A big part of the Apple (AAPL 1.27%) story during its last product cycle has been market segment share gains against high-end Android vendors such as Samsung (NASDAQOTH: SSNLF). Indeed, as Samsung's mobile revenue plunged during the iPhone 6/6 Plus cycle, Apple's iPhone-related revenue soared.
Although it reported record iPhone shipments in the first quarter of its fiscal 2016 (albeit helped along with some channel inventory fill that wasn't there a year ago), Apple's revenue in the Americas region dropped 4% year over year.
At the same time, a new research report from market intelligence firm Parks Associates shows that in 2015, Samsung actually began to close the gap with Apple in terms of installed base share in the United States. Indeed, per the report, 31% of smartphone users now have Samsung devices, just 9 percentage points behind Apple at 40%.
It would appear, then, that Apple is losing unit share to Samsung in this region which, unsurprisingly, is Apple's largest.
Not totally apples-to-apples
It's important to note that Samsung tends to very aggressively cut prices on older-generation phones as well as even its latest phones mid-cycle. For example, the 32-gigabyte Galaxy S6, which launched less than a year ago, sells for just $460 or so without a contract.
Older Samsung devices, like the Galaxy S5, can be had for under $400 without a contract.
The 16-gigabyte iPhone 6, now more than a year old, still sells for $550 without a contract. For even more storage, a 64-gigabyte model is available for $650.
Moving up to Apple's latest phones, the 16-gigabyte iPhone 6s can be had for $650 ,and it'll run customers $750 to get the device in a 64-gigabyte configuration.
Although Apple and Samsung are clearly close in terms of unit share in North America, Apple obviously has a significant advantage in terms of average revenue and likely gross profit per device.
Maintain or grow share without sacrificing profitability?
As overall smartphone market growth wanes, Apple will need to focus on trying to grow market share to drive revenue growth. Additionally, since Apple seems interested in growing its installed base in a bid to further monetize it, unit/share growth will be critical.
One thing that I can see working in Apple's favor is the iPhone 7 cycle. In addition to potentially catalyzing an upgrade cycle among the current installed base, it is likely to waterfall the current iPhone 6s/6s Plus phones to the price points that the iPhone 6/6 Plus currently occupy.
Where things have the potential to get even more interesting, though, is that Apple could actually keep the iPhone 6/6 Plus around and push them to even lower price points following the iPhone 7/7 Plus launches. This would put the 16-gigabyte iPhone 6 at $450 and the 16-gigabyte iPhone 6 Plus at $550.
These prices are still fairly high as far as the overall smartphone market goes, but as far as iPhones go, they're quite inexpensive. And although those phones will be a couple of generations old by then, they'll still be excellent large-screen devices that could serve as a nice, low-cost entry point into the Apple ecosystem for budget-conscious smartphone customers.
And, of course, for customers who want a smaller screen, the rumored upcoming iPhone 5se should do quite nicely, especially since it is said to have better internal specifications than the iPhone 6/6 Plus.
