
Samsung overtakes Apple as world's most profitable mobile phone maker - Fortaymedia
http://www.guardian.co.uk/technology/2013/jul/26/samsung-apple-profitable-mobile-phone
======
RyanZAG
I'm having a good laugh over this headline for a very simple reason.

A few years back when the iPhone was selling more than all Android devices
combined, people were quick to say that Android would never be able to compete
since it's 'too geeky'.

Awhile later when Android took off a bit and all of the Android devices
together sold more than the iPhone, people were quick to say how it's just one
supplier (Apple) vs many suppliers producing Android phones.

Bit later, Samsung is doing really well with their Galaxy range, and suddenly
Samsung alone is selling more devices than Apple. People then say how Samsung
sells tons of different devices while Apple only sells one.

Again, a bit later, a quarter arrives where a single Samsung device (I believe
it was the S3?) outsold the iPhone. People were then very quick to point out
how profits are important, and Apple makes more profits than anybody making
Android.

Well, look at the news now. Samsung now overtakes Apple in profits as well.
I'm sure we'll have some new goalposts shortly that we can wait for.

These issues (profitability, marketshare, etc) are not ends to themselves -
they are only symptoms or indicators of the real market forces behind them.
The real issue is that Google/Android are out competing Apple in features,
price and 'freedom'. 'Freedom' in this case being a nebulous concept that
translates on-the-ground into something like 'able to load up porn apps on
your phone if you want to'.

~~~
gfodor
I was curious if now, 5 years later, if the latest Android phone still is
unable to scroll smoothly and animate smoothly between apps, at 60 fps, with
no lag, and respond instantaneously to touches. These are key things the
iPhone has done since it's first release since it's crucial to maintaining the
illusion you are manipulating things on the screen. Every time I try the
latest Android device in the store I just laugh in disbelief because
inevitably it is laggy and slightly unresponsive, and feels like I am
interacting with a _computer_.

Googling around, it looks like the S4 still has animation lag in all sorts of
places. Amazing.

I mean, hats off to Samsung for getting as far as they have. They've basically
exploited Google's engineering resources brilliantly and have been ruthlessly
competitive. Their design skills seemed to have gotten slightly better, and
bigger screens and every-feature-but-the-kitchen-sink moves phones when they
are compared to the iPhone, especially at a lower price point.

But the bottom line is they still don't really have the design chops and the
attention to detail. Their "innovations" on the S4 are pretty gimmicky. They
haven't built up a large economic moat around their ecosystem. I feel Apple
can pretty easily leapfrog them by introducing a device that is a reasonable
leap forward from where we are now. The iPhone 4, 4S, and 5 are all in the
same design family. I expect the iPhone 6 will be pretty different than any
phone we've ever seen before. I think Apple might even surprise us with an
iPhone 6 this year. Who knows though.

~~~
enraged_camel
Yes, yes, _yes_. I'm an iPhone user, and recently on a two day trip I took my
dad's S4 with me and used it as my sole device.

Oh. My. God.

The difference in user experience is _astronomical_. I work in the tech
industry and I _train_ users on how to use my company's software, and I could
not for the life of me wrap my mind around some of the most basic aspects of
the phone. Most functions, from scrolling and animations to simple things like
changing the focus from a text box on the web page to the URL bar of the
browser, had _noticeable_ lag. Sometimes the lag was so atrocious that I could
not be sure if my taps worked. Occasionally I would get impatient and tap
again, and it would register two taps simultaneously and treat it as a double-
tap! You are absolutely right that it felt like using a regular computer - and
old and slow one. I couldn't deal with it.

