Head To Head - Apple vs Samsung

At a time when corporations over the globe are flirting with downsizing and scaling back, Apple and Samsung continue to provide their consumers with a broad collection of products and services. Despite a tempestuous 2022, Apple and Samsung have achieved significant revenue during 1Q22, Apple shipped 56.5m smartphones versus Samsung’s 74.5m.

How It Started Vs How It Is Going

In 1976, Steve Jobs, a 21-year-old San-Francisco-born hippie, along with Steve Wozniak formed Apple, in Job’s family garage. Wozniak was the person who built the first Apple product called ‘Apple I,’ a kit computer that users would have to put together on their own. By 1997, Jobs led Apple through a massive growth period launching the iMac, MacOS10, iPod, and iTunes. Although these remarkable products saw great success, the crown jewel has indisputably been the iPhone, which launched on 29 June 2007. From that moment onwards, Apple sold around 2.8b smartphones to date, including 242m devices, last year alone.

Samsung was founded by 28-year-old Lee Byung-Chull in 1938. Despite the company’s origins as a small trading company dealing in dried fish and noodles, Lee would eventually become a pioneer of modern entrepreneurship and a beacon of national economic development for his country. Following the expansion to numerous industries including textile and financial services, Samsung found its golden goose in the late 1960s – the electronics business. It witnessed immense growth in the 1970s and 1980s due to its semiconductor business. On 29 June  2009, strategically precisely two years after the iPhone launch, Samsung introduced the ‘Samsung Galaxy’, its first smartphone.  Samsung has sold north of 2b smartphones since then, and 272m smartphones just in the past year.

And just like that, South Korean Samsung got into a global smartphone gigantomachy with the American Apple. It is important to note that for both companies, the smartphone business is their highest revenue generator.

No Guts No Glory

What is it that makes these two smartphone makers so special?

Apple’s case study is a US$2.3t masterclass for business. The company has always stuck with its basic motto, “Think Different”. Apple adheres to phenomenal product design, mainly thanks to Sir Jony Ive as well as undeniable back-end engineering. But it is the power of simplicity that revolutionised the smartphone business. Current Apple CEO Tim Cook stated that his company is not afraid of reinventing existing technologies. Apple has a long history of perfecting products and delivering them strategically around the globe, through a brilliantly vertically integrated enterprise. Apple controls all the critical parts of the supply chain used to make and sell its products. This allows the company to not depend on a 3rd party for controlling iOS integration. The company maintains the full technical and commercial power of its smartphone devices.

Beyond the massive success in the Western world, Apple has had a tremendous international presence – mainly in China, something other super-firms found notoriously hard to do, including Amazon ($AMZN). In 2021, US$68b, which accounted for 18% of Apple’s annual revenue, came from China. Apple was able to compartmentalise Chinese consumer psychology and comprehend how middle-class people use their phones at home as a device for watching TV, playing games, and watching movies. The ability to understand underlying client needs in China, allowed Apple to penetrate the most populous country in the world, which accounts for 18.5% of the world population.

Like many other Asian producers, Samsung’s strategy is marked by a high market readership. The company observes the market and is quick to respond, replicate and initiate new features to existing products introduced by competitors. As an example, in 2010, a Samsung internal presentation guided its engineers through a step-by-step process to copy the iPhone. Additionally, the pricing tactic varies significantly compared to Apple. Samsung opts for high-quality products at a reasonable price and uses the” skimming” tactic when launching new products. Upon launching, Samsung charges quite high, then when the market matures and competitors come up with similar products, Samsung immediately drops its prices. Samsung’s imposing marketing strategies include sponsoring events such as the Olympics and signing deals with the NBA, as well as sponsoring Chelsea FC in the UK, a deal worth over $16 million per annum.

Battle Of Courts

The conflict was almost inevitable for the mighty universal smartphone makers. Upon Samsung’s initial smartphone launch, Jobs called Samsung a copycat ‘POOF’ and since that moment, the two turned sworn frenemies. Jobs famously mocked Samsung large phones as “hummers” and said, “No one’s going to buy that”. As a comeback, Samsung’s VP of marketing told Jobs “I am talking to you on a phone right now that Apple just copied. Who was right?”. In 2011, Apple sued Samsung for $2.5b for copying the iPhone design and after a twisting sequence of events and countersuits, Apple won the case in 2018, with a $539m settlement.

Fifteen years after the iPhone release and 13 years after the Galaxy launch,  we are only scratching the surface of smartphone advancements. The fascinating twenty-first-century race between the two is unquestionably pushing the innovation envelope, in consumer electronics. Combined, the two have invested nearly US$80b in R&D in the past two years, to pursue and discover enhanced technologies, and serve their ever-demanding smartphone consumers. Put together, they employ almost 450,000 people and have paid out more than US$20b in shareholder capital within the past year alone.

To put things into context, over 5b people in the world own a smartphone. On average, people use their smartphones for more than three hours per day. Samsung and Apple share an increasingly integral role in shaping how people use their smartphones and how it affects their social perceptions.

ICYMI: do your own research and make your own decisions. This article drills down on a specific company, however it is not a recommendation to invest in the company and should not be taken as financial advice.