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Should Apple Inc. Fear the Samsung Galaxy S7 and S7 Edge?

By Ashraf Eassa - Feb 23, 2016 at 9:45AM

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Perhaps, although investors should probably wait and see what iPhone 7 brings to the table.

Samsung (NASDAQOTH: SSNLF), following tradition, announced its next-generation flagship smartphones -- the Galaxy S7 and the Galaxy S7 Edge -- at a pre-Mobile World Congress event. The device is widely viewed as incremental, serving up solid, but hardly groundbreaking enhancements.

The S7 phones have improved rear-facing and front-facing cameras, faster processor, more system RAM, support for a microSD expansion slot (giving up on trying to up-sell to higher storage capacities, a la Apple (AAPL 2.45%)), and so on.

They're a pair of really solid, high-end Android devices.

The question, though, that Apple investors might (read: should) be asking themselves is this: Will the Samsung Galaxy S7 phones have a material, negative impact on demand for the iPhone 6s/6s Plus?

It seems possible
When the full reviews of the S7/S7 Edge come in, I believe that the findings vis-a-vis the iPhone 6s/6s Plus will be the following:

  • The Samsung phones pack substantially better (both sharper and better image quality) displays.
  • The Samsung phones are able to fit more screen into a smaller physical footprint (thanks to much narrower bezels).
  • The Samsung phones have much better cameras.

Apple will of course have the advantage of running iOS and it will have 3D Touch, but 3D Touch has not proven to be the inevitable feature for most people that the iDevice maker had hoped it would be.

I think those reviews, if they come out and say what I think they're going to say, could very well serve to steer customers away from Apple's iPhone 6s/6s Plus (which are already suffering from tepid demand in the marketplace) toward Samsung's flagships.

What Apple needs to do to respond
Frankly, this is exactly why Apple needs to shift away from its tick-tock strategy and deliver meaningful improvements across every vector each year. The iPhone 6s/6s Plus should have included higher-quality, sharper displays. Apple also appears to have dropped the ball on the camera with the 6s/6s Plus, with third-party tests often claiming minimal image quality improvements over the iPhone 6/6 Plus.

There's little that Apple can do until it launches the iPhone 7/7 Plus in the September time frame. However, when it does launch those devices, it had better come out with a heck of a phone. The device needs to be so ahead of the curve when it comes out that it can withstand whatever innovations that the likes of Samsung have in store for the Galaxy S8, which is likely to launch in the March/April 2017 timeframe.

I have every confidence that Apple's chip team will deliver with the A10; indeed, the A9 is -- in my book -- a superior processor to either the Exynos 8890 or the Snapdragon 820 that power the Galaxy S7, and I think that Apple has something amazing cooking with the A10.

It's up to the rest of the teams within Apple (and outside of Apple, since Apple works closely with third-party suppliers) to deliver. The iPhone 7's display needs to be incredible ­-- extremely sharp, beautiful, and power efficient.

The industrial design needs to be absolutely stunning; beautiful enough so that competitors wonder why they didn't think of it before, and innovative enough that actually imitating it will be difficult.

The good news is that this is likely exactly what Apple is cooking up given the massive increase in its research and development budget over the last couple of years.

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