At one point I was checking my work email and had to access a voicemail that
arrived as an attachment. I clicked it, and instead of playing the voicemail
right away (which the iPhone does), the S4 _downloaded it as a file._ Okay,
fine, I get it, you want to pretend you're a computer. But where the hell did
it go? Is there a separate browser area for downloaded items like in Chrome?
Is there a desktop, or some kind of folder? And if you're pretending to be a
computer, am I going to need special software to be able to open this file?
Are you really going to make me open another tab and Google "how to find
downloaded files on Android"?!? WHY ARE YOU MAKING ME THINK? _WHY ARE SIMPLE
THINGS NOT OBVIOUS LIKE THEY ARE ON IOS?_

In my experience, people are drawn to Android don't care much about user
experience and instead want larger screens and tons of features. Personally, I
view my smartphone the way I view my car: I want one that is easy to drive,
responsive and won't lag for ~2 seconds every time I do something.

~~~
statictype
I recently switched from an iPhone 5 (after 3 years on an iPhone) to a Nexus 4
and I can't say I've had same experience with lagging. Android has improved to
the point where I haven't seen any lag at all.

 _Most functions, from scrolling and animations to simple things like changing
the focus from a text box on the web page to the URL bar of the browser, had
noticeable lag._

So I just tried this now and saw no lag. It's not that I don't believe you,
but I'm surprised that the Nexus 4 can demonstrate good UI response but the S4
can't (even with all the junk that Samsung puts on top of Android)

I don't see lag as an issue but I agree that there are lots of UI
inconsistencies still in Android that make it not as easy to use as an iPhone.

On the other hand - good god is inter-app sharing/integration so useful and
efficient. Apple's kinda dropping the ball on that one.

 _In my experience, people are drawn to Android don 't care much about user
experience and instead want larger screens and tons of features_

Or maybe they, you know, what to actually make their phone do stuff for them
beyond what the manufacturer thought they may require.

There's a lot of good stuff on both sides. Dismissing one side condescendingly
like that doesn't move the discussion forward.

~~~
cageface
Likewise. My Nexus 4 and iPhone 5 are pretty much indistinguishable in terms
of UI responsiveness. Samsung devices are notorious for lag, even with the
ridiculously powerful hardware in the S4.

As happy as I am to see Android thriving I'd prefer to see somebody other than
Samsung on top.

~~~
rustynails77
I have used Android for about 6 months and iPhone for about 3 years. I find
using IOS like being in hand-cuffs. Let me give an example. For about 6
months, there was an audio bug in IOS (that now seems to be fixed). If I
plugged in my iPhone to a car charger/music player, and removed it while a
song was playing, the audio would switch off. Now Apple, being a hip company,
had about 6 volume settings, of which you can't see the settings for most of
these volume settings. The volumes I know of are :- 1) the volume level
through the headphones 2) the volume through the speaker, when the audio is
switched on by a physical switch 3) the volume through the speaker, when the
audio is switched off by a physical switch 4) the volume through the
headphones when the phone is plugged in through a 30 pin connector 5) an
application specific volume (eg. playing a movie through a web browser - which
does NOT use volumes 1-5) 6) ring-tone volume

Now, for some reason, Apple got the volumes mixed up so that it was IMPOSSIBLE
to get any sound (except 6.) without plugging in a 30 pin connector and
increasing the volume.

It took me MONTHS to work this out. All of the Apple "experts" I knew swore
that this was not possible until I showed them. Even Apple said there was no
bug and that it was faulty hardware, which I knew it wasn't.

The problem is that I keep on having similar issues with IOS. It's just "too
clever" for its own good. Settings that you need are just not there (eg.
accessing WIFI settings with a single click or slide).

There was also the time that iTunes REFUSED to copy music to my iPhone. If I
used a 3rd party tool, songs would be copied and could play, but as soon as I
used iTunes, it knew the new songs were "corrupted", and put the broken
versions of the music on my phone. Thankfully, this bug only lasted a week.

I also find my iPhone 4s laggy. As an example, if I load a web page in the
background, and try to scroll the current web page, the phone locks up for
about 1000 milliseconds (ie. a VERY long time). It really infuriates me.

As for the Android lag, I am not sure what people are referring to. the Google
hardware has not been a problem that I have seen - ever.

I think the best summary I can think of is that IOS is for people that _don
't_ want choice (eg. no FLAC, no 1080p MKV, no volume settings, you can't copy
music files directly - you need iTunes, etc). Android has more that you need
to know about, but at least you CAN find it if you want to.

I have a love/hate with IOS. But, when IOS pisses me off, it REALLY pisses me
off. I can't say the same for Android.

You can see that I like choice. I also agree with others that I'd rather see
Apple do well than Samsung. Samsung have a highly unethical history. If it
weren't for Apple, Samsung would still be churning out rubbish handsets.

------
glasshead969
IMO, you can't compare quarters of 2 companies with different product cycles.
Samsung just released S4 while Apple's last product launch was 9 months ago.

