NEW YORK: By many measures, Samsung Electronics should be on the ropes. Last month, it lost an important patent battle with its rival Apple after a jury in the United States ruled that Samsung had illegally copied aspects of Apple’s groundbreaking iPhone. Apple introduced its newest model, the iPhone 5, to enthusiastic reviews and a worldwide consumer frenzy, with customers lining up to buy the new model days before it arrived in stores Friday. This week, Apple shares hit a record high and cracked the $700 threshold.
So why is Samsung not only holding its own, but thriving?
Even as the Apple juggernaut has rolled over Research in Motion, which makes BlackBerry handsets, and Nokia, Samsung reported record earnings for its latest quarter, which ended June 30. Its handset profits, fueled by the introduction of its high-end Galaxy S III model in May, leapt 75 percent over the previous year. Samsung’s stock has gained more than 65 percent in the last year and was trading this week on the Korea Exchange at more than 1.3 million won, also close to a record.
Samsung can’t claim the intense media coverage, the passionate fan base or the cult of personality that grew up around Steve Jobs. But the giant South Korean manufacturer has built an impressive lead in global mobile phone sales. The research firm IDC reported that Samsung had 24.1 percent of the global handset market compared with Apple’s 6.4 percent at the end of the last quarter. Samsung also had a commanding lead in the lucrative smartphone market: 32.6 percent compared with Apple’s 16.9 percent, although the gap is likely to narrow because of the iPhone 5’s introduction.
By contrast, Nokia’s share of the smartphone market withered to 6.6 percent and Research in Motion, whose BlackBerry devices once accounted for nearly 20 percent of global smartphone sales, was no longer ranked among the top five producers.
These results didn’t come as a complete surprise to me. As I reported a little over a year ago, after testing the latest handsets from Apple, Samsung and RIM, I ended up buying the Samsung Charge, a decision that surprised me, since I thought I wanted the same iPhone 4 all my cool friends had. The BlackBerry was sadly lacking, and the iPhone was a strong contender. What won me over was Samsung’s large screen. Despite my large hands, I could type on the virtual keyboard with a fair degree of accuracy. (Try correcting typos when you’re frantically searching for information on a Web browser or entering passwords.) Photos also looked better, and Samsung’s 4G was faster, although I often found myself stuck in a 3G backwater. And it still fit in my pocket.
I can’t say my subsequent experience has been flawless. At one point the Charge stopped functioning, a failure that stumped the technicians at a Verizon service center. But they replaced the phone at no charge to me, and thanks to Google, all my contact information was backed up and easily migrated to the new device. Since then, I’ve been comfortably embedded in a seamless Android world of email, maps, directions, search and Web browsing even while continuing to use other Apple products.
But the competitive landscape has changed in just a year, with Samsung’s introduction of the Galaxy S III and now Apple’s release of the iPhone 5. My Charge already seems obsolete. Apple appears to have addressed all the issues that bothered me about the iPhone 4: The screen is bigger (though still not as big as the Charge or the Galaxy) and it offers 4G. It’s also lighter and, in my view, looks better than my Charge. But Samsung is so confident that its Galaxy S III holds up favorably to the iPhone 5 that it started an aggressive national advertising campaign with a head-to-head comparison between the two handsets, highlighting a list of features the iPhone lacks. And Samsung said it has a more sophisticated Galaxy handset waiting in the wings that will offer an even bigger screen.
Several experts and analysts I spoke to this week said that Samsung was a formidable competitor that had moved ahead of Apple in some aspects. Samsung “has come out with really attractive phones,” Toni Sacconaghi, senior technology analyst at Sanford C. Bernstein & Co., said. “They have large screens, great display, faster processors than Apple. Apple hasn’t been at the front edge of hardware design for a couple of years.”
Tero Kuittinen, an analyst at the mobile communications consulting firm Alekstra, agreed.
“The iPhone has remained pretty much static now for three generations. The first iPhone was a revelation, in a class of its own. But Apple has held onto the user interface for five years. You can still claim the interface is better, but the difference has been shrinking every year. On display, you can argue Samsung has taken the lead. Maybe you can slam Samsung for being an imitator, but when they imitate they do it right.”