On September 10, Apple announced the release of the iPhone 5S and 5C. While Apple’s visibility has remained steady over the past few generations of iPhones, there has been a noticeable growth in Android users, especially Samsung. Conversely, Apple’s CEO Tim Cook seems to be resistant to changing his products or his marketing strategy, and one has to wonder if this isn’t a mistake. Samsung is quickly taking control of the smartphone market (especially in Asia) by pushing a low-cost model with user-friendly features such as a larger screen. Some critics worry that if Apple isn’t careful, it might be edged out altogether by its business-savvy competitors. However, considering Apple’s business model, which favours high-end products targeted at a certain consumer, this is unlikely to happen.
Currently, Apple and Samsung are waging a patent war regarding the appearance of smartphones, and Apple is winning. In a landmark case last year, a San Jose court awarded Apple US$1bn in damages, finding Samsung guilty of infringement of Apple’s utility and its design patents of some products, and finding that Apple, in turn, had not infringed on Samsung’s utility patents. Furthermore, some of the evidence disclosed included emails from Samsung employees who were actively brainstorming about how to make their products more similar to Apple’s. In terms of patent disputes between Apple and Samsung, this is just the tip of the iceberg. Legal observers predict a lengthly dispute that will encompass appeals, retrials, and other motions that will ensure Samsung’s continued ability to produce the Galaxy series smartphone, at least in the short-term.
In the meantime, Apple has been espousing the virtues of quality over quantity. As Cook himself stated recently, “some people define or have sort of redefined innovation. And to them innovation only equals a new category…I don’t view it that way…To make the very best products in the world that really deeply enrich people’s lives…That’s what we’re about.” Cook’s comments have contributed to Apple’s already sky-high brand recognition and overall market value. This strategy, which builds on that of former CEO Steve Jobs, has centered on improving on what Apple already has in order to shore up loyalty from existing customers. This approach demonstrates foresight on Cook’s part: he has observed trends in the constantly evolving tech market and tailored his company’s modus operandi to suit the needs of a consumer who values high quality products. Notably, Apple has a higher rate of attracting customers from its competitor: 20% of Apple users have come from Android, while only 7% of Samsung users have had iOS. This is an encouraging statistic for Apple, which has only a 19% share of the smartphone market compared to Samsung’s 64%.
These market share statistics seem startling at face value, but an important consideration is the fact that Samsung’s dominance largely stems from cost considerations. Samsung’s Galaxy series is targeted at users who want all the perks of a smartphone without the $800 price tag. Coupled with its dominance in Asian markets, this makes Samsung more of a behemoth than one might otherwise think. However, Jobs’ strategy, which Cook has continued to pursue, has seen Apple become one of the most valuable publicly traded companies in the world.
The release of the mid-range 5C alongside the more upscale 5S therefore represents an important venture by Apple into a new market, and an attempt to edge out price-based competition from rivals like Samsung. It will be interesting to compare sales of the 5C versus Samsung’s Galaxy S4, since it might give us a sense of the broader preferences people have for their smartphone companies. If Samsung users genuinely prefer their smartphones to iPhones, they will stick with what they have rather than making the switch to Apple via the 5C. On the other hand, the release of the 5C could potentially undermine Samsung’s entire business strategy.
Another important development in the Samsung versus Apple saga is the proposed deal between Apple and China Mobile, the biggest telecom company both in China and in the world. With 700 million subscribers, a partnership with China Mobile could lead to greater inroads for Apple in the Asian markets, and could further threaten Samsung’s monopoly in a key region. As of yet, there has been no confirmation of the deal, but it is rumoured that the deal will go public in a matter of days.
Tech and business analysts will be scrutinizing the performance of the 5C over the next few months, since it’s going to have a significant effect on the future of Samsung as a whole, and especially of the survival of its Galaxy smartphones. While the legal battles are far from over, the release of the 5C might put an end to the Apple-Samsung rivalry once and for all.