Why Samsung is about to become the smartphone king


After leading the globe in smartphones sold for the last 15 years, Nokia is about to lose its crown as the smartphone king, but not to Apple. 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. 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 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 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, Samsung can take generic chip designs and tweak them to add or improve features in ways Nokia, HTC, LG, Research In Motion 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.

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