As the two most successful smartphone companies in the world, tech giants Apple and Samsung share a unique rivalry in more ways than one.
When they aren't suing one another in courtrooms around the world, Apple and Samsung are in a constant battle to outflank the other with each subsequent device launch. To make matters more complex, Samsung also manufactures some of the key innards of Apple's all-powerful iPhones, a dependence Apple can't undo fast enough. And lastly, in a testament to their dominance in this space, Apple and Samsung have historically generated all the profits among handset OEMs.
In light of Apple's spectacular FY Q1 report, we now know just how popular the iPhone 6 and 6 Plus are in the eyes of consumers worldwide And as more data and analysis become available, it's becoming increasingly clear that the iPhone 6 is gaining market share against Samsung, even in areas Samsung has long dominated.
Samsung's problems at home Apple has gained market share in virtually every market in which it operates since its iPhone refresh late last year. However, what's perhaps most telling about the iPhone 6 and 6 Plus' consumer response has been that Apple has made serious inroads in Samsung's home market of South Korea. According to data from Counterpoint Research, Apple saw its share of South Korean smartphone purchases more than double in the first month of the iPhone 6 and 6 Plus' availability, much of it at Samsung's expense.
Source: Counterpoint Research.
Making Apple's performance all the more impressive, this marks the first time a foreign smartphone OEM has claimed more than 20% of the smartphone market in South Korea, a market that Samsung's own branded smartphones have long dominated. However, the rising dominance of Apple's iPhones in East Asia is by no means limited to South Korea.
And although it probably has less of a symbolic impact than Apple's performance in South Korea, the iPhone 6 and 6 Plus have helped fuel market share gains across other key East Asian markets, most critically in China. According to research firm IDC, Apple doubled its market share in the People's Republic in the fourth quarter.
These fourth-quarter market share figures point to Apple's overwhelming success as Samsung struggles. I've discussed Samsung's unfortunate two-front war, with Apple attacking its high-end smartphone business with its larger-screened iPhones and Chinese upstart Xiaomi flanking at the low end, and these numbers perfectly illustrate this ugly dynamic.
Can Samsung come back versus Apple and Xiaomi? Although Samsung remains the world's largest smartphone company by unit shipments, that number in isolation masks just how precarious a position Samsung finds itself in.
For context, look at how Samsung's smartphone shipments merely treaded water last year as global smartphone shipments grew 27.6% altogether.
Obviously, Samsung had a bad year in 2014. However, this chart also probably understates just how precarious Samsung's position is going forward, for a few reasons.
As smartphone sales in developed markets slow in the years ahead, emerging markets will become increasingly integral growth drivers for the global smartphone space. Led by China and India, the Asia-Pacific region is expected to grow to nearly 1 billion shipments by 2017. This seems like a perfect opportunity for Samsung. However, Samsung's awful Q4 2014 performance in China at the hands of Xiaomi and Apple perfectly encapsulates why Samsung has its work cut out for it if it wants to remain relevant in the regions that are driving smartphone growth in the years ahead.
Having raised roughly $1.1 billion in its most recent round of funding, Xiaomi is well capitalized and intent on extending its influence globally in the years ahead. According to reports, Xiaomi's device shipments tripled in 2014 to over 61 million units shipped. And although it's reportedly managed to do so by selling its smartphones at razor-thin profit margins, Xiaomi apparently plans to sell 100 million smartphones in 2015 as it takes its rapidly growing brand global.
And if Xiaomi is likely to impinge on Samsung's shipments, it's Apple that will probably move decisively to soak up Samsung's smartphone profits. Apple's move to larger-screened iPhones has proved tremendously successful, with one analyst recently estimating that Apple alone produced 93% of all profits among smartphone OEMs during the fourth quarter. And with Samsung likely to pursue potentially gimmicky tactics such as curved side screens on its upcoming Galaxy S6, it's hard to see how Samsung will be able to reassert itself as an equal to Apple in the high-margin portion of the smartphone market, which generates the bulk of the industry's profits.
So with the stage set for Samsung to continue to lose market share at the hands of Xiaomi and others at the low end and stiff competition from Apple at the high end, it's hard to envision a scenario in which Samsung's once-illustrious smartphone business continues to thrive.
The article More Proof Apple Inc. and Xiaomi Have Samsung's Smartphone Business on the Ropes originally appeared on Fool.com.
Although he rooted for The Grand Budapest Hotel,Andrew Tonner's happy for Birdman as well. Sadly for his writing, his to-watch movie list just growing. Andrew alsoowns 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.
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