns out, only a fraction of Samsung's total smartphone sales actually come from the same high-end, high-margin devices that Apple actually competes with.

Investors should note this important distinction. In this video, Fool contributor Andrew Tonner compares and contrasts the difference between Apple's and Samsung's strategies, and discusses why Samsung's smartphone lead might not be as valuable as you might think.

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Read/Post Comments (7) | Recommend This Article (1)

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  • Report this Comment On November 17, 2013, at 11:17 PM, Oldmonkey wrote:

    Whenever a company plays an "I will ban from my device, apps for every competitor on different platforms I possibly can" mentality, I don't buy it. Been of the wrong end of a 32G Itouch, and I will never buy one of their products again. When my wife asked for an Apple tablet, I told her: "Not only are you on your own for technical help, you are on your own to pay for it" By ANYTHING else, and I will help you and pay for it.

    Some want the challenge of getting around Apple's obstacles, I don't. Name brand only counts when quality of merit and convenience meet. What a shame Apple always cripples their hardware doing this. Regardless of country when someone is paying top money, bad manners become a consideration when not a slave for fashion

  • Report this Comment On November 18, 2013, at 12:07 AM, JaredPorter wrote:

    Apple builds their eco system around maintaining an augmented, consistent "customer experience". This has propelled their products to an overall level of customer satisfaction unrivaled in the mobile and tech worlds they choose to compete in. This is why you see lines of people clamoring to buy up their latest and greatest products upon their launch introductions. Compare that to Android's fractured, often fragmented app experience where many of the tablet apps are merely blown up versions of their cell phone apps. Your wife is maybe smarter than you are when it comes to purchasing the better product. Better keep the peace at home and give in, lol. Additionally, you bring up getting technical help after the purchase. That's what Apple's Genius Bar is for. Good luck on getting an equal level of rapid face-to-face service from their competitors.

  • Report this Comment On November 18, 2013, at 2:19 AM, vernr75 wrote:

    These attempts to dismiss lower margin devices by Apple fans in the media and elsewhere is simply pathetic. What planet have you media guys been living on? You guys keep attempting to dismiss the emerging and developing markets as if they're some tiny fly on the wall. Haven't you noticed that the US is in debt to China? How did that happen? Or that the most profitable carrier in the world is...wait for it...China Mobile, the carrier that just happens to service the largest collection of poor people on the face of the earth??? How about THEM APPLES??? So much for market share not being important.

    The human population of this planet lives mostly in emerging and developing markets with a <2 billion minority that lives in what's known as developed nations. It's not the other way around. Disparage Samsung if you must, but Samsung is simply supplying as many of the world's 7 billion people as possible, just like any sensible globally focused business entity would do in its shoes. Apple is only really supplying a fraction of a billion people and will never do any better than that with their current business model.

    Here's the reality...and you're not going to like it. The iPhone gets almost all its market share by pretending to be a CHEAP phone in the few markets that offer phone subsidies for high priced phones. Real premium merchandise don't hide their premium price tags...and they don't have their price subsidized down to $200 in Western countries just so that they end up with the same CHEAP price tags as $200 products sold in the developing and emerging markets. If Apple's iPhone were so special and so loved and so desired by the masses, why would they absolutely need massive subsidies just to get consumers in supposedly wealthy Western countries to buy them? How can you dare boast about the number of 'premium' iPhone customers that Apple has amassed when Apple only got them because they used subsidies to put CHEAP $200 upfront price tags on their phones and gave millions of them away for $0 - an upfront price tag lower than that found on any cheap trinket sold in a corner store in Beijing?

    So there you have it. In the US, the iPhone is just another cheap phone from the perspective of US consumers. It's a $0-$200 device, just like any cheap devices sold in emerging and developing markets. Outside the US, the iPhone fails miserably in all places where the real price tag is revealed. What you guys don't seem to grasp yet is that the iPhone would have failed just as miserably in the US if it wasn't such a CHEAP phone here.

  • Report this Comment On November 18, 2013, at 4:23 AM, vb4 wrote:

    Weird video analysis.

    Plain and simple: Android is selling much better than Apple because the Android phones and tablets are available at many different price points and form factors.

  • Report this Comment On November 18, 2013, at 9:21 AM, tdizz wrote:

    Once Apple has a 5 inch phone I will go back to it. I like my galaxy note but Android is such a pain in the behind. I want a structured device that doesn't require me to know all the nuts and bolts to keep it stable.

    If Apple had gone to the 5"+ phone instead of the ipad mini they would have stopped the whole Samsung onslaught but Apple sometimes over thinks what the public wants for themselves.

  • Report this Comment On November 18, 2013, at 10:50 AM, KPOM wrote:

    @Vern75, the phone is $200-400 in the US with subsidies (not $0-200 unless you count the old models that don't make up a big portion of US sales). Anyway, Samsung phones are priced the same way, and Apple still outsells Samsung in that market here, too. iPhone also seems to be selling well on T-Mobile, which no longer subsidizes but does offer pay-by-month financing plans.

    Anyway, Apple doesn't make $200 phones because there isn't much money in them. Most of Samsung's mobile profits come from the pricier Galaxy S and Note lines, of which they expect to sell about 100 million this year, vs roughly 200 million iPhones.

    Could Apple continue to sell the iPhone 3G or 3GS for $200-$300 running some ancient version of iOS, the same way Samsung and others sell low-spec phones running Android 2.3? Sure. But why would they? If they ink a deal with China Mobile, they'll be going for the noveau riche and upper middle class crowd in China, and not the masses.

  • Report this Comment On November 18, 2013, at 3:14 PM, GaryDMN wrote:

    Samsung is winning the low profit margin commodity Android market and Apple doesn't even play in the commodity market, let alone the Android market.

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