Home > Uncategorized > Apple: Samsung’s Glancing Blow

Apple: Samsung’s Glancing Blow

Summary

  • IDC’s just released smartphone market share data shows that Samsung lost market share y/y while Apple gained in calendar Q2.
  • This was despite the release of the flagship Galaxy S6 and S6 Edge.
  • While the attack of the S6 has proved ineffectual, the counter attack of the next iPhone will not.

IDC released its quarterly smartphone market share data for Q2, and it confirmed my conviction that Samsung’s (OTC:SSNLF) new Galaxy S6 would deliver only a glancing blow to Apple (NASDAQ:AAPL). It was hardly even that. Samsung’s overall market share declined y/y, as did its unit shipments. In contrast, Apple grew y/y in both market share and units.

A Myth Demolished

I had stated in my earnings preview article that Apple’s June quarter would demolish the myth of Samsung’s invincibility, and I reiterated in my earnings review that the Galaxy S6 would turn out to deliver at most a glancing blow to iPhone sales.

IDC market share data confirmed these opinions. Despite having an all new pair of flagship phones in the S6 and S6 Edge, despite steeply discounting older models, Samsung lost share in the overall market in Q2. Samsung’s market share now stands at 21.7% vs. the year-ago share of 24.8%. Most importantly, Samsung alone of the top five smartphone vendors suffered a y/y decline in unit shipments of 2.3%, from 74.9 to 73.2 million for 2015 Q2.

In contrast, Apple was second only to fast rising Huawei in unit growth at 34.9% y/y vs. Huawei’s 48.1%. The chart below shows the y/y growth rates for the top five vendors since 2014 Q1.

Note that gaps appear in quarterly data based on the composition of the top five vendors, according to IDC.

While Apple gained 2.4 percentage points of share in the larger market y/y, its performance among the top five was even more impressive, a 3.78 percentage point gain. As I’ve done in the past, the chart below shows Apple’s share among the top five vendors, which excludes “white box” generic Android smartphone sales.

Once again, gaps appear in the chart plots based on the composition of the top five vendors.

Apple’s sequential share decline is normal seasonality given that it releases new phone models in late Q3, and is reflected in Apple’s overall market share data as well.

Interpreting the Data

One of the interpretations I’ve read (on AppleInsider) is that Apple grew market share at Samsung’s expense. That may be true, but it really can’t be ascertained from the data. In order to determine this, we would need to know the price composition of Samsung’s sales. Then we could determine if Samsung lost share in the premium price tier where Apple sits.

The surge of Huawei suggests that most of Samsung’s market share decline came at the low end, where it competes with Huawei and Xiaomi.

Given that Q2 was the first quarter of sales of the S6 and S6 Edge, I really doubt that Apple took much away from S6 sales, but that wouldn’t have been a realistic expectation. The important take away is that Samsung took its best shot at Apple and came up short.

The Counter Attack

Now the stage is set for Apple to launch its counter attack in the form of the expected iPhone 6S and 6S Plus. These will be better than the S6 in three important respects: the 6S will be endowed with iOS 9, the 6S will have a faster 64 bit processor fabricated on Samsung’s own 14 nm FinFET process, the 6S will have Apple’s exclusive Force Touch system.

Force Touch measures pressure applied to the screen and can be configured to use this for novel UI functions. Force Touch also provides tactile feedback that feels something like a button click. Both capabilities will be firsts for a smartphone.

Samsung is reportedly attempting to preempt the iPhone 6S with a new Galaxy Note 5 and larger S6 Edge, as well as increasing availability of the Edge, which was reportedly in short supply in Q2. I doubt that these moves will have much effect, since the new devices will be restricted to the same processor generation found in the current S6.

One thing we could see with the new 6S Plus is capability for split screen multitasking in iOS 9. Apple showed this at WWDC, but only for iPad Air 2. With the new A9 processor expected for the 6S, as well as iOS 9, there’s really no reason that the 6S Plus couldn’t employ split screen multitasking in landscape mode. It has the necessary screen real estate. This would make Apple’s phablet even more useful, as well as provide an important discriminator relative to other smartphones.

By the December quarter, I expect Apple to gain the top spot in smartphone market share among the IDC top five, as well as posting significant double-digit shipment gains compared to the year-ago quarter.

Reports are starting to surface that Apple’s off-balance sheet commitments reported in its recent SEC 10Q have increased 26% relative to last year. Morgan Stanley’s Katy Huberty thinks this could indicate a major expansion in new products. These probably include the iPhone 6S, iPad Pro, and increased availability for Apple Watch. Other new products could include an iMac refresh, and finally the long-awaited Apple TV refresh.

With all the new products in the pipeline, I’m definitely not wringing my hands about the year-over-year comps.

Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.

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Categories: Uncategorized
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