Samsung’s latest smartphone launch gives it plenty of new features to reclaim the innovation advantage over its longstanding rival Apple. The new Galaxy S10 range unveiled on Wednesday boasts Samsung’s first 5G phone, a fingerprint reader hidden behind the display, as many as three rear cameras and a novel “pinhole” selfie camera that is cut out of its edge-to-edge screen.
But on one key measure, Samsung is following Apple’s lead: raising prices. The Korean smartphone maker is charging $900 for the standard S10 model when it goes on sale next month. That is cheaper than Apple’s competing iPhone XS, but still $100 more than the equivalent Galaxy S9, which turned out to be a disappointing seller for Samsung last year. Apple’s decision to raise prices in 2017 with the launch of the $1,000 iPhone X helped it increase revenues at a time when other smartphone makers — including Samsung — were struggling. But that boost was shortlived, with Apple warning of a slowdown in iPhone sales that could see revenues fall by as much as 10 per cent in the current quarter. As Apple and Samsung push upmarket, the Chinese challenger Huawei’s cheaper devices are bringing it ever closer to stealing the two companies’ longstanding lead in smartphone sales.
Despite being effectively locked out of the vital US market by government security concerns, Huawei saw its unit volumes increase by 44 per cent in the fourth quarter of 2018, according to market researchers IDC, in marked contrast to Samsung and Apple’s declines during the holiday sales season. “This year at the soonest, next year at the latest, we will become number one in smartphone numbers globally,” Huawei’s consumer business chief executive Richard Yu said last month, as his division reported $52bn in revenues for last year. IHS Markit analyst Wayne Lam said that Huawei is “firing on all cylinders” and stands a chance of overtaking both Apple and Samsung as soon as this year.
“Apple and Samsung lost a lot of ground in China to Huawei,” he said, pointing to Huawei’s “China first” features, such as better integration with messaging app WeChat, and renewed support by consumers there for domestic companies, including Xiaomi, Oppo and Vivo. A recent survey of 2,000 wealthy Chinese consumers by equity analysts at HSBC found that about 39 per cent planned to buy a Huawei smartphone next, compared with 31 per cent for iPhones, which the bank’s researchers described as “clear evidence of shifts in consumer preference”.
Meanwhile, smartphone sales in the US and Europe are suffering from customers holding on to their existing phones for longer than they used to. “Samsung and Apple both are stuck in the same hole that they dug themselves into, which is making products more expensive and feature-filled so that ultimately consumers are holding on to them longer,”
Mr Lam added. To avoid “sticker shock” from Wednesday’s S10 launch, Samsung is adding a new model to the usual two-device Galaxy line-up. The S10E lacks the extra zoom and wide-angle capabilities of its siblings’ triple camera and has a smaller 5.8-inch screen, but at $750 is priced to compete head-on with Apple’s iPhone XR. Mr Lam says that will help Samsung in more price sensitive markets such as India but he is concerned that consumers will be confused by the proliferating options, which also include a 5G, or fifth-generation mobile internet, model that is expected to cost as much as $1,500.
“I’m still doubtful that offering choice is the best strategy — consumers don’t want [perceived] compromises,” he said. “That’s why the old single model, single price point worked so well.” But Carolina Milanesi, analyst at Creative Strategies, believes there is merit in Samsung’s approach, which reflects the broad and diverse nature of its existing customer base. “You need to cater differently to people that have an old [Galaxy S] product but don’t want to spend $1,000 for a new one,” she said. “The combination of the innovation and the different price points should put Samsung in a better position than they were last year.”
Claiming industry “firsts” has always been central to Samsung’s branding. On Wednesday it unveiled a new foldable device — part smartphone, part tablet — just days ahead of Huawei’s anticipated debut of a similar product at the Mobile World Congress event in Barcelona. However, with the foldable screens only just reaching commercial viability and pricing likely to put both Huawei and Samsung’s models out of the reach of all but the wealthiest consumers, the devices are unlikely to affect the race for market share. “It is more about positioning and defining the next phase” of the mobile market, said Ms Milanesi. The Galaxy Fold will showcase Samsung’s in-house display expertise in the same way that the super-sized Note range did a few years ago, she added, “but this is not a big volume seller this year at all.” The same long-term thinking applies to Samsung’s first 5G phone, which it unveiled on Wednesday but will not go on sale until mid-2019.
Ben Wood, analyst at CCS Insight, said: “Samsung is getting the jump on Apple, which is not expected to have a 5G iPhone until the final quarter of 2020.” He added that Samsung’s early experiences with 5G will allow it to “learn the nuances” of the new networking standard, which promises faster speeds and lower power requirements. “As a result, it is highly likely Samsung will be on its second or third-generation 5G device when Apple eventually launches and Samsung should have a well-optimised 5G platform.”
