ABI Research just released an industry report that forecasts that Samsung will dominate the mobile handset market going forward from today until at least 2018. Wow. Well, we're amazed to hear this as nothing will prove to be further from the truth. At best, Samsung will continue to play second fiddle to Apple in terms of dominance. The forecast, as we understand it is for smartphones, and doesn't include tablets, which is just as well as Samsung will not dominate the tablet market in any way, shape or form.
But let's examine that word - dominance - for a moment, and within the context of smartphones. What is it exactly that Samsung is going to dominate?
Total number of smartphones sold globally? Sure. We certainly do not see Samsung failing to sell, in absolute terms, the largest total number of smartphones over the next five years.
Total dollars generated from those sales? Maybe, but maybe not. More than likely, eight or nine out of every 10 smartphones Samsung ends up selling over the next five years will be on the low end of the scale, where cost matters greatly and "cheap" is the critical factor and main virtue. It may very well prove to be the case that Samsung wins the total smartphone battle, but ultimately loses the total smart mobile device revenue war.
Total number of state of the art smartphones sold? No way in hell. It is mind-boggling to us that so many people believe that Samsung has actually caught up to Apple in terms of vision and state of the art technology, leadership and capability. Samsung has accomplished no such thing, the "why" of which we detailed in our article earlier this week on former Apple CEO John Sculley's wrongheaded prescriptions for what Apple needs to do going forward.
Apple is once again going to raise the bar substantially in 2013, not only for smartphones but for tablets as well. When it does, Samsung will once again find itself chasing Apple through at least 2015 just to begin catching up to what Apple will deliver in 2013. Apple will retain full ownership of the state of the art end of the market, where the word "cheap" does not exist and where Apple will drive where the largest share of high end revenue ends up going.
What will happen instead is that Apple will expand its devices to offer the "premium" device in each category of smartphone and tablet market segments. So we'll see the most expensive "inexpensive" smartphone come from Apple. We'll see a "ridiculously large screen" smartphone from Apple, and it will be the premium device in the segment. And Apple will gain its share - and revenue - of each of these markets because, in truth, what the market wants is "Apple" devices.
Has anyone ever noticed that more often than not Samsung phones are referred to as "Android" devices? We hear it often - "I went with Android instead of an iPhone." It's much less the case that we hear, "I went with the Samsung Galaxy S III instead of an iPhone." Samsung is keenly aware of this - we'll certainly credit it with that knowledge. This is why Tizen is important to Samsung, even if it won't help Samsung. We remain steadfast in our belief that Samsung should acquire Research in Motion for its operating system and its enterprise chops.
Finally, let's leave Apple for the moment and turn to Nokia, HTC and Windows Phone 8 (and subsequent iterations). Nokia, and to a much smaller but still impactful extent HTC, will begin to hammer Samsung on both the mid and low end of the smartphone spectrum. Windows Phone is going to become a major mobile operating system in the smartphone space - anyone who believes otherwise simply because the OS comes from Microsoft is barking up the wrong tree.
What this means is that Samsung will face a significant war - not today, but as we move into 2014 and 2015 - with Nokia and HTC in the low and mid smartphone markets. These markets will also include Huawei and ZTE from China. Meanwhile, Apple ends up dominating the premium sub-segment of each of them. It isn't Apple that is going to be challenged by the Chinese low end players - it will be Samsung that will be challenged by them.
As Apple SVP of worldwide marketing Phil Schiller recently noted, "We may only own 20 percent of the market but we own 75 percent of the profit." Alas for Samsung, that is not going to change, either today or in 2018.
Edited by Brooke Neuman