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Apple and Samsung Have Been Disappointing Critics for Years

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There's a phenomenon that's permeated the tech media -- I like to call it the "incremental update fallacy." If you've read a review of just about any flagship smartphone released in the last few years -- especially those made by Apple (NASDAQ: AAPL  ) and Samsung (NASDAQOTH: SSNLF  ) -- you've no doubt encountered this fallacy.

It goes something like this: A reviewer, writing about the latest phone, will praise the newest model, complimenting its speedier internals, additional features, and more intuitive interface. Yet, despite being objectively better than the handset that preceded it in almost every way, the phone will be derided as just an "incremental" upgrade. Some will suggest that the company in question has passed its innovative peak.

This week, it's Samsung, whose recently released Galaxy S5 is being derided for failing to move the needle. But just a few days ago, HTC was getting slammed for offering a flagship phone with only marginal improvements. Six months prior, Apple's iPhone 5s was criticised for not being revolutionary enough.

If the pace of smartphone innovation is indeed slowing, then it stands to reason that these companies are in trouble -- consumers may be less likely to upgrade, finding it unnecessary.

Just an incremental update
But you'd never be able to tell, at least by reading the reviews. Since the very first revisions to their phones, Apple and Samsung have been derided for delivering only incremental updates. Walt Mossberg, for example, has praised most of Apple's iPhone revisions; yet, at the same time, he has very rarely found the newest model to be a major upgrade over the previous one.

Of Apple's iPhone 3G, Mossberg suggested that existing iPhone owners "hold off." A year later, he characterized the 3GS as being more "evolutionary, rather than revolutionary" and not a "compelling" upgrade. Apple's iPhone 4 was found to be "big" upgrade, but Mossberg declared that the 4S wasn't a "dramatic game-changer like some previous iPhones." Other reviewers have come to similar conclusions: In 2012, CBS said the iPhone 4S fell short of expectations, and that the iPhone 5 offered only "incremental improvements."

Samsung's current Galaxy S5 is widely being characterized as only an incremental upgrade over the Galaxy S4, but a year ago, pundits were saying the exact same things about Samsung's 2013 model: "Evolutionary, not revolutionary," was how CNN characterized the general consensus. The same was said of the Galaxy S3.

Those increments add up
At this point, the "incremental upgrade" characterization has become a tired cliche. When Apple unveils the iPhone 6, expect reviewers to complain that Apple didn't do enough -- no matter what the phone offers.

Each year, Apple and Samsung make only minor changes to their flagships, but over time, those changes add up -- screens have grown and become sharper, processors are faster, net connectivity has improved, cameras have gotten better, and radical new features like waterproofing and biometrics have been added. Apple's iPhone 5s may not be a major step up from Apple's iPhone 5, but it's dramatically better than the iPhone 3GS; Samsung's original Galaxy S hardly compares to its current flagship.

It's all about the two-year upgrade cycle
In terms of recurring sales, the size and scope of the improvements are largely irrelevant. Rather, it's really about the continued existence of the two-year contract model. In the U.S. and Japan, and other markets where Apple's iPhone and Samsung's expensive Galaxies are common, carrier subsidies are the norm. You buy your phone on a two-year contract, and when it expires, you get a new one -- because you don't get a discount, holding on to your old handset just doesn't make sense.

At least in the U.S., there's a growing trend to move away from this model, which could increase the length of upgrade cycles by making it more cost-effective to hold on to older handsets -- a threat to both Apple and Samsung in terms of sales. But at least for now, unsubsidized plans remain in the minority in the U.S. -- until that changes, the "incremental upgrade" accusations can be ignored.

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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 April 09, 2014, at 10:14 AM, HiramWalker wrote:

    Hilarious to hear Sam use this to temper Galaxy S5 criticism, when he uses the same meme to criticize Apple.

  • Report this Comment On April 09, 2014, at 10:24 AM, zippero wrote:

    Just several weeks ago on 2/26/14, Mattera wrote a scathing article entitled, "Samsung's Galaxy S5 Is A Total Disappointment," in which he said the S5 was only a modest improvement and should really have been called the "S4S." Mattera wrote:

    "A modest improvement - Samsung isn't shipping the same phone as last year, but the improvements it has made are hardly noteworthy, and extremely disappointing compared to what was rumored.

    The Galaxy S5 isn't the sort of paradigm-defining phone that's likely to win over Apple's customers, and it may even open the door for some of Google's other hardware partners to take center stage."

    He also wrote:

    "...from a product standpoint, it barely moves the needle and should be of no concern to Apple or Google shareholders.

    Samsung's S year - If Samsung were following Apple's naming conventions, the Galaxy S5 might instead be called the Galaxy S4S. This year, Samsung has made only modest changes to its flagship handset.

    The screen is a tiny bit bigger, but not any less sharp.Touchwiz is largely unchanged, except for a new menu system. The processor is slightly faster, but still 32-bit. The backplate is now dimpled, but still made of plastic. The phone is waterproof, but the ports are annoyingly covered.

    The two biggest changes are the addition of a heart rate monitor and fingerprint scanner -- ancillary features that could appeal to some users, but are far from instrumental."

    So Mattera is doing in the article above what he does best: showing himself to be a complete idiot.

    By the way, the Galaxy S5 scores lower than the iPhone 5S on a variety of benchmarks, according to Anandtech.

  • Report this Comment On April 09, 2014, at 10:52 AM, GaryDMN wrote:

    Both Apple and Samsung are product companies. that produce and ship actual products. It is easy to criticize them for being somewhat predictable. On the other hand, nobody criticizes Google, a non-product company, that has one significant revenue source and limitless hype and vaporware, but no successful products, unless you consider ads a product, not a service. Apple announces a product and ships it within weeks of the announcement. On the other hand Google announces a product like Glass in 2012 and still has no plans to release them, ship dates or pricing. Samsung is becoming more like Google, announcing products well in advance, but they do actually deliver, within months. I will take substance over hype everyday.

  • Report this Comment On April 09, 2014, at 11:07 AM, Mathman6577 wrote:

    I think it's time to start criticizing the critics (especially tech "analysts", most of whom are not really technically astute -- their forte is business and finance). No one really cares about what most of them say anyway. If you like a product buy it and if you don't like it don't buy it (but stop telling me what to do).

    And regarding revolution vs. evolution. By definition any product update is evolution. Get over it folks. Only a new product category is revolution. And innovation is still possible in an evolutionary cycle (which the smartphone industry is in ... e.g. Touch ID is innovation).

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Sam Mattera

Sam has a love of all things finance. He writes about tech stocks and consumer goods.

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