Samsung is now more profitable than Apple, according to second-quarter financial results released by Samsung on Friday in Seoul. But while the two rivals have successively one-upped each other with ever sleeker, more technologically sophisticated phones, new competition is stirring.
Already, the combined share of the worldwide smartphone market controlled by Apple and Samsung slipped to 43 percent in the second quarter from 49 percent a year earlier, IDC, a research firm, reported on Friday.
Some of the companies that are chipping away at the leaders are familiar names trying comebacks, like Sony, Nokia and HTC. Others are relative newcomers, like LG of South Korea and Lenovo, ZTE and Huawei of China.
“The story is no longer Apple versus Samsung,” said Bryan Wang, an analyst at Forrester Research. “Going forward, they will both face similar challenges.”
Analysts say buyers are more willing to look at alternatives to Apple or Samsung because the differences among smartphones are becoming less pronounced.
The proportion of phones running Google’s Android operating system keeps growing, and technical specifications are converging. Like Samsung’s Galaxy S4, a number of other phones, including Sony’s Xperia Z, also include high-definition 5-inch screens.
That makes price, where the Chinese smartphone makers have an edge, an increasingly important selling point.
Those challenges were evident in the latest earnings report from Samsung on Friday, when the company said it expected competition in the smartphone business to stiffen in the third quarter, with new models pending from LG and other rivals. “The strong growth streak for the smartphone market is expected to continue in the third quarter, albeit at a slower pace,” the company said in a statement.
Samsung remains a powerhouse, reporting big gains on Friday in sales and earnings for its latest quarter. Net income rose 50 percent, to 7.77 trillion won, or $6.96 billion, from 5.19 trillion won a year earlier. Revenue rose to 57.46 trillion won, or $51.6 billion, from 47.6 trillion won.
On Tuesday, Apple posted quarterly net income of $6.9 billion on revenue of $35.3 billion.
Strategy Analytics, a research firm, said Samsung had passed Apple for the first time to become the world’s most profitable maker of mobile handsets. Samsung, which does not break out results for its handset-making business, generated $5.2 billion in quarterly operating profit from the unit, Strategy Analytics estimated, compared with $4.6 billion for Apple.
Samsung previously pulled ahead of Apple in market share, and its gains continued in the second quarter, when it controlled 30.4 percent of global smartphone shipments, compared with 13.1 percent for Apple, according to IDC.
Samsung has had to work harder than Apple to achieve those gains. Ubiquitous TV ads around the world and big-ticket promotional events like an introductory party for its flagship model, the Galaxy S4, at Radio City Music Hall, have driven up marketing costs. And while the S4 has been selling at a brisk pace, it has fallen short of some analysts’ expectations. Investors have grown accustomed to bigger gains, and the share price of Samsung, like Apple shares, has taken a beating this year.
“In a way, Apple and Samsung have become victims of their own success,” said Pete Cunningham, an analyst at the research firm Canalys. “When these companies report many billions of profits every quarter, it’s hard to say they are doing anything wrong.”
While the old generation of phone makers — Nokia, Motorola, BlackBerry — struggle, together Samsung and Apple still collect more than 90 percent of the profit in smartphones, analysts say. Yet that success has emboldened more companies to try to challenge them.
Individually, none of these companies pose a threat to the top two. Collectively, however, the next three top players showed strong growth over the last year. No. 3 LG’s share of worldwide smartphone sales increased to 5.3 percent from 3.7 percent in the second quarter, according to Strategy Analytics. No. 4 ZTE rose to 5 percent from 3.7 percent and No. 5 Huawei went to 4.8 percent from 4.2 percent.
IDC had a slightly different ranking, with Lenovo replacing Huawei in the top five and also showing solid growth, to 4.7 percent from 3.1 percent.
As recently as the first quarter of 2011, three Western companies — Apple, Nokia and BlackBerry — topped the IDC list.
The eastward shift reflects the growth of sales in China, which has surpassed the United States to become the biggest smartphone market, and other developing economies. Analysts say much of the growth in coming years will occur among lower-priced smartphones, an area in which Chinese makers are strong and Apple is notably absent.
But both Apple and Samsung face new challenges at the high end of the market, where their dominance has been most pronounced. Sony, for example, has shown renewed strength in Japan, where its Xperia Z has been outselling the iPhone, and Europe, where IDC showed Sony’s market share rising to 10 percent in the first quarter from 6 percent a year earlier.
LG, which said in the last week that its smartphone shipments had more than doubled in the second quarter from a year earlier, to 12.1 million from 5.7 million, clearly has bigger ambitions in the United States. For the introduction of a new flagship model, the company has planned a splashy event along the lines of Samsung’s Radio City extravaganza, sending out a “save the date” notice to journalists for Aug. 7.
Why are rivals to Samsung and Apple so optimistic? Despite the slowdown in growth that the market leaders have signaled, the business continues to expand. Smartphone shipments worldwide rose 52 percent in the second quarter, to 238 million phones, according to IDC.
“The smartphone market is still a rising tide that’s lifting many ships,” said Kevin Restivo, an analyst at IDC. “Though Samsung and Apple are the dominant players, the market is as fragmented as ever. There is ample opportunity for smartphone vendors with differentiated offerings.”
