Can Large-Screen iPhone Steal Samsung Clients?

Posted by Kirhat | Wednesday, April 02, 2014 | | 0 comments »

Samsung vs Apple
If Apple will really launch two new versions of the iPhone in the latter half of the year, a number of sell-side analysts are certain that at least one of the versions will sport larger screens. Rumors have been trickling since last year that the new Apple flagships will offer a 4.7-inch screen, while the other will clock in at 5.5-inches.

If these rumors are indeed true, which is supported strongly by manufacturing evidence each day, then this could be Apple’s first foray into the phablet space, a market long dominated by Google's biggest hardware partner, Samsung.

Why is this significant? Some says it’s because by offering a similar-sized product, Apple could be poised to steal many of Samsung's (and Google's) best customers.

Analysts at ISI Group have big expectations for the iPhone 6. According to Brian Marshall, the iPhone 6 will be the "mother lode of all upgrade cycles," prompting both Apple loyalists and longtime Samsung fans to make the switch.

It's easy to see why ISI Group would make such a projection: Although most of Google's share of the smartphone market comes from the low end, there is a significant group of buyers that choose high-end Android phones, mostly from Samsung. In 2013, for instance, Samsung sold at least 50 million Galaxy S4s and Note IIIs worldwide. These phones are powered by Google's mobile operating system, but cost as much (or even more) than Apple's high-end iPhone.

Why would buyers choose these phones? The biggest reason (no pun intended) is screen real estate. This means that if you want your smartphone to have a screen larger than four inches, you've no choice but to go with a smartphone powered by Google's mobile operating system.

But the big screen isn't the only reason some buyers choose Samsung's phones. And even if that was the only reason they purchased a Galaxy in the first place, they might find it difficult to switch.

According to Business Insider, Samsung has built up a great degree of customer loyalty in recent quarters. In fact, about 58 percent of Samsung owners who upgraded last year opted for another Samsung device. That's notably less than Apple – when it comes time to upgrade, more than 80 percent of current iPhone owners choose another iPhone, according to Consumer Intelligence Research Partners.

However, if you really try to look at it, Samsung’s customer loyalty is arguably more impressive. For one, unlike Apple, Samsung doesn't control the Android operating system that powers its phones. It is relatively easy to switch from a Samsung Galaxy S3 to a rival HTC One or Google's own Nexus 5 – purchased apps, movies, and music easily carry over, as the Android operating system remains constant across Google's many hardware partners.

It's worth noting that, like Apple's iTunes, Google's rival Google Play store seems to work just as well at trapping consumers. Unfortunately, Google doesn't break out the revenue derived from Google Play, but last quarter it did say that it was contributing meaningfully to the company's revenue growth, and the search giant has been aggressively advertising Google Play in recent months.

Perhaps the most concrete evidence of Android lock-in is the rate of iPhone upgrades at major carriers: Historically, about 80 percent of AT&T's smartphone sales have come from Apple's phone; at Verizon, it's only about 50 percent. Until 2011, AT&T had exclusive rights to the iPhone in the U.S. – Verizon customers who wanted a smartphone had to make do with something powered by Google's operating system. That trend has continued: T-Mobile, which didn't get the iPhone until last year, saw only one-fifth of its customers choose Apple's smartphone.

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