Samsung and HTC have been challenged by similar problems over the past year. In the high-end market, they face Apple , which stole the big-screen spotlight with the iPhone 6 Plus. In the midrange and entry-level markets, they must fend off Chinese rivals includingXiaomi, Huawei, and Lenovo, which sell their phones at paper-thin margins.
As a result, Samsung's share of the global smartphone market slipped from 30% in fourth-quarter 2013 to20% in the same quarter of 2014, according to Strategy Analytics. HTC, which held 11%of the market in 2011, controlled less than 2% by the end of last year.
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Reversing those declines will be tough, but neither Samsung nor HTC intend to stop making premium Android devices. Samsung recently unveiled the Galaxy S6, which will launch on April 10, and HTC introduced the One M9, which will arrive on March 31. But does either flagship device stand a chance against the iPhone 6?
Samsung's Galaxy S6/S6 Edge (L) and HTC's One M9 (R). Source: Company websites.
Superior hardwareBoth the Galaxy S6 and One M9 have much beefier specs than the iPhone 6.
To stand out against other Android devices and the iPhone, Samsung will also launch the S6 Edge, which features a curved three-sided screen. The One M9, however, looks nearly identical to the One M8.
In terms of extra features, the Galaxy S6 has a fingerprint sensor, a near-field communications chip, and support for Samsung Pay. The One M9 lacks a fingerprint sensor but can support Google Wallet or Android Pay with its NFC chip.
Inferior marginsAs attractive as the S6 and One M9 look, neither Samsung nor HTC can match Apple's cult-like brand appeal. Since the iPhone is seen as a status symbol worldwide, Apple gets away with selling cheaper hardware at higher margins.
The entry-level 16GB iPhone 6 costs $649 without a contract. That's the same estimated retail price as the 32GB S6 and the 32GB One M9. This means that to gain any ground against Apple, Samsung and HTC must sell their devices at lower margins. A recent Strategy Analytics report revealed that Android devices, which accounted for over 80% of the global smartphone market in 2014, only accounted for 11% of all profits during the fourth quarter. Apple swallowed up the remaining 89%.
Meanwhile, Chinese rivals in the Android space are making Samsung and HTC devices look ridiculously expensive. Xiaomi's Mi Note, the company's 2015 flagship device, sports a 5.7-inch screen with 386 ppi, a quad-core 2.5 Ghz processor, 3GB of RAM, 13MP and 5MP cameras, and a 3000 mAh battery. Those specs can't match the top-tier figures of the S6 and One M9, but they're certainly "good enough" for most consumers, especiallywith a price tag of just $370.
Xiaomi's Mi Note. Source: Xiaomi.
That puts Samsung and HTC in a tough spot. If they install cheaper hardware in the flagship devices to match Xiaomi's prices, they will lose their premium branding among Android manufacturers. But if they keep taking the high road, they could cede more market share to lower-margin competitors.
The verdictThe S6 and One M9 are great phones, but they probably can't reverse Samsung's and HTC's smartphone losses. Samsung's S3 briefly overtook Apple's iPhone 4S in 2012 because it offered a large 4.8-inch screen that dwarfed the latter's 3.5-inch display, but that heyday didn't last long. Last May, the S5 failed to outsell the much older iPhone 5s during its first full month of sales.
Since the differences between major smartphones are now less noticeable to the average consumer, purchases are often based on habit, brand loyalty, and ecosystem dependence instead of a desire for the fastest hardware.
At the top of the smartphone market, it's a battle of the brands. At the bottom, it's a matter of which company can sell the best hardware at the lowest margins. It's getting tough for Samsung and HTC to compete against Apple in the high-end market, so they might have to focus more on expanding their lower-end efforts instead.
The article Will Samsung's Galaxy S6 or HTC's One M9 Challenge Apple's iPhone 6? originally appeared on Fool.com.
Leo Sun owns shares of Apple. The Motley Fool recommends Apple, Google (A shares), and Google (C shares). The Motley Fool owns shares of Apple, Google (A shares), and Google (C shares). 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.