Arch Rivals: Samsung Vs. Apple

Mar.18.13 | About: Samsung Electronics (SSNLF)

Samsung's (OTC:SSNLF) long-awaited Galaxy S4 is finally here. Samsung has unveiled its next big challenge to Apple Inc. (NASDAQ:AAPL) in Radio City Music Hall in Manhattan, New York, on the U.S. giant's own turf. Samsung is stepping up its rivalry with Apple with its new Galaxy S4 smartphone, which has a larger, sharper screen than its predecessor, the best-selling Galaxy S3.

The Galaxy S3, which Samsung managed to get on every major wireless carrier in the world, was one of the few breakout hits of 2012, and CNET named it the "product of the year," topping Apple's iPhone 5.

The Samsung S4 launching event was a big success. The event was accompanied by a live orchestra while an audience of thousands watched the theatrics on a stage consisting of four levels.


Its shape and home screen are nearly identical to the Galaxy S3. But it comes up with many additional exciting features. The Galaxy S4 features the 5-inch 1080p (1080x1920) HD display screen, which is substantially larger than the iPhone 5's 4-inch (640x1136) screen. It has an extremely dense-looking display at 441 ppi, as compared to that of iPhone 5's, at 326 ppi. It runs Android 4.2, features a 1.6GHz Exynos Octa-core chip or 1.9GHz quad-core Qualcomm SoC (depending on region) with 2GB of RAM paired with 16GB/32GB of storage. iPhone 5 has only 1 GB RAM with 16GB/32GB/64GB of storage.

Connectivity is a great deal for any smartphone. Samsung Galaxy S4 works on 3G, 4G LTE and even China's TD-LTE bands, uploading and downloading data at an even faster speed, which is great for streaming large files or videos to and from the cloud.

Speaking of videos, the Samsung Galaxy S4 features a powerful 13-megapixel camera and a 2-megapixel front-facing camera, compared to the 8-megapixel camera and 1.2 megapixel front-facing camera of the iPhone 5. But the Galaxy S4 has many more better camera features that iPhone 5 doesn't offer, including the ability to shoot photos and videos from the front and rear-facing cameras simultaneously, and the ability to erase people that accidentally walk into the frame.

Samsung did not disclose the price of its new flagship smartphone but did inform that from the end of next month the Galaxy S4 would be offered by 327 mobile operators in 125 countries.

Unique Features:

Samsung has also unveiled some new eye-catching features that no other smartphone is currently offering, including the one that starts with I. The most prominent features, which it has pioneered, are the "smart scroll" and "smart pause." The facing camera on the handset monitors user's eye movement and acts accordingly. It will enable to scroll through text or web pages just by analyzing user's eye movements and it can even pause a video if the user looks away. It's "Group play" feature will allow multiple Galaxy phones to link together to play games, share songs, etc. Samsung S4 Fitness app "S Health" monitors user steps, diet, etc. The infrared blast feature will make Galaxy S4 a universal remote for any TV. It also comes with temperature and humidity sensors. All these unique features differentiate Galaxy S4 from its rival iPhone 5.

Global smartphone Market:

According to a new market research report published by, the total global smartphone market is expected to be worth $150.3 billion by 2014, out of which the Symbian and Blackberry OS will account for nearly 32.2 percent and 18.9 percent of the total revenues respectively.

The global smartphone market is growing at a rapid speed, already accounting for about 14 percent of the global mobile phone market. This high growth rate has been backed by rapid technological development such as high-speed Internet browsing, cloud computing, and the evolution of 3G and 4G network technologies.

Samsung vs. Apple market share:

Samsung dominates the smartphone market with a 29 percent share in Q4 2012, up from 22.5 percent a year ago. Apple comes second with a market share of 21.8 percent, compared to 23 percent a year ago. Samsung's Q4 2012 smartphone sales totaled 64.5 million units, up 85.3 percent from the previous year, while Apple's sales reached 43.5 million sets, a 22.6 percent increase as compared to the last year.

The first reason for Apple losing sales and market share is that it is losing its edge in innovation. The attractive features introduced by the rivals at cheaper prices attract users to switch. Second is that it has been unable to capture a considerable market share in emerging markets like China and India. Samsung shipped over 30 million smartphones in China last year for a 17.7 percent share of the market. Apple was the third-largest vendor with 11 percent market share despite the fact that China's largest wireless carrier does not yet offer the iPhone.

Another major issue with Apple is that its revenue is heavily dependent on just one product line, iPhone accounted for 48 percent of the total revenue in the fourth quarter of 2012. On the other hand, Samsung Electronics does not only diversify geographically but it also derives its revenue from four different segments within electronics market as shown in the figure below. Of the IT and Mobile communications share, mobile segment accounts for just 43 percent of the total revenues. That shows that Samsung in not dependent on its mobile phone sector.

Furthermore Samsung mobile segment is extensively diversified, ranging from high-end smartphones to low-end basic phones. Samsung also functions as a vendor for many smartphone manufacturers and Apple is one of its biggest clients. While Apple focuses only on high-end smartphones, which makes it fully dependent on its iPhone models.

An analysis of key valuation multiples like Price-to-Sales and Price-to-Book, it becomes clear that Samsung dominates Apple. Though Samsung's Price-to-Earnings ratio is higher than that of Apple's, but it is justifiable given its high growth potential.

Key Valuation Ratios



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Any recommendation will have to take into consideration the following two factors. First, Samsung is less risky than Apple, as Samsung has a wider range of mobile phones in addition to better geographic segmentation. Apple is highly dependent on just one product - i.e. iPhone - with limited geographic approach. Second is that Galaxy S4 is clearly superior to Apple's iPhone 5. This means that Samsung has greater growth potential in the near future. The above analysis suggests that if investors wants to take a position in the technology sector, Samsung is the better buy than Apple.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.