Is Apple Going to Steal Samsung’s Phone Strategy?

Apple (NASDAQ: AAPL  ) will release a larger iPhone next May, according to a report from DigiTimes. The Taiwan-based publication has a long record of correctly forecasting Apple's upcoming products, including the iPad Mini.

If Apple releases a larger iPhone in May, that would be only eight months after releasing the iPhone 5s, a far shorter period than usual. On this basis, some have rejected the report as nonsensical -- but it makes perfect sense if Apple plans to adopt a product strategy developed by Samsung (NASDAQOTH: SSNLF  ) and utilized by many of Google's (NASDAQ: GOOGL  ) hardware partners.

Samsung's dual flagship strategy
Unlike Apple, Samsung has two flagship phone lines: the Galaxy S and the Galaxy Note. Typically, Samsung releases the latest Galaxy S in the first half of the year and the newest Galaxy Note in the second half.

This is beneficial to Samsung in the sense that there's never more than a six-month period without a new Samsung handset entering the market. Although they are not dramatically different, Samsung typically makes slight improvements from one phone to the next -- the Galaxy S4, for example, features a Snapdragon 600 processor, while the Galaxy Note III has a Snapdragon 800.

The growing importance of phablets
Samsung's phones also serve different markets. The Galaxy Note III's 5.7-inch screen is simply too large for some people; although Samsung says it is selling well, demand for the phone remains limited relative to Samsung's Galaxy S4.

Other OEMs that use Google's Android have adopted the same strategy. HTC, for example, has the One (its standard flagship) and the One Max (the oversized version of its flagship handset). Sony has the Xperia Z1 and the Xperia Z Ultra. LG has the G2 and the upcoming G Flex.

By not selling a phablet, Apple is essentially a ceding an entire market segment to Google's Android, similar in the way in which it ceded the smaller tablet market prior to the release of the iPad Mini. This will become increasingly important in coming quarters, as the demand for phablets is projected to continue increasing -- Technalysis Research predicts that next year, phablets will outsell tablets worldwide, a projection that's already come to fruition in many parts of Asia.

The iPhone phablet in 2014?
Bloomberg reported in November that Apple was working on two new, larger iPhones: one with a 4.7-inch screen and one with a 5.5-inch screen. This second handset would fit squarely in the realm of the phablet, about on par with Samsung's Galaxy Note.

If Apple splits its product line -- releasing the phablet in the first half of the year and the flagship iPhone in the second half -- it would mirror Samsung's phone strategy, allowing Apple to nearly always have a new handset on the market. If that's the case, Apple shareholders should take it as a positive. It's possible that Apple's unwillingness to release a phablet has cost it sales -- a few Apple devotees may have made the switch to Google's Android for larger phones. An iPhone phablet would allow Apple to recapture these customers, while a two-flagship model would allow Apple to release more phones more often.

Apple's management has promised new products in 2014. If DigiTimes is right, expect one of those products to be a phablet. Watches and TVs aside, an iPhone phablet could be Apple's most important product next year.

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Read/Post Comments (13) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 24, 2013, at 1:39 PM, johnestromjr wrote:

    Smart move by Apple. Let others see what the market for a new device is - then make a better one than the competition makes. It makes much more sense now that Apple and China Mobile have signed an agreement since both want to sell as many Apple devices as they can for their mutual benefit and the Chinese market is huge compared to the USA. It's as big as the USA and Europe combined. And hungry for Apple's iPhones and iPads. They're the reason Apple made a 'gold' colored iPhone 5S as well. They need to make one in Chinese red too. Great color.

    Staggering their iPhone releases also makes great sense - always a new product never more than 6 months away. Thanks Apple! :)

  • Report this Comment On December 24, 2013, at 1:45 PM, GaryDMN wrote:

    Samsung has a strategy? What is it, make anything and everything Apple makes and anything they think Apple will make in the future, like the iWatch rumor.

  • Report this Comment On December 24, 2013, at 1:46 PM, jdmeck wrote:

    Say it aint so. The first thing Jobs' did when he was back in control, was to cut the product line so it was not so fragmented. Hopefully Apple does not go backwards and undue what was done in the past.

  • Report this Comment On December 24, 2013, at 1:56 PM, gsagi wrote:

    (1) Digitimes is THE tabloid of the tech world: it does not forecast, it fabricates—it is a sensationalist rag. The sad thing is that you quote it. Who is next: Rob Enderle of the Enderle Group?

    (2) phablets came out as battery life was lousy on many of the early Droids so a larger screen was an excuse to deliver larger footprint smartphones and it created a smallish market.

    (3) if the market is lucrative enough for a larger screen in iPhone, you can bet your sweet buns that Apple will go for it.

    Apple is an artist who steals. Samsung is a dilettante who copies.

    Cheers and Merry Xmas!

  • Report this Comment On December 24, 2013, at 2:25 PM, dbtuner wrote:

    I don't get the large phone thing. Where do you keep it? It's too big to fit in a shirt pocket. Can't hold it with one hand. Maybe this is a play for emerging markets where they can't afford a phone and a tablet.

