Can Apple’s Lead Be Sustained?

With reports coming in that Touch-ID is about to be copied, the viability of Apple's lead long term is questionable.

Jan 8, 2014 at 1:30PM

An interesting report from DigiTimes notes that during the first half of 2014, there will be a shortage of fingerprint sensors -- the key differentiating feature in the iPhone 5s. This is due to the fact that LG and Samsung (NASDAQOTH:SSNLF) will be adopting fingerprint sensors in its upcoming high-end smartphones. This shows the danger to Apple's (NASDAQ:AAPL) business model from a long-term perspective.

Yes, Apple innovates. But everybody can -- and will -- copy
The sad truth is that anything that Apple does, Samsung, LG, Motorola, and so on can copy. If Apple can perpetually find ways to stay a step or more ahead of the competition, then this "innovation problem" isn't really a problem at all. However, the key question that Apple bulls/investors need to ask themselves is just how long this innovation can continue?

Just as the PC markets became largely commoditized, so will the smartphone and tablet markets. Sure, there will be a market for the high end and, if Apple does keep innovating, it can own this fairly lucrative and high-margin part of the business. However, the big fear is that Samsung, LG, and many others will, year-after-year, bring these high-end features at mid-range or low-end price-points -- indirectly hurting Apple's business.

It's all about the brand and the ecosystem
Apple's two major lines of defense as hardware becomes commoditized are the software ecosystem and the Apple "brand." It's clear that consumers love Apple and even seem to be willing to pay a premium over a comparably outfitted device. Further, the Apple "ecosystem" -- from the software to the Apple stores -- is also a real advantage, particularly in keeping the high end.

It's not inconceivable that Samsung and others will go ahead and open their own stores stateside -- Samsung is already very aggressive about doing the "store within a store" thing at Best Buy. But there's still a fundamental gap between the value of Samsung's brand and the value of Apple's that could prove to be helpful in defending sales, even against very aggressive marketing campaigns from Samsung.

Foolish bottom line
Apple is an innovator, but the problem is that the lead that can be had from being an innovator in this fast-paced environment against deep-pocketed competitors such as Samsung and LG is not sustainable. The differentiation needs to continue to come from the intangibles, as it is clear that just about every smartphone/tablet vendor can do nice industrial designs with great internals. 

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Ashraf Eassa has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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