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Why Samsung is about to become the smartphone king

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After leading the globe in smartphones sold for the last 15 years, Nokia(s nok) is about to lose its crown as the smartphone king, but not to Apple(s aapl). Samsung is poised to become the first company since 1996 to sell more smartphones than Nokia as early as this quarter, according to estimates from analysts at Nomura, as reported by Reuters (s tri). The leadership change shouldn’t come as a surprise to those who have followed both Nokia’s fall from grace since the introduction of the original iPhone in 2007 and the strategic steps that Samsung has taken in recent years. Nokia, which accounted for 65.6 percent of all smartphone sales in the second quarter of 2007, only had a 24.3 percent share in the first quarter of this year, according to IDC figures.

Nokia’s smartphone share decline since the iPhone launch has been steady, as first phones that run Apple’s operating system, and more recently, Google’s Android (s goog) platform have enjoyed sales growth faster than the overall smartphone market. Nokia believed its Symbian operating system paired with excellent hardware would be enough to compete, but the company threw in the towel earlier this year. As announced this February, Nokia has decided to use Microsoft’s (s msft) Windows Phone 7 software for smartphones going forward, with the first such handsets expected later this year. Meanwhile, Samsung embraced Android early, which has paid off, and made the following wise decisions to position itself as the new top dog in smartphones:

  • One super phone for all. Samsung wasn’t the first to the high-end Android handset game, but its initial effort was a huge hit. The Samsung Galaxy S took an Apple-like approach with a single design, but with the added tweaks for different carriers. One main design allowed the company to gain a larger return on the research and development — a very different approach than that of Nokia which offers dozens of different phones. The Galaxy S was released in June of 2010 and reportedly sold more than 10 million units last year worldwide.
  • We’ll bring the chips, thank you. Unlike Nokia, Samsung designs its own smartphone processors, just as Apple began to do with the A4 chip it brought to the iPhone 3GS. As a licensee of ARM (s armh), Samsung can take generic chip designs and tweak them to add or improve features in ways Nokia, HTC, LG, Research In Motion(s rimm) and other smartphone makers can’t. This also means Samsung is less likely to face supply constraints for chips and other smartphone components that could impact handset production. In addition to building the processors that power its phones, Samsung is also among the leading suppliers of flash memory used in its handsets, as well as those of competitors.
  • Want some Bada on the side? While Samsung is growing its smartphone share mainly through Android handsets, the company has a nice little side project for future growth called Bada. I initially questioned the sense of Samsung creating its own handset platform, but sales figures are proving me wrong: Research firm Canalys estimates Samsung shipped 3.5 million Bada phones in the first quarter of 2011, which is a million more sales than Microsoft’s Windows Phone 7 saw.
  • Now playing: music, books and movies. Taking another cue from Apple, Samsung quietly started to build its own media ecosystem in September of last year. The company offers books, magazines, video rentals and purchases, plus a full-featured music store in three different “hubs” that work with its devices. This helps make the Samsung smartphone line more attractive as it provides one-stop shopping and a solid user experience for media content. In turn,these hubs can put Samsung’s iPod touch competitors, the Galaxy Players, on fairly equal footing with Apple’s products. That could provide a halo effect of sorts: Media purchases or rentals on a Samsung Galaxy Player could be enjoyed on a Samsung smartphone, which could help boost sales further.
  • Return of the king. Samsung is well positioned for 2011 thanks to the successor to the Galaxy S. Known as the Galaxy S 2, the handset uses Samsung’s superb Super AMOLED Plus screen (see our video look of this screen on the Samsung Infuse 4G), a dual-core processor and 1080p video recording in an 8.49-millimeter-thin package. Last month, Samsung announced 1 million sales of the handset in Korea alone, with only 70 days of sales needed to surpass the milestone.

After pointing out Apple’s influence on Samsung as the company is about to take the smartphone lead, I’d be remiss if I overlooked two related points. First, Apple itself is also poised to overtake Nokia this quarter, according to Nomura, as the no. 2 smartphone maker. With an annual refresh of just one handset model available globally, that’s nothing short of impressive. Given the new features and enhancements in the new iOS 5 software, which will presumably arrive with new hardware in a few months, there’s no reason to think Apple’s growth will slow.

