Having seen the Galaxy S3 lift its brand to new highs, Samsung (OTC:SSNLF) is looking to step up the assault on Apple’s (NASDAQ:AAPL) home ground – the all-important U.S. market. For the first time ever, the South Korean giant chose the U.S. to hold the launch event for its latest flagship smartphone, the Galaxy S4, in what is a clear sign of the company’s increasing focus on the high-end market. However, after the runaway success of the S3, Samsung decided not to take any risks with the overall design of the phone, which is why the S4 doesn’t look very different from its older cousin despite the bigger 5″ screen. Under the hood as well, Samsung has gone for incremental upgrades only with a better processor and a bigger battery that should improve the overall user experience, but nothing truly revolutionary. This did not go down well with the markets as Samsung’s stock slipped in trading during the day.
Software differentiation at play
However, the company has jam-packed the phone with software features in order to differentiate itself from the Android crowd as well as Apple. The S4 has many attractive features such as the ‘Smart Scroll’ and ‘Smart Pause,’ each of which tracks eye movements to scroll web pages and pause videos. There is also the ‘Air Gestures’ feature, which lets users scroll through photographs or web pages by simply swiping their hand, without touching the screen. One of the features offers the ability to translate nine languages, from text to speech and vice versa. Apart from these, there are several other features such as the S Health, the S Band and the Group Play, which Samsung has incorporated to make the S4 stand out. However, most of these features, although impressive, are already available though third-party apps or can easily be replicated by the same.
The strategy here doesn’t seem very different from the way it floods the market with smartphone models in every price range to overwhelm rivals and capture market share. In this case, however, it has to be careful not to overwhelm users with the incredibly large number of feature sets, all of which may not prove useful to everyone.
Samsung’s high-end statement rings loud and clear
However, it is undeniable that Samsung’s market-flooding strategy has worked wonders for the company in recent years. The past year has seen Samsung gain a lot of smartphone market share. The first quarter of last year saw Samsung take a decisive lead in the smartphone market – a lead that it has maintained ever since. For the full year 2012, Samsung accounted for more than 30% of the smartphone sales worldwide, increasing its lead over Apple whose market share has remained stagnant at almost 19% y-o-y. We believe that the big market share gains that Samsung has achieved is, for the most part, a result of the number of low-end Android smartphones it has flooded the markets with, both in emerging and developed markets.
However, Samsung’s superiority in the low-end smartphone market was long foreseen considering the company’s scale and the market-flooding strategy it has used right from the start. What is however relatively new is that it has managed to leverage the huge following garnered with the wide array of Android choices to start challenging Apple in the high-end of the smartphone market. At about 33.5 million units each, the high-end Galaxy S3 sold nearly as much as the iPhone 5 or the 4S did in the last two quarters combined [Apple iPhone 5 Overtakes Samsung Galaxy S3 to Become World’s Best-Selling Smartphone Model in Q4 2012, Strategy Analytics]. In the first three months following the S3 launch last year, Samsung racked up almost 20 million unit sales – a figure that it had managed with the previous generation S2 only after more than thrice as many months.
What makes Samsung’s ascent even more extraordinary is that the Galaxy S series is only in the third-generation compared to the iPhone 5, which is a fifth-generation product, meaning that Samsung had a comparatively smaller base of Galaxy owners to upgrade than Apple had with the iPhone. The incredible success that Samsung has had with the flagship Galaxy S points not only to the rapid pace of growth in smartphone sales worldwide, but also the company’s growing presence in high-end smartphone market – a segment that has long been Apple’s hegemony.
All factors considered, Samsung may still have some catching up to do in the high-end smartphone market considering that the older generation iPhone 4S sold more than the S3 last quarter. The difference was however only a couple of million units, which Samsung will look to make up with the latest S4. The lack of a big design change or a ‘wow factor’ in the S4 will probably not attract the S3 owners, many of whom will be locked into a two-year contract anyway. But this is probably not Samsung’s end game. It is not after existing S3 owners who it will target with its next release. Instead, the S4 is meant to attract those looking to upgrade from a two-year old device or those using rival handsets. Maybe it is not such a wonder therefore that Samsung chose to hold its S4 launch event in the heart of the U.S.
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