Apple losing the smartphone war, but it’s not over yet

Samsung delivered a new blow to arch rival Apple last week when it unveiled its latest smartphone. We look at how the fight is shaping up between the two big-hitters in consumer electronics.

The technology world was on the edge of it seat last week when Samsung unveiled its latest smartphone: The Galaxy S4.

At a much-hyped event in New York Samsung threw down the gauntlet to other smartphone manufacturers by revealing a phone with features including the phone knowing whether the user is looking at it or not – and reacting accordingly – and the ability to sense a finger hovering over the screen before you touch it.

The S4’s voice recognition feature means users can also dictate and send text messages while translator software can understand nine languages.

And the list goes on – so much that some experts have dubbed the Galaxy S4 the “iPhone killer”.

Apple's iPhone 4s and Samsung's Galaxy S III (REUTERS/Lee Jae-Won/Files)

Samsung vs Apple

Apple and Samsung were the only two companies to turn a profit in the smartphone market last year, after early frontrunners such as Blackberry and Nokia fell behind the American and South Korean firms.

So, how’s the fight between them squaring up so far?

Despite Apple being by far the largest technology company in the world by market capitalisation and profit, Samsung outsells it on a per-unit basis. Last year it became the world’s largest phone-maker by unit sales, overtaking long-term market leader Nokia.

It has also been gaining market share, hurting Apple’s margins and stock price. Samsung boasted bigger revenues than Apple last year, £183.5 billion to Apple’s £156.5 billion. It has a much bigger employee count too; 220,000 to Apple’s 115,200.

Another win for Samsung is the amount it ploughs into research and development at £7 billion to Apple’s £2.8 billion. And as it sells more phones than Apple – 66.1 million to Apple’s 45.8 million in the last three months of 2012 alone – it might, at a first glance, seem that Samsung is the outright winner in the great smartphone battle.

But there’s one key area where Apple is still ahead: Profit.

According to CNN Money’s Fortune blog, in Q4 of 2012 for every pound spent on one of their smartphones, Apple makes 43p while Samsung makes 36p. So that means that Apple’s profit was actually 43% greater than Samsung’s last year even though Samsung sold more phones.

[Related feature: What an iPhone costs to make]

Evolution of the iPhone


Samsung is certainly ambitious. The only company in the world that spends more on advertising than Samsung is Coca-Cola.

Samsung was founded by Lee Byung-chull in 1938 in Seoul, South Korea. Initially the group operated in several business areas including food processing, textiles, insurance, securities and retail. It entered the electronics industry in the late 1960s and by the 1990s it had a global presence, particularly in the mobile phone market which was then in its infancy.

The 1990s saw many of the Samsung Group’s subsidiaries sold off leaving it to concentrate on three industries: Electronics, engineering and chemicals.

Yet despite concentrating its efforts in these areas, the Samsung Group still comprises around 80 different companies operating in anything from life insurance to hotels.

It’s arguably mobile phones that Samsung is best known for now and its ambition in this market saw it hit the headlines last year in a public row with Apple about patent violations.

In the US jurors rules that Samsung had to pay Apple $1.05 billion in damages for violating six of its patents on smartphone technology (since heavily reduced). In Samsung’s home market of South Korea judges ruled against Apple. And that’s just two of more than 50 patent cases across 10 countries, with judges in split between the technology firms.

Customers queue to be the first to pick up the iPhone 5 at Apple's Regent Street store. </p> <p>Daniel Deme/WE …

A turning tide

Apple has traditionally had a clear lead on Samsung in customer loyalty. However, the worm is slowly turning. Last year Apple claimed the top spot in the Brand Keys Customer Loyalty Engagement Index for smartphones but this year it’s been knocked off the top spot by Samsung.

Whether Samsung can retain the crown next year is another matter. Apple still has millions of devotees who’ll queue up outside stores for days to get their hands on new products.

But Samsung has its own loyal customers now. Kantar World Panel Comtech found more than two-thirds of existing users now expect to buy another Samsung device.

Apple has seen its shares fall 30% in six months, its Maps software was panned for inaccuracies; its financial results - that used to always beat trader forecasts – have recently missed analysts' expectations twice in a row.

But that doesn’t mean the fight is over.

"[Apple has] all the components of the magic potion, which is the hardware-software ecosystem," said Brian White, analyst with Topeka Capital Markets. "All they need to do is take that potion and put it in a different segment of the iPhone market."

What the new Samsung Galaxy S4 looks like
The beauty of the phone is the highly crafted design encompassing a larger screen size and battery, minimized bezel; all housed in a light (130g) and slim (7.9mm) shape.
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Getty Images | Photo by Allison Joyce / Getty Images
Fri, Mar 15, 2013 00:28 GMT