~~~
protomyth
Sure you can, that way you can get the "Apple took back its #1 position"
clicks in the next couple of months.

------
bsaul
I think there's a lesson here in comparing apple ipod to iphone strategy. How
come no one managed to beat apple's ipod and samsung beat the iphone.

I have a couple of ideas (price tag on the iphone was too high, market size is
bigger and attracts more competitors, technology is more difficult because it
deals with both hardware and software, etc), but no definitive answer. That's
something that will be discussed in business schools for a long time.

~~~
randallu
There was nothing like Android for music players. Samsung is not a software
platform company in any way.

~~~
bsaul
Samsung is definitely a software plaform company. It had Bada that it used in
its Wave product line (which surely accounts for a small percentage of their
profit) and it will soon have Tizen.

Android is definitely one reason, and one could say that samsung AND google
won against Apple. That what i meant when i said the business is much more
complicated as it requires to be excellent and competitive both in hardware
and software.

~~~
randallu
Bada is dead, Tizen looks likely to be DOA. By software platform company I
meant a company that can sustain software platforms. It's really easy to ship
a new platform every year; no third parties want that though.

I agree with your point that Samsung really upped the ante on Android
hardware. The GS1 and GS2 were a tipping point on Android hardware performance
and quality -- now that Qualcomm is making high performance parts and everyone
is doing competitive product design Samsung are less necessary to Android (but
still dominating).

------
terabytest
Doesn't Samsung produce a much vaster chain of models, which also contain very
cheap versions which are obviously more affordable than Apple's? If that's the
case, I think this statistic might be a little skewed, because it's pretty
obvious that you'll end up with a bigger market share if you sell 10 different
flavors of the same thing compared to a company which only sells one.

~~~
zdw
To use a car analogy, Apple is a premium car maker, similar to how Lexus is
viewed in the USA. They make mid to high end products, at higher than average
prices, with much less product variation. Lexus isn't selling trucks, for
example.

Compare this to say GM, which makes a very wide range of products in multiple
market segments Lexus doesn't attempt to even exist it, and frequently at the
same to much lower prices in the market segments that they have in common.

So, with Apple, you basically have 3 device sizes to choose from, with or
without WAN modems, at 4 incremental price points, all with fairly similar
specs that tend towards the higher end.

Samsung and other Android phone makers have tens to hundreds of devices that
range the gamut from tiny to huge. Want a 6" phone/tablet with a stylus?
Android has it. Want a head unit that goes in your car and runs Android? Sure.

And with more choices * on average lower price points = more market
penetration.

I'd on a per-car, Lexus makes more than GM, and in the same way, on a per-
device basis, Apple makes more than Samsung.

~~~
corresation
_To use a car analogy, Apple is a premium car maker, similar to how Lexus is
viewed in the USA._

Apple ships absolutely _enormous_ volumes of devices to virtually every strata
of the economy, selling the "premium" iPhone 5 (which is still owned by kids
with burger-flipping jobs -- my jobless niece in a working-class family has
one), to the last generation iPhone 4S discount device, to the _even older_
generation iPhone 4 ultra-discount device. Then there's the incredible value
iPod Touch that Samsung can't compete with.

They may not offer dollar-store products, but they're more like the Old Navy
of brands than any sort of elitist assumptions.

They make good products and they stay away from the very low end (though they
do still pitch a three year old device), but luxury comments aren't rationally
supported.

Worth noting that Samsung's smartphone ASP (average selling price) is just
under $500. Apple's is currently $580. The narrative that Samsung made bank on
waves on discount devices just aren't supported by economics, and the models
are much closer than many seem to think.

