Apple's Inc.'s Older iPhone 5s Is Beating Samsung's New Galaxy S5

Is demand for Samsung's smartphones already peaking while Apple iPhone sales continue to grow?

Daniel Sparks
Daniel Sparks
Jul 14, 2014 at 7:45PM
Technology and Telecom

The first major sign Samsung may be significantly underperforming near-term expectations came when it offered pre-earnings guidance earlier this month to warn investors of a massive 24% decline in operating profits. The company cited currency challenges, headwinds in its smartphone sales, and cannibalization of its smaller tablets by phablet smartphones. But the story just keeps getting worse. Apple's (NASDAQ:AAPL) eight-month-old iPhone 5s is still apparently outselling Samsung's flagship phone, even though the latest S5 model was just released, according to a new report from Counterpoint.

iPhone 5s. Image source: Apple.

Is Samsung losing ground?
The iPhone 5s continued to be the world's best-selling smartphone in May, based on a channel survey across 35 countries. This goes against what many analysts had predicted, Counterpoint notes. Even worse for Samsung, the race wasn't even close.

"The highly anticipated Galaxy S5 comes in at second place but still a quite distant number two in terms of (sell through) unit sales," said Counterpoint analyst Tom Kang.

Not only is Samsung's premium smartphone business suffering, but total smartphone shipments for the company actually declined, year over year, in its second quarter.

Apple may have something to do with Samsung's poor results
Apple's top spot on the list of best-selling smartphones in May comes ahead of the tech-giant's third fiscal quarter earnings report. Analysts expect Apple to report 35 million iPhone sales, a third-quarter record and up 12% from the year-ago quarter.

Going forward, Apple will likely test Samsung even more. Today, Samsung benefits from Apple's absence in the category of smartphones with display sizes larger than four inches. But a stream of part leaks and supply chain reports strongly suggests Apple is planning to launch an iPhone 6 that is available in both 4.7-inch and phablet-like 5.5-inch display sizes.

Samsung Galaxy S5. The latest-generation Galaxy smartphone has a display that measures 5.1-inches. Image source: Samsung.

Even more, Counterpoint's research supports the idea that phablets are popular with consumers. Forty percent of smartphones sold globally in May were phablets, Counterpoint's channel survey shows.

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"If Apple comes out with a phablet later this year it will instantly become a hit and top the list of phablets within two months of availability," said Kang.

A growing number of analysts expect that the demonstrated demand for larger smartphones at other manufacturers signals robust demand for Apple's next-generation lineup of iPhones.

Given that the market for smartphones with larger displays is already proven to be hot with consumers, Apple investors are in a fortunate position that offers a favorable risk/reward profile at these levels. Samsung, on the other hand, is in a tough position. After riding the success of phablets in Apple's absence, demand for the South Korean-based company's smartphones appears to have peaked, even as Apple continues to grow sales on a year-over-year basis with its 4-inch iPhone 5s.