- In the not so distant past Samsung regularly made fun of Apple for not changing their phones enough between generations.
- The Galaxy S5 has changed very little from the Galaxy S4.
- This opens Samsung up to other companies innovating more than them.
The last few years of the smartphone market have been all about the trend of Samsung (OTC:SSNLF) taking market share from the once dominant Apple (NASDAQ:AAPL). Samsung's smartphone market share surpassed 31% in 2013, with Apple's sitting at just 15.3%.
Some of the most memorable pieces of the publicity battle between the two were Samsung's commercials making fun of Apple fans lining up to get their new iPhones. I'm sure many of you remember during the iPhone 5 launch these commercials included Apple fans raving about how the headphone jack was on the bottom now "ooh ahh." Then a smug Samsung owner and scoffs at them and talks about the more substantial improvements made by Samsung with their Galaxy line of phones (bigger screen, etc.).
However, with the recent launch of the Galaxy S5, we have now seen Samsung falling into the same problem they so recently made fun of Apple for; there is nothing new. The Galaxy S5 screen increases to 5.1" from 5" while remaining the same resolution as the outgoing Galaxy S4, has the same amount of RAM, and a mild processor upgrade. The appearance of the phone has been largely criticized for being almost identical to the S4... except uglier (the back looks like a band aid). And in terms of features? The S5 now includes a fingerprint scanner (done by Apple months ago in the iPhone 5s) and a heartbeat monitor (something pretty much any phone is capable of with a third party app). So as far as anyone can tell there is almost nothing new about this phone.
The Galaxy S5 was also released just 9 months after the Galaxy S4. With no meaningful new features to pull in new customers, Samsung appears to be releasing new phones just to release new phones. This certainly makes them hypocrites looking back at their jabs at Apple. The other issue with introducing new phones on this aggressive schedule is the carrier upgrade cycle. In the US most people buy their new phones at a subsidized price from their carriers. Users are eligible for these upgrades every 2 years with most plans at major carriers. Although there are new plans that allow faster upgrades they generally cost consumers significantly more as outlined in my previous article. So most consumers are still on the 2-year cycle. With Samsung now releasing phones every 9-10 months this means that most consumers who purchased Samsung phones 2 generations ago (the Galaxy S3) are not yet eligible for an upgrade and will not be buying the Galaxy S5. When these consumers are eligible for an upgrade in another 4-6 months they may opt for a newer phone released closer to their upgrade time. This will impact Samsung's ability to retain customers.
So does all this mean that the Galaxy S5 will not sell well? No. I can virtually guarantee that the Galaxy S5 will be the best selling smartphone of 2014. However, I do believe it will open the door for other manufacturers to get an edge technologically and start to take market share because of Samsung playing it safe and trying to guard their position. I see other companies making products that beat Samsung phones in certain areas like HTC with the build quality of their newer devices and Motorola with their features like active display and touchless voice control. So while the Galaxy S5 will sell well, I believe Samsung has opened the door for other manufacturers to out-innovate them by becoming what they once made fun of: 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.