~~~
rrreese
The iPhone 4 unlocked costs £319 in the Uk, or around $490 USD. To claim that
this is an "ultra-discount device" is preposterous. I'm sure you can get it
free with an expensive contract, but the costs remains decidedly non-cheap. To
put that in perspective a quick google shows an £80 no contract Android phone.
I'm sure its terrible, but that is an "ultra discount device".

~~~
corresation
The iPhone 4 is priced for contracts, with a $0 (actually less -- usually the
"buyer" gets credits) entry-fee. In the North American sense -- or in much of
the world where the top selling devices are overwhelmingly $600+ -- it is
absolutely "ultra discount": it's a three year old device!

As no-contract pricing starts to become competitive, Apple will do what is
necessary with their discount entrant. But right now for a guy walking into
Verizon or AT&T or many other cell providers around the globe, the iPhone 4 is
as cheap as they can get.

As I said before, the ASP of Samsung smartphones approaches $500. This myth
that everyone else is desperately pitching dollar phones is just nonsense. Yet
so far this little thread offshoot has seen Apple compared with Lexus, Louis
Vuitton, and Bentley.

------
mcintyre1994
Can somebody explain why Samsung didn't have this title in Q2 2012?

From the article:

"The California company made an estimated $3.2bn (£2.1bn) profit from iPhone
sales in the second quarter of the year, according to the research firm
Strategy Analytics, a marked drop from $4.6bn a year ago" So, Apple 2012 Q2 :
$4.6bn

"The same trend has squeezed Samsung's handset profits, which are down from an
estimated $5.6bn in the second quarter of 2012" Samsung 2012 Q2 : $5.6bn

Interesting figures anyway, Apple's drop of over $1bn is interesting, they've
dropped over 3x as much as Samsung did.

~~~
adventured
The article is wrong. Samsung earned $3.64 billion in Q2 2012, from their
phone business. They had an operating profit of $5.9b in Q2 2012 (which is the
apparent source of confusion).

So Apple out-earned Samsung in phones last year, $4.6b to $3.64b.

[http://techcrunch.com/2012/07/26/samsungs-q2-2012-earnings-s...](http://techcrunch.com/2012/07/26/samsungs-q2-2012-earnings-
smartphone-business-propels-41-5b-in-revenues-5-9b-in-profits/)

~~~
mcintyre1994
That'd make more sense, thanks for the techcrunch link, that's much more
useful. [http://techcrunch.com/2013/07/25/samsung-q2-profits-
up-47-5-...](http://techcrunch.com/2013/07/25/samsung-q2-profits-up-47-5-but-
operating-profit-at-its-mobile-division-slows/) seems to confirm the Q2 2013
figure of $5.6bn for Samsung, so that's actually a big increase year-on-year.
That Guardian article is very misleading.

------
itg
Must be nice being a chaebol and having the complete backing of your
government.

~~~
w1ntermute
Must be nice being an SV company and receiving the adoration of your
government and the American people while blatantly dodging taxes and locking
customers into a severely restricted platform.

~~~
ceol
There is no American comparison to a chaebol, especially Samsung. Fanboy
arguments aside, you can't compare the two.

It would be like if Apple built your car, held your insurance policy, and
owned the apartment complex you lived in. None of that comes close to having
to buy digital apps on your Apple phone from Apple.

~~~
hahainternet
Apps, Phones, Tablets, Accessories, Cars, TVs, Home Entertainment systems.

While I agree a direct comparison is unwarranted, the future of Apple's closed
ecosystem is slightly worrying.

------
lotides
(Haven't used this account in a while, not sure if it's shadowbanned. Hope you
can see this.)

