Earlier this month we reported that Counterpoint's Monthly Market Pulse published a report showing that Apple's iPhone 5S was the number one selling smartphone in the world for October. Adding to Apple's lead, the iPhone 5 took the number two spot which proved to be more popular than Samsung's Galaxy S4 which came in the number three spot. Apple's iPhone 5C, which most thought wasn't going to sell well at all, actually came in fourth ahead of Samsung's popular Galaxy Note 3. With that track record, Samsung is changing course for 2014 and aims to conquer the mid-range smartphone market by creating cheaper units. It's a move to protect Samsung's "volume" sales game against the rising tied of local smartphone brands in China as well as the iPhone 5C which is going to get a lot more traction due to the new Apple-China Mobile partnership. The move is going to hurt their profit margins without knowing if the strategy will even pan out.
The Korean press noted yesterday that Samsung Electronics is strengthening its lineup of mass-market mobile phones to better penetrate emerging markets such as India and China. The purpose is to shift its business focus amid the saturation of the high-end smartphone market. It's a move to conquer the mid-range smartphone market from Chinese competitors such as Lenovo Huawei, Xiaomi, HTC and Yulong. This will, on price alone, be a move to crush Apple's new iPhone 5C from gaining any further ground in China and India in 2014.
Samsung's aggressive move on price isn't going to spell good news for their partner firms including Samsung Display. "We have to increase the supply of cheaper LCD panels instead of OLED panels with higher added value due to Samsung Electronics' business strategy," said Samsung Display, adding, "Although the supply volume might become larger than before, it is almost sure that we cannot avoid a drop in profitability."
So any efforts to crush their competitors on price alone will come at a steep price just to continue their marketing game of being a smartphone "volume" leader. It's a dead-end strategy that doesn't translate into selling more online apps, games or music. Consumers who buy a smartphone based on price alone are people who generally want a cheap phone for calls and email, not for its features or apps. Apple gets this and apparently Samsung still doesn't.
While it was surprising to some that Apple even created the iPhone 5C to better compete in the mid-range smartphone market, it's evident that Samsung's aggressive moves to quickly lower prices of mid-level phones in 2014 is to put pressure on Apple's generous profit margins.
Apple has headroom on their margins to make such a move if they so choose to go that route over adding new features in 2014. Yet in the end, Apple is likely to offer a bit of both in September 2014 so as to entice even more consumers in the mid-range end of the market to buy into the iPhone brand so that they could use iTunes and the App Store.
The timing of the news relating to Samsung's aggressive pricing moves comes on the heels of the official announcement of the Apple - China Mobile partnership. Perhaps the news hit a nerve over at Samsung.
On another note, it's being reported today that Samsung has completed the development of next-gen wireless charging products using the magnetic resonance and that they're likely to become mainstream in the first half of next year. Wireless power transmission technology refers to the method to transfer electricity from a charger to a device using the inductive principles of magnetic fields, without the need of a charging board.
Korea's National Radio Research Agency (RRA) announced that it will revise the standards for equipment that use radio waves by day's end which lays the groundwork for the commercialization of magnetic resonance-based wireless charging equipment.
Earlier this month Patently Apple posted a special report titled "The Cordless Home is now in Reach with Magnetic Resonance." In that report we noted that Samsung and Qualcomm would likely be first to market with smartphone solutions and today's news supports that forecast. Whether Apple's patented magnetic resonance solution is on their 2014 roadmap or not is unknown at this time.
Yet no matter what camp you're rooting for in the smartphone marketplace, both companies bringing next generation wireless solutions to market over the next 6-18 months is going to be a win for consumers everywhere. In fact, Apple may have an extra motivator to quicken their introduction of next generation wireless charging solutions, as Brussels is attempting to make every mobile phone use the same charging standard in Europe by 2017. So the race is on.