Already, the combined share of the worldwide smartphone market controlled by Apple and Samsung slipped to 43 percent in the second quarter from 49 percent a year earlier, IDC, a research firm, reported on Friday.
Some of the companies that are chipping away at the leaders are familiar names trying comebacks, like Sony, Nokia and HTC. Others are relative newcomers, like LG of South Korea and Lenovo, ZTE and Huawei of China.
“The story is no longer Apple versus Samsung,” said Bryan Wang, an analyst at Forrester Research. “Going forward, they will both face similar challenges.”
Analysts say buyers are more willing to look at alternatives to Apple or Samsung because the differences among smartphones are becoming less pronounced.
The proportion of phones running Google’s Android operating system keeps growing, and technical specifications are converging. Like Samsung’s Galaxy S4, a number of other phones, including Sony’s Xperia Z, also include high-definition 5-inch screens.
That makes price, where the Chinese smartphone makers have an edge, an increasingly important selling point.
Those challenges were evident in the latest earnings report from Samsung on Friday, when the company said it expected competition in the smartphone business to stiffen in the third quarter, with new models pending from LG and other rivals. “The strong growth streak for the smartphone market is expected to continue in the third quarter, albeit at a slower pace,” the company said in a statement.
Samsung remains a powerhouse, reporting big gains on Friday in sales and earnings for its latest quarter. Net income rose 50 percent, to 7.77 trillion won, or $6.96 billion, from 5.19 trillion won a year earlier. Revenue rose to 57.46 trillion won, or $51.6 billion, from 47.6 trillion won.
On Tuesday, Apple posted quarterly net income of $6.9 billion on revenue of $35.3 billion.
Strategy Analytics, a research firm, said Samsung had passed Apple for the first time to become the world’s most profitable maker of mobile handsets. Samsung, which does not break out results for its handset-making business, generated $5.2 billion in quarterly operating profit from the unit, Strategy Analytics estimated, compared with $4.6 billion for Apple.
Samsung previously pulled ahead of Apple in market share, and its gains continued in the second quarter, when it controlled 30.4 percent of global smartphone shipments, compared with 13.1 percent for Apple, according to IDC.
Samsung has had to work harder than Apple to achieve those gains. Ubiquitous TV ads around the world and big-ticket promotional events like an introductory party for its flagship model, the Galaxy S4, at Radio City Music Hall, have driven up marketing costs. And while the S4 has been selling at a brisk pace, it has fallen short of some analysts’ expectations. Investors have grown accustomed to bigger gains, and the share price of Samsung, like Apple shares, has taken a beating this year.
“In a way, Apple and Samsung have become victims of their own success,” said Pete Cunningham, an analyst at the research firm Canalys. “When these companies report many billions of profits every quarter, it’s hard to say they are doing anything wrong.”
While the old generation of phone makers — Nokia, Motorola, BlackBerry — struggle, together Samsung and Apple still collect more than 90 percent of the profit in smartphones, analysts say. Yet that success has emboldened more companies to try to challenge them.
Individually, none of these companies pose a threat to the top two. Collectively, however, the next three top players showed strong growth over the last year. No. 3 LG’s share of worldwide smartphone sales increased to 5.3 percent from 3.7 percent in the second quarter, according to Strategy Analytics. No. 4 ZTE rose to 5 percent from 3.7 percent and No. 5 Huawei went to 4.8 percent from 4.2 percent.
IDC had a slightly different ranking, with Lenovo replacing Huawei in the top five and also showing solid growth, to 4.7 percent from 3.1 percent.
As recently as the first quarter of 2011, three Western companies — Apple, Nokia and BlackBerry — topped the IDC list.
The eastward shift reflects the growth of sales in China, which has surpassed the United States to become the biggest smartphone market, and other developing economies. Analysts say much of the growth in coming years will occur among lower-priced smartphones, an area in which Chinese makers are strong and Apple is notably absent.
But both Apple and Samsung face new challenges at the high end of the market, where their dominance has been most pronounced. Sony, for example, has shown renewed strength in Japan, where its Xperia Z has been outselling the iPhone, and Europe, where IDC showed Sony’s market share rising to 10 percent in the first quarter from 6 percent a year earlier.
LG, which said in the last week that its smartphone shipments had more than doubled in the second quarter from a year earlier, to 12.1 million from 5.7 million, clearly has bigger ambitions in the United States. For the introduction of a new flagship model, the company has planned a splashy event along the lines of Samsung’s Radio City extravaganza, sending out a “save the date” notice to journalists for Aug. 7.
Why are rivals to Samsung and Apple so optimistic? Despite the slowdown in growth that the market leaders have signaled, the business continues to expand. Smartphone shipments worldwide rose 52 percent in the second quarter, to 238 million phones, according to IDC.
“The smartphone market is still a rising tide that’s lifting many ships,” said Kevin Restivo, an analyst at IDC. “Though Samsung and Apple are the dominant players, the market is as fragmented as ever. There is ample opportunity for smartphone vendors with differentiated offerings.”
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