No matter what you think of Apple, or Google, and their respective ecosystems,
I'm curious what people think of Samsungs popularity. They're a massive South
Korean company that until recently was well known mostly for ripping off other
companies products and out-marketing them (I'm not making this up, these
accusations go back decades now covering a variety of consumer products, go
ahead and Google it). Some people, myself included, don't really believe this
practice ever ended. Say something were to happen to Apple and Samsung truly
pulled away as the technology leader in the future. Are you as a consumer
happy putting your eggs in that basket, so to speak? Do you think Samsung is
going to embrace a culture of innovation, vision and design? I honestly don't
see it. As a designer, I've stayed clear of Samsung products because they just
come off as cheap (or expensive) imitations. As a market leader, you have the
privilege to introduce consumers to exciting new technologies, UI innovations
and ideas. Samsung isn't built for that. Their idea of great design is hiring
1,000 good designers and taking a little bit from each one. That's not how
design works. You have to have a unified vision with a great idea behind it.
Consistency is so important. I don't care if Apple is the leader for the next
decade but I'd rather a more creative company took the reins.

~~~
r00fus
Samsung coasts on Google's creativity in pushing Android. If they had to rely
on Tizen or Meego (or god forbid Symbian), they'd be dead in the water... and
that's not considering Google's very popular 1st-party Android apps (ie,
GMail, Maps, etc).

Without Google, Samsung has no trump cars in the hand. They know it, which is
why they put any money at all in to other OSs.

What is amazing is that Google is letting them dominate the Android market so
completely. If Google hopes that a strong Samsung will ward off a strong
Apple, they better watch their own back.

------
RealGeek
Déjà vu, it's Windows all over again.

~~~
joakleaf
How is it Windows all over again?

Windows 3.0 and 95 were built on top of DOS which already had the majority of
the market. Apple never had a large portion of the world-market in the 80s and
90s.

Samsung doesn't make the operating system but only the phones. Google doesn't
profit directly from Android. So neither of those two companies are similar to
Microsoft of the 80s.

DOS was incredible strong in the enterprise sector and that's how Windows
really grew. Mac was weak in that sector. Android isn't built on top of
anything similar to DOS. It also isn't stronger in the enterprise sector than
iOS.

The battle between Windows and Mac was not about "free" versus proprietary.
Hardware vendors didn't get Windows for free. Microsoft made its money selling
Windows.

Windows didn't "win" because of just _one_ company. Although IBM did push DOS,
they didn't push Windows. Windows "won" because of many companies.

Apple wasn't the largest IT-giant in the 80s and 90s. It is now. It has a
fortune in the bank and plenty of smart people.

It isn't really Android that has the majority marketshare. It is Samsung! I.e.
one hardware company.

So it really isn't anything like Windows and Mac from 80s and 90s. This is
something different.

It is however a battle of marketshare involving Apple, and right now they are
losing share to something that looks similar to iOS, just like they lost to
Windows that looked similar to Mac in the 90s. However, the situation and
premises are not the same.

What will be interesting now, is if Samsung and Google will continue to get
along and if Samsung will want to differentiate themselves more from stock
Android. I think they'll have to, in order to compete against even cheaper
phones in the long run; The Android market could implode in a massive price-
war with profit margins dropping to 0 everywhere.

Apple can also still fight back. iOS is a reasonably solid foundation, and
right now Samsung is their only real competitor. Traditionally, these devices
compete on Software, design, and hardware capabilities. Apple is a much
stronger software and design company than Samsung... So who knows how this
will end?

~~~
tsotha
>Windows 3.0 and 95 were built on top of DOS which already had the majority of
the market. Apple never had a large portion of the world-market in the 80s and
90s.

The Apple II predated the IBM PC. Apple had virtually the _entire_ market in
the '80s.

~~~
harrytuttle
This is untrue. They had the people who made the most noise in the 1980's and
barely touched anywhere outside the US.

~~~
scholia
It was tough selling the Apple II in a lot of places because there were cheap
Asian clones at a fraction of the price.

That lasted until Apple started suing them. Then the Asian manufacturers
switched to making PCs and peripherals.

------
codeflo
Are the smartphone divisions of Motorola, LG and Sony still operating at a
loss? I wonder how long these companies will continue to throw money at a
market they seemingly can't compete in.

~~~
kryptiskt
Motorola are losing much money right now, they are rolling the dice on the
Moto X launch that's coming up. Google will make a huge marketing push for
that one.

LG, Sony and HTC are making modest amounts of money on phones. HTC has
nosedived to that level and the other two have turned around losses to be
there. They need to do better, but they have little reason to pack it in.

~~~
czhiddy
> They need to do better, but they have little reason to pack it in.

[http://allthingsd.com/20130705/htc-profit-misses-
expectation...](http://allthingsd.com/20130705/htc-profit-misses-
expectations/)

They're still profitable, but for how long? If they don't engineer a
turnaround, they'll be solidly in the red a year from now.

At that point, they have plenty of reasons to pack it in.

