Is Samsung Afraid of Apple's iPhone 6?

Samsung's (NASDAQOTH: SSNLF  ) marketing team is no stranger to aggression -- the Korean tech giant has used its massive ad budget to target Apple (NASDAQ: AAPL  ) , its products, and its fans in recent years, repeatedly mocking the company in a series of television ads.

While Samsung's smartphone market share has (and continues to) lag behind Apple's in the U.S., its marketing campaign has been effective at generating buzz, and has even drawn praise from Apple executive Phil Schiller.

Yet, the company's latest ad reeks of desperation, and suggests that even Samsung believes Apple's next iPhone will be a runaway success.

Samsung: We've been here for years
Samsung's latest ad features two men in a coffee shop discussing Apple rumors (watch it here).

"iPhone might be getting a bigger screen," one says, before a voice-over chimes in. "You know that thing you've been waiting on for like two years, and how it's supposed to be awesome, and how it's gonna blow your mind?"

That "thing" is the iPhone 6. In recent months, numerous reputable media outlets and various supply chain leaks have reported that Apple's upcoming iPhone 6 will feature a screen larger than its predecessor. Though nothing remains confirmed, most observers -- including, evidently, Samsung -- seem to have taken it as fact.

Samsung's ad is delivered in a mocking tone, identical to its prior clips that have painted Apple's customers as brain-washed drones. But this time, Samsung's marketing team is unable to offer up a compelling reason to buy its products, except to say that Samsung has been offering phones with larger screens for years.

Apple could steal Samsung's best customers
That may be true, but if Apple's next iPhone does feature a bigger screen, Samsung's size advantage won't matter for too much longer.

I've explored the question of whether or not Samsung should fear Apple's larger iPhone in the past. Ultimately, I didn't think it was much of a cause for concern. Although Apple's ecosystem and its customer loyalty may be greater than Samsung's, there's evidence to suggest that the larger Android ecosystem can be just as sticky, and Samsung's customers have been getting increasingly loyal in recent years. Samsung now retains some 77% of its customers according to Statista.

But its latest ad suggests that Samsung is well aware of what a larger iPhone could do -- when the size of its screen is no longer a distinguishing factor, Samsung may lose its biggest selling point.

Samsung's struggles
Financially, Samsung has begun to struggle, although the company blames recent performance weakness and disappointing guidance on competition at the low-end. In emerging markets, particularly China, generic smartphone vendors have begun to offer cheaper competing devices as good as (or perhaps better than) Samsung's products.

If Apple delivers a larger iPhone this fall, it could weigh on Samsung's high-end Galaxy handsets, phones that have so far dominated the market for expensive Android devices. Analysts have seen Samsung's recent missteps as an opportunity for Apple -- Barclays, when it upgraded Apple shares to overweight earlier this month, cited Samsung's weak preliminary results as a reason to buy Apple shares.

With Apple shares having crushed the market since the company last reported earnings, hope appears to be running high for the company's next flagship handset. While it may be tempting to write-off insane sales projections as overly optimistic, Samsung's willingness to target the device -- months before it's likely to be unveiled -- bodes well for Apple.

Leaked: Apple's next smart device (warning, it may shock you)
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

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  • Report this Comment On July 22, 2014, at 12:26 PM, ScottAtlanta wrote:

    In the end, Open systems always beat closed systems....Android is an open system, Apple's is closed...the winner may not be Samsung, per se, but it will be Android or some other open system. Thank Google for that.

    Apple was closed minded about the size..."our size just right for you, you buy phone," when in fact they were wrong, the consumer chose "hands down" the larger screen size and Apple was loosing big time. Now they are forced to offer larger screen.

    Apple's culture is closed...therefore this "drama" will play out again and again....with the open system winning more and more and in the end dominating.

  • Report this Comment On July 22, 2014, at 4:59 PM, zippero wrote:

    ScottAtlanta: Open systems, like Windows OS and Android, get commoditized because the only thing that PC and Android phone makers have to differentiate themselves from each other is price. Price wars guarantee that cheaper, low-quality components get used over time, so with the falling prices comes falling quality. Android's following Windows OS's open model down the road to profitless commoditization for its OEMs is nothing to cheer about. Windows PC and Android phone makers' profits are almost non-existent, and their share prices (which depend on profitability) have flatlined at best over the past decade while Apple's has gone up several thousand fold, because of its more profitable, proprietary OS that allows Apple to avoid profitless commoditization entirely.

  • Report this Comment On July 22, 2014, at 5:12 PM, zippero wrote:

    Not only Samsung but the whole nation of Korea is in life-or-death crisis mode now as Samsung's Chairman Lee Kun-hee appears to have suffered brain damage from his heart attack two months ago. He opens his eyes and stares blankly out his Samsung Hospital V.I.P. hospital room window, while the nurses change his diaper. His playboy son is overwhelmed with all his new responsibilities, and prefers to drive out in the middle of the night in his Bugatti. The whole fate of the nation rests on his shoulders now, as Samsung makes up 50% of the total profits of Korean companies on the Korean stock market. He doesn't want Samsung to become the "Nokia of Korea," but it's something he can't seem to avoid. He regrets Samsung never developed its own proprietary, non-commoditizable mobile OS five years ago instead of taking the easy route of going with Android. Well, now every Chinese company is using Android now too, so Samsung is commoditized and profits are falling faster than a Chinese bullet train. As Samsung is losing its highest-spending customers to Apple, Google Play is losing its high-spending Google Play customers to Apple's App Store. Android is commoditized and profitless not only on hardware but on its Google Play app ecosystem, too.

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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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