iPhone appeal dims as Samsung shines

2012-07-30 21:58

New York - The latest iPhone looks much the same as the first iPhone, which came out more than five years ago. That hasn't been a problem for Apple - until, now.

The pace of iPhone sales has slowed, Apple revealed last week. Part of the problem is that the competition has found a formula that works: thinner phones with big screens that make the iPhone look small and chubby.

For a dose of smartphone envy, iPhone owners need to look no further than Samsung Electronics, the number-one maker of smartphones in the world. Its newest flagship phone, the Galaxy S III, is sleek and wafer-thin.

By comparison, the iPhone "is getting a bit long in the tooth," says Ramon Llamas, an analyst with research firm IDC.

Apple has become the world's most valuable company on the back of the iPhone, which makes up nearly half of its revenue. IPhone sales are still growing, but the question of how fast they're growing is of keen interest to investors.

The iPhone certainly has room to grow: only one in six smartphones sold globally in the second quarter had an Apple logo on its back.

When Apple reported financial results for its latest quarter last week, a new phenomenon was revealed: Buyers started pulling back on iPhone purchases just six months after the launch of the latest iPhone model.

Apple executives blamed the tepid sales on "rumours and speculation" that may have caused some consumers to wait for the next iPhone, which is due in the fall. But in the past, iPhone sales have stayed strong nine months after the new model is launched, then dipped as people began holding off, waiting for the new model.

In the April to June period, Apple sold 26 million phones, 28% more than it did in the same quarter last year.

Complicated relationship

Most other phone makers "would kill" for those numbers, says Stephen Baker, an analyst with research firm NPD Group.

The exception is Samsung, which has solidified its position at the world's largest maker of smartphones. Analysts believe it made just over 50 million smartphones in the second quarter, or nearly twice as many as Apple. (The company doesn't release specific figures.) Its smartphone sales have nearly tripled in a year.

Most of Samsung's sales comprise cheaper smartphones that don't compete directly with the iPhone. Its flagship phones, though, have emerged as the iPhone's chief rivals.

Samsung and Apple have a complicated relationship. They're rivals in the smartphone and tablet-computer markets, and are set to square off in a high-profile trial over mobile patents in San Francisco this week. Samsung is one of Apple's largest suppliers of chips and displays, and Apple is one of Samsung's largest clients.

Though Apple is known as a relentless innovator, the iPhone's screen has been the same size - 3.5 inches (8.9cm) on the diagonal - since the first iPhone came out. It was a big screen for the time, but among the competition, screen sizes have crept up.

Samsung has increased the screen size of its Galaxy series with every model since it debuted in 2010. The Galaxy S had a screen that measured 4 inches (10cm) diagonally, and was followed by the S II, at 4.3 inches (10.9cm). The S III, the latest model, measures 4.8 inches (12cm). The screen is nearly twice as large as the iPhone's. Yet the Galaxy is thinner and lighter than an iPhone.

Samsung has also achieved surprising success with an even bigger phone, the Samsung Galaxy Note. Its 5.3-inch (13.4cm) screen makes it somewhat awkward to hold to the ear, but customers don't seem to mind, or perhaps they value the large screen and included stylus more.

Aside from design, Apple is inflexible in another way: by releasing a new phone only one per year, it lets the competition create new phones with features the iPhone doesn't have and lets them go unchallenged, at least until the new iPhone comes out.

"Apple's schedule leaves the other ten or nine months of the year wide open for everybody else," says Llamas.

For instance, the newest Samsung phones can use the latest high-speed data networks in the US, and talk to payment terminals in stores, so they can act as smart "credit cards".

All the profit

Samsung times its product launches to take maximum advantage of the lull in iPhone sales that usually precedes the launch of a new model. The S III went on sale in Europe in May and in the US in June.

The rest of the competition is in disarray, and hasn't been able to capitalise in the same way on Apple's rigid release schedule and conservative design. Nokia, until recently the world's largest phone maker, is in sharp retreat and is conducting a complete revamp of its smartphones.

Research In Motion is stuck with outdated software for its BlackBerrys at least until it launches a new operating system next year. HTC of Taiwan is suffering from marketing missteps in the last few years. LG Electronics, another Korean company, hasn't been able to keep up with Samsung when it comes to high-end phones, or with cheaper manufacturers on the low end.

Together, Samsung and Apple make half of the world's smartphones, and since competitors are losing money or breaking even, account for nearly all of the profits in the industry.

"Samsung is the only company that didn't really buckle under the weight of the iPhone 4S. Good, solid devices and good, solid marketing behind them," Llamas says.

Analysts now expect the new iPhone to arrive in September or October, probably with a slightly bigger screen. Sticking to one screen size has served Apple well, Baker says, but he sees the company moving with the times, as it's done many times before.