Second, the Apple similarities may yet come back to hurt Samsung as Apple has filed suit, claiming that Samsung has copied the iPhone design. There’s no question that the Galaxy S, as well as Samsung’s TouchWiz user interface, bear more than a passing resemblance to the iPhone and iOS. Depending on the outcome of the lawsuit, Apple could financially gain from the lawsuit, but it’s unlikely Samsung would be forced to cease selling their devices. Copycat strategy or not, it doesn’t look like Apple is going to unseat the new king of smartphones any time soon.

40 Responses to “Why Samsung is about to become the smartphone king”

  1. To be honest, samsung is just a shadow of Apple. My daughter boutht the Galaxy, big mistake. IT was in the repairhope after two weeks, just like our T.V. Samsung will always just be shoddy
    junk that looks good for a while, but in the end collapses.

  2. AmericaFail

    Let’s cheer for Samsung success at stealing the innovative ideas from Americans. Let’s thank Google for giving free technology to Asian companies.

    Woohoo we’ll all be unemployed with a dollar worth a penny soon.

    • Right, hopefully the courts will allow Apple to stop samsung from stealing its technology. If they don’t, then that’s government fail.
      Secondly, Google has also stolen Apple’s technology, and the courts should stop them.
      Thirdly, the decline of the dollar is due to government incompetence and constantly printing money to fund irresponsible spending.

      So, in the end, if AmericaFails’ as you predict, it will be the federal government’s fault.

      If people don’t believe in patents, then ammend the constitution and let companies start keeping their secrets secret. They can compete on that playing field fine, and Apple will kick ass.

      The anti-patent people want the revelations of the patents being published so things can be copied, but don’t want the innovators to be allowed to profit.

      In short, they want something for nothing.

  3. Spot on! The surprise is that it’s Samsung that seems to have come up with a winning formula, instead of HTC which is the company everyone was focusing on until recently. The new Galaxy SII is a real beauty of a product (, and if Samsung can continue on this form, they’ll hold the crown for a long time.

  4. Things can move vary fast in this industry. I agree that Samsung will become the #1 smartphone seller. The question is how long do they get to hold the title. With all the speculation of a much cheaper iPhone tied to the new iCloud service Apple could be in a position to again experience huge growth.

    It is good to see Samsung building it’s own ecosystem but I think they will not be able to keep up with Apple. Apple is able to get licensing deals with the media companies that no one else can for the moment.

    My last thoughts are that Apple is still a vindictive company, it has softened this over the years but it is still at it’s heart. I expect Apple to move it’s processor fabbing to someone other than Samsung as soon as it makes business sense. I also expect it to be making large payments to component suppliers such as Sharp and Intel to move both their memory and screen supply away from Samsung. They wont risk there supply chain but they will change it.

  5. Not a fan of samsung… the two samsung phones i’ve had i hate… i had a droid before no need to root it… now i got a samsung continuum.. not only is it android version 2.1 but the unremovable bloat ware and crap they put on it sucks… samsung is annoying

  6. The Samsung Galaxy S really is the first Star Trek type device. As soon as we can stop causing cancer through this antiquated microwave radiation giving cellphone & celltower technology, by inventing a new, safe, method of communication, we’ll be one step closer to a poverty-free future for all. Go Samsung

      • It’s not the same thing. Feature ‘overlap’ is one thing. It happens a lot, but making products that deliberately look very similar to a competitors is entirely different. HTC, a considerably smaller company than Samsung, have managed to design some pretty neat looking devices without *ahem* “borrowing” from Apple’s design language wholesale. In fact it’s something that Samsung are guilty of doing a lot. Apple are just the first to take action.

        Sorry to be pedantic, but it’s ‘incorporate’.

  7. We had the Samsung Galaxy S2 to play with for a few days over at e2 community. I was quite impressed with screen, actually wow! That screen is top notch.

    The new phones Samsung has been bringing out from the Mini to the Ace are quality handsets and no wonder they are doing well.

    Good luck to them.

