Apple and the quasi challenger that was. And the real challenger that is here, finally.
We live in a world of two halves. Most people I know personally at least. The first world, the Apple groupies, the ones that crowd around the Mac Store, touching the I-don’t-have-this-product-but-soon-will (in whatever iteration it might be) for the fifth time and the other half consisting of the I-am-the-rebel-free-and-wild-under-the-sun of the Android adopters. The glaring majority belongs to the Samsung group.
I have also met a lot of geeks, who profess the independence to brandish their geekiness using a non-Apple platform. I could care less. You could swap the script running off a USB to transport your highly encrypted key to operate your coffee machine in the morning while I sleep lazily on my bed. You see I am lazy for the inaneness that most tasks require me for. Apple allows me to be lazy.
There was a time when price points were an issue. But not any more. They all pretty much cost the same. Any price motivation should justify a switching cost (high in the case of a phone because our modern digital lives tend to revolve around phones) or a serious health issue.
It is but quite evident who feels inferior. Apple groupies post in social media of their love of their product, ordering them the day of the release sitting in a bar while I munch my sweet potato fries, and later on while I hear of what premium others pay (ridiculous) for getting a phone a month early before it hits the local shelves. The other clan (in this case the Samsungites) go on a social media frenzy poking fun at Apple (it seems Samsung owners have more knowledge of iPhone features than iPhone users themselves). Or the non-innovations. Or spreading the modern day virus that we cannot inoculate against, the epidemic we call memes. I stopped even clicking links (I used to click them once upon a time sincerely hoping to stumble upon some wizadry that would convince me to switch). Remember I self-proclaimed to be lazy for most of the banality of the world?
We can inspect this on different levels.
First, the product in itself. The only reason for me not raising my eyebrow to all of the above mentioned anti-Apple antics, was first, because what I call the integrity of a product. Apple, by combining, software with the hardware (both of which it has almost all control over) can always squeeze out the best experience out of a product. It is truly when this happens a firm can know how much they can push their product in both optimization and a smooth user experience. Of course, a firm as humongous such as Apple and with a huge pool of resources to manage on a single project can lose focus and perspective but is still far better placed to deliver a better product. You can’t fool me with product videos (both camps), get into full flow of using a phone and you’ll see what I mean.
Apple is still not there meanwhile. They use to manufacture their in-house designed chips using, yes you heard that right, Samsung and TSMC. They have dropped Samsung from manufacturing their A10 chip (see how number of players are getting fewer) leaving the manufacture to TSMC alone.
Second, the ecosystem. Apple controls that eco-system, but Samsung doesn’t. Talk about keeping the product smooth (or as some might call in-line with the Apple code)
Third, as a company that has investors of the public. Samsung posted in the fiscal year 2015, 180.87 billion USD as revenue and an operating profit of 23.8 billion USD while Apple posted a revenue of 234 billion USD and get this, an operating profit of 75.5 billion USD (a higher estimate of 75.5 billion has been excluded). This means that the gross margin of Apple is 32.26% (the financial releases estimates it at 39–40% but I’m going to keep this simple) while Samsung’s margin is 13.15%. Meaning if Apple had to make the same profit as Samsung they can charge for a product 13 cents less to a dollar. So the Iphone 7 Plus 32 GB costing 769$ can be sold 100$ less and Apple would make the same profit as Samsung would dollar to dollar. But Apple won’t do it. Because it feels that it has hit a sweet price point. It’s marketing power allows it to price the phone a 100$ more. (Please note that the Apple fiscal year ends in October, so discounts holiday sales while Samsung fiscal year ends in December, meaning includes the holiday sales) Hence as an investor I would rather invest in Apple than Samsung simply because the surplus value consumers perceive in an Apple product.
So Samsung has essentially remained an illusionary challenger. The Samsungites are gung-ho in looking out for the faults of the Apple. Like some weird inferiority complex that tries in vain to reassure how they are not inferior. The hastiness employed to beat Apple to the market has resulted in a faulty and seriously hazardous product at the hands of a consumer. Day after day, every passenger travelling through airports listens to the repetitive chime of the Samsung disaster three times — at check in, pre take off passenger announcement and from a crew member if they see even a ghost image of the Note. Yes, Samsung had more of the market share owing to their products that is sold across various price points but that doesn’t change the fact of who rakes in the most chips.
So who is this real challenger? Google.
Google all this while had hitched on the other phone builders (the Nexus was a personal atttempt but a sheepish attempt) to retain its dominance in search, advertising, and other digital product realms. So where does final a strong challenge come from? From the new Pixel project. Google taking a leaf from Apple has realized to truly ward off Apple and its growing influence (the services that Spotlight and Siri searches use are decided by Apple) and to really create a competing product to challenge the value surplus Apple dictates in the market, they really had to take things in their hand. It looks like that challenge has been finally accepted.
And I am now ready for a real dog fight.
Note: As of writing, all share prices have jumped in the last 3 months, Apple’s is up 20.35% (I am guessing owing to the iPhone 7 demand), Samsung’s is up 12.82% and Alphabet’s is up 8.38%.
Also Note: I own an iPhone 6 Plus, but also is the de facto engineer employed by my father to help him with his Android/Samsung iterations.