    If you want a phablet, buy the iPad Mini. You can iMessage and Facetime. Does anyone actually call anyone anymore? With the NSA tracking phone calls and texts, isn't Facetime, iMessage, and Skype the way to go?

  • Report this Comment On December 24, 2013, at 2:37 PM, JHawkinTexas wrote:

    In response to your headline, What, by throwing every POS against the wall and see what sticks. The answer is NO.

    Who is the market for the phablet? People who can't see well and want larger screen? That is certainly one segment but it is not large enough to mess with despite the hype from the press and analysts. Who else? Maybe those who can't afford both a tablet/computer and a cell phone. Also a possible segment but one that Apple is not interested in because it is, by definition, low end.

    Finally, ask yourself why someone would want to buy a BMW 5 series when they could get a Honda Accord for a lot less money (both vehicles accomplish the exact same functionality)? If you UNDERSTAND the answer, you know the difference between Apple and everyone else.

  • Report this Comment On December 24, 2013, at 3:37 PM, never2dull4u wrote:

    Apple's timing couldnt' be any better. By the time the iPhone 6 comes out with the larger screen size, it will ZAPP the market share away from Samsung. Those who own the S3 are due for a new 2 year contract renewal. Guess who they will flock to....?

    Samsung will have to MAXIMIZE their advertising dollars to prevent defection..!

    Media has given Samsung way too much credit for market share. Only reason why Apple is trailing is due to lack of larger size screen.

    Now, the lion has roared. Apple wants their market share back..! Nothing Samsung can do about it because the "Next Big Thing" is really nothing left to show.

  • Report this Comment On December 24, 2013, at 3:51 PM, twolf2919 wrote:

    I have no doubt Apple will come out with a larger phone, BUT it won't be the 5+" phablets Bloomberg and other "analysts" who don't really understand Apple's design philosophy. Apple *WILL NOT* sacrifice one-handed operation. That limits what is physically possible. I think Apple can maybe go to 4.3" or 4.5" if the screen's side bezels disappear and the phone is made even thinner.

    So that's my prediction for 2014: a 4.5" iPhone 6. A phone with a bigger screen, but which does not sacrifice portability and ease-of-use. And one which doesn't make you look like a giant dweeb holding it up to your ear.

  • Report this Comment On December 24, 2013, at 4:45 PM, slapppy wrote:

    Ummm no. Apple doesn't SPAM the marketplace with 8 different versions of one model..Thats Samsung Strategy.

  • Report this Comment On December 24, 2013, at 6:15 PM, bobbydig wrote:

    Samsung came into 2013 slamming Apple's lack of innovation. Now we have a chance to look back we now know the strategy may have raised some curiosity, but did not crush Apple.

    2013 will be the year that Samsung became the "Just another thing" company. LOL

  • Report this Comment On December 24, 2013, at 7:41 PM, Tim1T wrote:

    It should be clear to any knowledgeable Apple watcher that our commentator doesn't have a clue about the Apple strategy -- or Samsung's.

    If Apple does put out a big phablet, that won't be a change in their strategy AT ALL -- just look what they've been doing for years with the iPad products. Apple's strategy is to 1. Release form factors that capture the key market segments, 2. Release a limited number of products in that category to ensure that each is as good as it can be and 3. Go for the high end in terms of price, components and usability.

    That's why an Apple phablet -- if designed and engineered the way they will do it, fits perfectly into the strategy.

    Samsung's strategy is to look at the entire marketplace and deliver a product that covers each market segment and all price ranges. Right now on Samsung's site they are listing 150 phones in every price range and level of quality. They also cover product areas for computers, home appliances, cameras, audio systems, etc. There's no way they can put out hundreds and hundreds of products each year and do each right.

    Samsung may care about quality for some of their high end products but they don't sweat the small stuff for their run of the mill products. Samsung sees there's a market for a cheap plastic flip phone and they cover it. So how is that the same market strategy as Apple's???

    That's why Samsung and Apple are taking a different approach to the smart watch product. Samsung saw a potential market and threw something together to cover that market. And that "smart" watch was a joke because it wasn't fully thought out.

    Apple, if they do bring out a smart watch, will take the time to ensure it solves an actual consumer problem.

  • Report this Comment On December 24, 2013, at 10:56 PM, rocket7777 wrote:

    Apple is all about slowing down technology and profiteering. It knew there's market for various things. It do not want to kill future update by offering things until other things are saturated.

  • Report this Comment On December 25, 2013, at 12:24 PM, Rjdincle wrote:

    I am obviously a bit of an idiot since I don't think anyone's mentioned this before and there is likely good reason why, but...

    Isn't the current iPad Mini just a radio away from being converted from a tablet to a phablet? The OS is there. It just needs calling capacity and the phone icon added, right?

    I personally think the whole phablet thing looks stupid. But if someone wants to hold a book sized tablet to their head to make a phone all, who am I to judge?

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