Samsung's (NASDAQOTH: SSNLF) rise as the world's largest smartphone vendor has been nothing less than impressive. The company has not only made a killing in the low end and mid range of the handset market, but it has built a strong enough brand at the high end with its Galaxy S series that it is a very legitimate threat to the mighty Apple (NASDAQ:AAPL). While the Galaxy S4 did extremely well, sales of this phone disappointed the lofty expectations that the investor community had. That said, the Galaxy S5 can be a "game changer."
Samsung is fighting both Apple and secular trends
While Samsung's products are strong, and while its growth in the high-volume entry/mid-range of the market is robust, the company must fight two headwinds at the very high end of the market:
- The high end of the handset market has slowed considerably, much to the chagrin of both Samsung and its chief high-end rival, Apple.
- Apple seems to be strengthening its position at the high end.
The first point is one that nobody can really do anything about, and having a high market share position means growing that share is increasingly difficult. The second bullet point, however, is something Samsung can attempt to combat with next-generation, differentiated products.
Apple's iPhone 5s could become stale
While the iPhone 5s has been described by Apple as the most "forward-thinking" smartphone that the company has ever created, there is very real risk that it will become stale alongside phones that are coming at Mobile World Congress 2014. More importantly, though, is that Samsung's Galaxy S5 is likely to prove to be a rather nice phone with great hardware and software, as the company continues to refine its approach.
The Galaxy S5 is likely to sport a Qualcomm Snapdragon 800 in the U.S. and other developed markets (and an "Exynos Infinity" for international versions), 3GB of RAM, a 2560x1440 display, an updated/new industrial design, and a fingerprint reader. This should make it the crème de la crème of Android devices, and to address the critics that Samsung's products are "cheap plastic," there will likely be a version with a metal chassis. The iPhone 5s is likely to pale, at least from a hardware perspective, in comparison.
It's not all about the hardware
There's no doubt that the S5 will likely to be more feature-packed and have a more aesthetically pleasing design than the iPhone 5s, but this really isn't enough. Many Apple buyers became customers not only for the hardware, but for the software ecosystem, the smooth uncluttered user interface, and the excellent support that Apple provides. Also, it's tough to deny the cachet that the Apple brand has among the more affluent of the smartphone-buying population.
It will be interesting to see how Apple's market-share numbers end up following the Galaxy S5 launch. If the Galaxy S5 is as impressive as the leaks and the pre-release marketing hype suggest, then Apple's market share could take a meaningful hit until the company launches its next-generation iPhone 6, which should contain meaningful hardware and software improvements that can turn the tide back in Apple's favor.
Foolish bottom line
The upcoming Samsung Galaxy S5 is likely to be a great device, the most premium of the Android devices. Apple is probably going to lose high-end share as this product ramps, but if Apple is smart, it will prepare to host a "special event" to launch a suite of new iPhone products sooner rather than later.