Apple Reigns Supreme: How Rivals Like Samsung Fall Short in the Smartphone Market

turned on imac beside macbook on table

Rivals in Apple’s core smartphone market pale in comparison to the Cupertino giant. Samsung, a down-on-his-luck South Korean electronics conglomerate that sells more mobile phones globally than any other company, is only a tenth of the market capitalization, although it also has a massive semiconductor business. Xiaomi, a Chinese challenger, sold more devices than the iPhone in August and accounted for less than 5% of Apple’s gross profit. The average selling price of an iPhone is $900, while the average selling price of a Samsung phone is $300, and the average selling price of a Xiaomi phone is only half that. Google, a Silicon Valley neighbor with a well-established digital advertising business and growing hardware ambitions, plans to sell $5 billion worth of Pixel phones in 2023—compared with Pixel sales of $200 billion for iPhones. competition? What game?

Judging from Wall Street analysts’ targets for Apple’s stock price, it seems like nothing can stop it from marching toward a $4 trillion victory. Still, the iPhone’s permanent place among the world’s richest people cannot be taken for granted. In many ways, its status seems less certain than it has for years.

iPhone seems to be the most impeccable in the domestic market. Nearly half of Americans age 12 or older own one. Considering how powerful a status symbol the Apple logo has become, many people are reluctant to do this. If you’re under 20, “you either have an iPhone or you blame your parents,” concludes Runar Bjorhovde of research firm Canalys.

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One big problem is that the U.S. smartphone market is shrinking. Americans bought about 124 million new mobile phones in 2023, down from 174 million six years ago, according to data from Counterpoint, another research firm. Now, the strategy of grabbing a bigger share of the shrinking American pie may have run its course. Apple’s domestic sales will peak in 2021, reaching 77 million units. Shipments last year were 70 million units.

Samsung has long been eager to get a piece of Apple’s business. Its latest high-end phone is an early adopter of Google’s Gemini artificial intelligence (AI) to enhance search, photo editing and other tasks. Gemini, whose co-founder just won a Nobel Prize, fits perfectly with the Android operating system, which was also designed by Google and made available as open source to Samsung and other companies. But it’s not as smart as Google’s own Pixel, which integrates Gemini not only with Android but also with its custom mobile chip. Apple has historically relied on a similar convergence of hardware with its operating system, iOS. But it has largely eschewed AI modeling and, contrary to its habitual control-freak tendencies, has chosen to rely on outside help for key technologies. Apple Intelligence, an artificial intelligence assistant, will start rolling out in a few days with the help of OpenAI, the creator of ChatGPT, but it will likely result in a more choppy user experience than the Pixel.

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Apple faces more trouble in China. Its second-largest market is also in secular decline, but competition is fiercer. No smartphone brand in China accounts for more than 18% of sales. Five local companies including Oppo, Vivo, Honor, Huawei and Xiaomi plus Apple each account for at least 14%. On October 22, Tim Cook, the CEO of the American company, made a surprise appearance in Beijing for the second time this year, possibly to break what senior Apple observer Horace Dediu called the “stability” of the Chinese market. state”.

If so, Mr. Cook would be wise to change things. A recent Canalys survey showed that Chinese consumers are more enthusiastic about artificial intelligence features than their Western counterparts, and local rivals are quick to offer them. Meanwhile, Apple still has no date for launching Apple Intelligence in China. The ultra-high-resolution cameras that Apple has shunned are a selling point for no-frills rivals in a selfie-obsessed country. So does their Chineseness: Patriotic spending has helped Huawei achieve a remarkable comeback, while the United States has tried to suppress it with sanctions since 2019. Recently, its shipments in China surpassed Apple’s for the first time in three years. Counterpoint’s Yang Wang said the Chinese device uses cheaper but higher-quality Chinese components than the iPhone, making it more cost-effective. This is important at a time when consumer confidence is low.

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In a region where smartphone sales are still growing rapidly, Apple faces a different problem – its pricey iPhones are almost nowhere to be seen. Transsion’s low-priced devices dominate Africa. In India, Oppo, Vivo and Xiaomi together account for two-thirds of Indian phone sales, while Apple’s share hovers at 5%. As disposable income increases, mobile phone buyers in the southern hemisphere may, like many Chinese before them, opt for high-end products from existing suppliers rather than rush to buy iPhones.

Apple might console itself by saying that these problems seem trivial today. The world’s 1.5 billion iPhone users represent the richest fifth of humanity. Many people happily lock themselves away in iOS walled orchards, where Apple sells them high-margin services, from cloud storage to streaming and, soon, artificial intelligence. Given OpenAI’s machine learning capabilities, Apple Intelligence may be a worthwhile compromise. Cook is about to enter India, tomorrow’s biggest spoils. However, Apple must not forget that dominance does not mean failure to surrender.

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