~~~
wtetzner
It's unfortunate, because I've owned the HTC 8x, and now the HTC One Google
Play Edition. These are both some of the nicest phones I've used/seen.

------
aet
Why not compare the companies based on their overall strategies/profits? Do
people actually make investment decisions based on a single line of business?

------
saejox
Apple devices are ridiculously expensive. iPhone5 is $900 here.

~~~
Tloewald
Apple's prices are fine here (the US) but it's hard to compete when everyone
else is selling competing products at a loss (Barnes and Noble is selling off
its Nook HD+ inventory at $129, Google has spent billions on Android and more
buying Motorola for little apparent income, Amazon's business model is to sell
razor blade handles at a loss so it can sell blades at break even, and
Microsoft is paying Nokia to make Windows phones almost no-one buys — how can
anyone compete with that on price?)

~~~
cageface
Apple still has huge profit _margins_ , and so far made the mistake (IMO) of
holding on to those margins instead of trading them down a bit to increase
market share. They've done a lot of damage to themselves with this strategy
but they still have a lot of room to maneuver.

~~~
seanmcdirmid
Don't you think they might have damaged their brand by "trading them down a
bit to increase market share"? Why don't BMW or Mercedes go trade down their
margins to sell more cars?

I know engineers don't understand marketing very well, but they should at
least understand the very simple principle of brand building.

~~~
danieldk
This is where the car analogy breaks down: we can reasonably expect that a BMW
or Mercedes can use the same roads as a Dacia. But once Apple doesn't have a
significant share of the smartphone market anymore, Google and others could
easily lock them out further by making services that are Android-only. It's
hard to ignore a 40% audience, it's attractive to bully a 10% audience, that
is willing to pay huge margins, into switching to Android.

~~~
cageface
Exactly. You'd think there would be people left in Cupertino getting an uneasy
sense of deja vu right now.

------
protez
I don't think Apple designed iPhone to become the world's most profitable
mobile phone maker. Apple just happened to become the one with its "Apple II
attitude" to mobile computing.

Compared to how Apple II got obsolete in the personal computer market in
1980s, iPhone/iPad has much brighter future from its solid ecosystem.

It's just the time for Apple to start selling low-priced iPhone models to
compete against Google in developing countries.

------
cpprototypes
Apple partly helped make Samsung popular with their ridiculous patent lawsuit.
It was a lot of free press for Samsung.

------
general_failure
People are delusional if they think ios has better ui than android. The app
store has a terrible ui on iOS where many times it doesn't load at all. And
dumbing down the ui to one button is not so great.

------
10dpd
Anyone who follows The Guardian's tech coverage in the UK would not be
surprised to learn that the reporter for this article is not a certain Apple
fanboy..

------
lazyjones
So the Android strategy of delaying/preventing OS updates to make customers
purchase new smartphones after 1-2 years finally paid off.

~~~
hahainternet
This is not an 'Android strategy'. Downvoting you for lying.

------
marincounty
I don't think Job's would have allowed this to happen?

------
pearjuice
It is over, Apple is finished.

~~~
epo
So some outfit called Strategy Analytics, who no one has ever heard of, (but
who will no doubt turn out to have Samsung as a shareholder or customer) says
that their estimates of Samsung's profits exceeds their estimates of Apple's
profits. And the fandroids lap it up.

~~~
laumars
To be honest, your comment comes across as more of a fanboy remark than the
guy you were responding to.

And to be honest, I'm just sick to death of how every Apple discussion (and on
every forum) ends up as a heated flamewar against brainwashed sheeple who
value brand loyalty above their own sanity. And I'm not singling Apple
customers out; I'm talking about Samsung / Android zealots in Apple threads as
well.

It's as if we, the developed world, have nothing better to do with our time
than start arguments on the internet about inconsequential bullshit because
someone dared criticize our favorite brand.

~~~
fc2
Android fans care about open source, not Google or Samsung. There's a big
difference between that and Apple fanboyism.

~~~
laumars
I disagree. Most Android fans don't follow open source that closely (eg
they're Windows users on the desktop). And most open source fans (myself
included) don't consider Android _that_ open.