"When they have the reputation and the brand loyalty that they have, you don't have to be the first to market" with new features, Baker says. "You don't have to take that risk."

  • fred.fraser.12 - 2012-07-30 22:29

    Apple needs to increase the size of the iPhone's screen, that's all.

      merven.halo - 2012-07-31 07:46

      But that is why they've got the iPad for! I love my iPhone, the only thing that irks me is the copyright protection on their systems.

  • veritas.odium.paret - 2012-07-30 22:46

    Eish, if only the costs of these data bundles could be more merciful. It's costing some of us a lot to really enjoy these phones and use some of their great features...

      Squeegee - 2012-07-31 07:12

      Put in unlimited ADSL and go wi-fi.

      JohncarlosBiza - 2012-07-31 11:35

      MTN 2gb is R190. Not bad for mobile data and it can last you a good month or two if you avoid streaming vids

  • Jose Pereira - 2012-07-30 22:49

    Seems like an article written by a Samsung fan. They can have their bigger screens, I prefer the apple brand. It's synergy with other Apple devices. It's operating system and it's rigidity. Drop a Samsung and the whole thing falls apart. There is no comparison.

      rlong1952 - 2012-07-30 23:07

      Yes, agreed. Apple build quality is far better and yes of course Samsung is outselling Apple at present because the S3 is a new model, but when the new iPhone comes in September, things will change. I had an opportunity (because I live in Asia) to compare the Galaxy to Sky's Vega phone and I can tell you that even though that phone doesn't have the hype around it that the Galaxy has, it is a much nicer phone. Galaxy's are overrated, many of my friends here in Asia have them and I struggle to find one that really likes them. My Korean friend told me the other day, he is really sorry he didn't take the iPhone rather than the Galaxy and that from a Korean!!!

      troffel - 2012-07-30 23:37

      Rofl! Drop the Samsung and the whole thing falls apart? You might want to educate yourself more and youtube some drop test vids, champ.

      hendrikvs - 2012-07-31 07:47

      ALL Apple products rock! Will never be able to adopt to anything but Apple products! They simply are the best!

      merven.halo - 2012-07-31 07:48

      @Kamohelo Olifant - well said dude, well said...

      jean.rossouwsa - 2012-07-31 08:18

      Clearly you have never had a SAMSUNG yet, have you? And the fact that it breaks easily is bunch on nonsense.

      bretton.eveleigh - 2012-07-31 09:07

      I've used Apple products for many years in the video & graphic design industries. They are cool, styling is awesome, and work well. But the new boys on the block are out-smarting them... comparing a S2 to a 4s feature for feature, the S2 trumps!

      fabs.rodriguez - 2012-07-31 11:19

      I've yet to see a Samsung with a cracked screen.... ;)

  • wesleywt - 2012-07-31 06:12

    Perhaps Apple should sue the people for not buying their phones.

  • david.goliath.355 - 2012-07-31 07:10

    Apple rips people off with their high prices, that will be their downfall.

  • whoowhoohoo - 2012-07-31 07:27

    I am sorry but I disagree. I own both an iPhone and a Samsung Galaxy Ace. Never had a single hiccup with the iPhone, nothing but trouble with the Samsung, especially the screen tht dies suddenly or refuses to wake up when I receive calls. Biggest rubbish I have had since my first NOKIA some 17-odd years ago.

      Hamrammr - 2012-07-31 07:48

      You can't compare a iPhone and a Galaxy Ace, if you wat a comparison compare it with a a Galaxy SII or SIII, maybe even the Galaxy Note. It is like comparing a expensive German luxury vehicle to a entry level Chevvy Spark, please compare phones in the same class. I regularly work with iPhone 4S phones and own a Galaxy Note and have used a Galaxy SII, the iPhone does'nt even come close to the Samsungs in all respects. Have dropped my Galaxy note a few times and nothing broke, it did not even scratch. One of the guys at work dropped his new 4S once and the screen cracked beyond economical repair.

  • adrian.tyler - 2012-07-31 07:35

    Galaxy FTW. Open source FTW.

  • bretton.eveleigh - 2012-07-31 09:04

    Strange that the article doesn't delve into the OS's of the iPhone and Samsung S series... Apples iOS is good, but it's heavily locked down, with most apps good costing a fair penny. Samsung uses Google's Android, it's open source, has oodles of quality free apps, and is easy to customise & personalise. That's what swayed me to the S2 over the iPhone!

  • joe.muhr.14 - 2012-07-31 13:02

    How do you know if someone owns an iPhone? ...They tell you! :-D

      tonic14 - 2012-08-03 10:46

      Because we are proud of it :)Samsung owners want to hide their shame, so they keep queit...

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