  8. Lucian Armasu

    I started expecting Samsung to take the #1 manufacturer position since a few months ago, but I didn’t expect it to happen until next year. Samsung has been growing at a steady pace because of Android, so that shouldn’t really surprise anyone. But what’s surprising is how fast Nokia is losing market share. By the time Nokia starts selling WP7 phones, they might not be bigger than HTC (which is a pretty small company), and HTC hasn’t sold a whole lot of WP7 phones so far, even though they made like 5 or 6 models.

    As for Samsung, this is just the beginning of their Android journey. Next year they should be able to make $50-$100 unlocked Android phones in huge volume for poor countries and price sensitive customers(even more bad news for Nokia), with the help of the upcoming Cortex A5 chip, which should be cheaper than the very old ARM11 chip currently used in low-end Android phones, but much more powerful (almost as powerful as Cortex A8). Making their own displays, chips and internal storage will help keep costs down, too.

  9. It’s amazing how hard Nokia has fallen. Samsung has seemingly picked up the pieces with it’s adoption of Android. Why didn’t Nokia just adopt the platform? It’s free. Kevin are you ready to come back to Apple with the updates in IOS5?

    • Jake, part of me agrees with you on the Android adoption: I called for that nearly a year before the MSFT deal. I think WP7 gives Nokia some additional customization flexibility it might not have had with Android since all Android partners have the same options available to them. With MSFT, Nokia has some differentiation potential. As far as me coming back to Apple, I can’t say I truly ever left. ;) I have a 4th gen iPod touch and iPad 2, so I can get my iOS fill. But I could come back to the iPhone, depending on the hardware. It would be even more likely if Apple supported T-Mobile’s data networks since I’m a T-Mo customer with good coverage where I work and live. Either way, I’m not your typical consumer because I’d still have an Android phone to use.

  10. This just further strengthens what I always said: if only Nokia had embraced Android early on, they would not be in the position they are in now. They might have even been at No. 1 position. Boy, I’d love to know what exactly transpired in the discussions inside Nokia when they decided not to make Android phones!

  11. Tim F.

    I often disagree with him, he can’t write a single brief sentence in less than 500 words and 3 paragraphs, and he’s mired in the old world, Asia- and Africa-oriented mindset once dominated by Nokia, but Tomi Ahonen called it in Apple’s favor a week ago, and his numbers are one thing he usually hits pretty close to the mark. No mention of Samsung at the time, but I’d wager it’s close between the three at the top.

    Unfortunately, I find it’s difficult to trust Samsung’s numbers: they consistently release huge numbers of shipments directly into the Korean market, but then there is really usage data to back it up. We should start getting some solid estimates in the next week or two however.

  12. “After pointing out Apple’s influence on Samsung as the company is about to take the smartphone lead, I’d be remiss if I didn’t overlook two related points.”

    typo alert: Shouldn’t that say “I’d be remiss if I overlooked two related points”?

  13. Leslie

    Having owned the Samsung Galaxy S2 for few days, I can understand why Samsung is generating such sales. It is an awesome phone. By far the best I have had. My last few phones have been Nokia N70, N95, iPhone, iPhone 3GS, iPhone 4.
    This thing feels so light in the hand and is so powerful. Screen is amazing that I sit drooling over it.
    Nokia might still be able to do good with W7. iPhone will continue to generate huge sales but Samsung is going to beat the crap out of other Android manufacturers like LG, Motorola and Sony Ericsson. If I has shares in Motorola or SE, I would sell it right away.

  14. Point #6, which you alluded to, is Samsung building its own high-quality displays. That means it has first access to them, and can decide which other smartphone manufacturers gets (or does not get) access to them.

      • I have my doubts about this. Building their own displays may give Samsung the Giant Corporation several benefits beyond revenues, such as leadership in innovation, knowledge of integrating display and other hardware. But no big public company is going to *not* sell even just one more widget if the market wants it.

    • brown_te

      Right. Same point with the A4 chips – Apple may be designed the tweaks but Samsung is doing all the manufacturing, are they not? (Not that the Apple/Samsung battle would get that ugly….)

    • Yup, I saw them early but was working on some other pieces, so I had to come back to this one. If nothing else, Apple’s strategy is proving right twice: once for Apple and once again for Samsung in a way. ;)