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These 2 Phones Could Be the Biggest Threats to iPhone 7

By Sam Mattera – Mar 4, 2016 at 12:12PM

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Samsung's Galaxy S7 and LG's G5 will be among the most compelling Android flagships released this year.

Samsung's Galaxy S7. Image source: Samsung.

Apple (NASDAQ: AAPL) remains dependent on the iPhone. Last quarter, it generated about 68% of the company's revenue, and probably a greater percentage of its net income. iPhone customers are famously loyal, but the company still faces a healthy amount of competition in the high-end handset market.

If history is any indication, Apple's next flagship smartphone (presumably called the iPhone 7) will make its debut in September. The most significant competition it's likely to face, however, could arrive this month. Samsung's (NASDAQOTH: SSNLF) Galaxy S7 and LG's (NASDAQOTH: LGEAF) G5 are scheduled to make their debuts in the near future, and they should be among the most popular Android-powered smartphones of 2016.

Samsung's S-generation
Last year's Galaxy S6 was the most revolutionary smartphone Samsung had released in years. Spurning its traditional plastic design, Samsung released an attractive handset made of both metal and glass, with a top-notch display and beefy processor. Unfortunately, such design decisions necessitated compromises in usability, and Samsung opted to cut several long-standing features. Unlike its predecessor, the Galaxy S6's battery can not be replaced, nor can its storage be expanded, and it isn't the least bit waterproof.

The Galaxy S7 brings back two of three: Samsung's flagship smartphone once again supports micro SD storage, and it's waterproof at a depth of up to 1.5 meters. Galaxy S7 owners will not be able to replace the battery, but they can recharge it quickly, even wirelessly, and it's more than 17% larger than the one found in the Galaxy S6. From a physical standpoint, the phone is nearly indistinguishable from its predecessor, but the back now curves slightly, which may make the phone easier to hold, and the camera doesn't stick out nearly as much from the back. Unsurprisingly, the camera itself is improved and the processor is faster.

It supports Samsung's Gear VR headset, and those who buy the phone by March 18 will get one for free (a $100 value). The phone itself is currently available for pre-order and should arrive in stores on March 11.

LG unveils the first modular smartphone
Samsung's smartphone business has come under pressure in recent years, as competition has intensified. Still, Samsung was the world's largest seller of smartphones last year, according to research firm IDC. LG, in contrast, wasn't among the top five. It makes sense, then, that the company would be more aggressive with its 2016 flagship.

The G5 is a dramatic departure from its predecessor. It offers the improvements most would expect -- a better camera, a faster processor, more RAM -- and some new features that are quickly becoming the standard among flagship Android handsets (a fingerprint scanner, USB-C). But it also offers something quite novel.

The phone's lower bezel is replaceable, and can be swapped out for a variety of different modules that expand the device's functionality. So far, LG has announced two. The first, made in partnership with acclaimed speaker specialist Bang & Olufsen, is a high-end digital audio adapter that should provide G5 owners with a better acoustic experience. The second is a grip with dedicated camera buttons and a larger battery -- ideal for those who wish to use the G5 as their primary digital camera.

Technically, the G5 isn't the first truly modular smartphone: Google unveiled a fully modular Project Ara prototype last year. But that phone never went into production, and Project Ara (the company's moonshot bet aimed at popularizing the concept) remains delayed indefinitely.

It's easy to imagine a suite of useful modules that LG could design for the G5: an e-ink display, a dedicated gaming controller, a solar charging panel, among many others. Of course, it's also possible that LG neglects the feature, and it's viewed, in retrospect, as a useless gimmick. Regardless, the G5 is perhaps the most exciting Android flagship in years. It does not have a firm release date just yet, but should arrive in the near future.

A three-horse race
In the U.S., Apple, Samsung, and LG are the most popular smartphone vendors. In the U.S., there were nearly 200 million smartphone owners in the fourth quarter last year, according to comScore. Of those, 42.9% were iPhones owners, 28.4% had Samsung devices, and 9.9% sported LG handsets.

Other firms, including Huawei and Xiaomi, provide tough competition for Apple's handset in other markets, most notably China, but the U.S. remains the second-largest smartphone market in the world, and one of the strongest for the iPhone in particular. Other handsets are likely to challenge the iPhone in 2016, but baring a radical shakeup, the Galaxy S7 and G5 could provide the most compelling competition.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Sam Mattera has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Apple. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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