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Has the 'Smartphone War' become a two-horse race?

While the global smartphone market is worth over £130 billion worldwide, this hugely lucrative business is dominated by only two manufacturers - North American Apple Inc. and the South Korean Samsung conglomerate. In 2012, these two massive businesses were reported to collectively own 103% of the yearly profit for smartphones sales, with the 3% spill-over accounted for by reported operating losses for companies like Motorola (-1%), Sony (-1%) and Nokia (-2%)

While Apple have always dominated the marketplace, with 72% of the industry's profits in Q4 of 2012, Samsung's sudden surge has been an unexpected development. In 2010, Taiwanese manufacturer HTC were the Android smartphone maker of choice, surpassing Apple in Q4 of 2010 to gain a 20% market share of the highly lucrative US marketplace. (This was at a time when Samsung were a second-tier manufacturer, best-known for budget handsets in the east.) Since then, HTC's profits have slumped massively; they reported a mere £900,000 in profits for Q1, compared to more than £5 billion for Samsung. Worse still, they've been downgraded from a tier one to a tier two manufacturer, which means they faced serious difficulties gathering enough components for their upcoming HTC One flagship phone. While the HTC One looks to be a polished device with some glowing reviews, the lack of available components meant a delay in shipping - which can only cost it market share to high-end rivals such as the Samsung Galaxy S4.

Other manufacturers have fared even worse, at least in terms of losses. Nokia went from a gross market share of 38% in 2010 to less than 4% as of 2013. Fortunately, their partnership with Microsoft's mobile OS looks to be paying off: Windows Phone has been seeing substantial adoption rates in emerging markets, and is doing an excellent job of beating off the lower end of the Android market in places like China and India. Even so, Nokia's vow to gain 10% of global smartphone market share by the end of 2013 strikes most pundits as optimistic, at best.

Above: The current CEO of Nokia, Stephen Elop, pictured with a top-end Lumia handset.

So why has the smartphone market devolved into a two-horse race between the gargantuan Apple and Samsung? Apple's dominance is easy to understand; while the iPhone wasn't the first smartphone to be released, it certainly compiled everything that was great about smartphones and made them acceptable to a global audience. They opened the doors for what was possible with a smartphone, and gained a huge amount of trust and recognition among users long before Google released its first iteration of Android - they're entrenched in the smartphone market, the reigning king.

Samsung's story is a little harder to understand, but still follows a fairly clear narrative. Samsung had a reputation for lower-end devices, which served it well in the budget marketplace; they gained sway in places like China and India fairly early on. But the chief reason for their success lies in their business model. As a conglomerate, Samsung has a hand in virtually everything - their factories produced the chipsets that powered the iPhone for years. It only makes sense that when they started producing their own higher-end phones, they could have a hand in every aspect of the device, allowing them to tailor the hardware to their needs. Their habit of treating every aspect of their business as a crisis means that Samsung works faster and harder than competitors, pushing out competitively-priced and high-powered phones for the established market while simultaneously creating a plethora of low-end phones to please the shallower end of the pool. By appealing to everyone, they've effortlessly dominated global smartphone market share, with over 64% of smartphones shipped marked with the Samsung logo - though, of course, they're still behind Apple in overall profits.

Above: Samsung dominate smartphone market share, if not profits.

Is this situation likely to change? It's a hard question to answer. Apple have been on top for around six years now, an astronomical amount of time for a business as fickle as smartphones, and it seems unlikely that someone could shift this behemoth at this late stage of the game. But Samsung's meteoric rise also seemed unlikely just a few short years ago. The constant shifts and fluxes in the way the market works means that Nokia could, conceivably, gain the 10% market share they're hoping for, and then exceed it; or perhaps HTC will rally with the launch of the HTC One, and make a break for Samsung's throat; or perhaps the growing sense of ill-will towards the Apple hegemony will overpower its vast reserves of cash and power, and cause it to lose mass market appeal. Only time will tell how the smartphone market will look three or four years from now.

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Mobile Madhouse

While the global smartphone market is worth over £130 billion worldwide, this hugely lucrative business is dominated by only two manufacturers - North American Apple Inc. and the South Korean Samsung conglomerate. In 2012, these two massive businesses were reported to collectively own 103% of the yearly profit for smartphones sales, with the 3% spill-over accounted for by reported operating losses for companies like Motorola (-1%), Sony


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