Apples iPhone 6 Hits Samsung Galaxy in Its Home Country

By Markets Fool.com

Continue Reading Below

Source: Samsung.

For industry watchers, Samsung appears to have a hit on its hands with the newest iterations of its Galaxy line. While it's still early, most indications are that the company's S6 and S6 Edge are more akin to the Galaxy S4's success than the Galaxy S5 that was widely considered a flop. After selling more than 70 million units for the Galaxy S3 and S4, Samsung's Galaxy S5 sold 40% less than its predecessors and led to shakeups among its mobile executive team.

However, a recent report from the Korea Times points toward higher expectations on behalf of the company in regards to the newest iteration. An unnamed executive expects sales of "70 million plus" units, and boasts there is "no doubt there they will be the biggest-sellers in the Galaxy series ever." The company's Vice Chairman Kwon Oh-hyun added, "the first week looks impressive."

However, it doesn't appear Samsung's home country of South Korea has gotten the memo. The newest report in South Korean media, courtesy of Patently Apple, outlines Samsung's struggles: "South Korea's No. 1 tech giant had sold a little over 200,000 units of the two smartphones here as of Sunday [April 19] since their launch on April 10, sharply falling short of the 300,000 pre-orders, according to the data, indicating that earlier sales forecasts may be exaggerated."

An ominous warning, or no big deal?
On optics, Samsung underperforming in its home country is embarrassing; but the question for investors should be if this data is actionable. And unfortunately, that's less clear. On one hand, underperforming pre-order estimates by one-third is an ominous warning. On the other, it's reported that the company received 20 million preorders, so underperformance on such a small amount of units isn't important if this is an isolated forecast error.

Continue Reading Below

That's the thought among Samsung analysts, but there is a caveat. The South Korean market is heavily based upon discounting and subsidies. In many cases, customers can combine both manufacturer subsidies and carrier subsidies to not only get a new phone for free, but to also receive cash back on the purchase. And while the South Korean government has done a lot to clamp down on illegal and anti-competitive behavior, the culture is still one of heavy discounts in order to move product.

Apple's competing in South Korea
For years, Samsung has been the No. 1 smartphone manufacturer in South Korea as nationalistic pride and the aforementioned marketing culture have kept foreign rivals at bay. Last November, however, Apple's market share in South Korea jumped in the wake of the iPhone 6 and iPhone 6 Plus release as its newer, large form factor found an enthusiastic audience. A report from smartphone research firm Counterpoint found Apple doubled its market share to 33%, while Samsung dropped from nearly 60% to 45% that month.

Most importantly, Apple doesn't believe in extreme manufacturer discounting in order to move units -- regardless of the market it enters. For the company to compete solely on the unit's merits and without aggressive discounting, and to acquire such market share, is a testament to the brand and product. Samsung is looking for carriers to increase subsidies on the Galaxy S6 in order to move more units. If Apple is able to maintain significant market share on Samsung's turf, that could be a more worrisome sign than Samsung's home country underperformance during the course of nine days.

The article Apples iPhone 6 Hits Samsung Galaxy in Its Home Country originally appeared on Fool.com.

Jamal Carnette owns shares of Apple. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.