Apple vs Samsung: The profit wars

The latest season of the smartphone wars is imminent. And it ’s not just about features and innovation.

Arthur Goldstuck
The second most important product of the mobile year is about to be unveiled, as Apple prepares to launch the new iPhone 8 in San Francisco. That very description tells us how dramatically the world of phone sales has shifted.

Just three years ago, it would have been unthinkable to rank anyone ahead of Apple in revenues or profits. A few months ago, it even became the world number one in smartphone unit sales, as it briefly overtook Samsung, despite having only two current models.

But now a seismic shift is under way. For the second quarter of 2017, Samsung became the most profitable company in the world for the first time. It reported more than $12 billion in profits, versus less than $11 billion for Apple.

The shift is all the more remarkable, in that it comes in the wake of one of the most spectacular failures ever of a new smartphone, namely the Samsung Galaxy Note 7. Not only was it withdrawn from the market by its manufacturer, but it was banned from even being carried on board flights by most airlines.

The result was a crushing blow to Samsung’s image. However, the blow to the bottom line was softened by a vast family of processors, appliances and gadgets the company produces.

A year later, Samsung has firmly shelved the disgrace. It has resurrected the Note range, with the eighth edition launched in New York just a few weeks before the Apple event. The significance of the launch cannot be overstated: Samsung pulled ahead of Apple despite one of its two flagship products literally crashing and burning; and now it’s bringing the proverbial new, improved version to market.

Apple, in response, has merely been able to catch up to Samsung’s second flagship device, the Galaxy S8+. The rumour mill around new iPhones, which have been uncannily accurate in recent years, gave Samsung little reason to lose sleep in 2017.

The key expected features of the new iPhone, such as infra-red facial recognition, a large 5.8-inch screen on the largest model, and a bezel-less design with edge-to-edge display, thanks to a virtual home button lurking under the screen, represented the sincerest form of flattery to Samsung.

These were some of the startling features introduced in the Galaxy S8 back in April, with the S8+ adding a massive 6.2-inch screen.

Both S8 models included iris recognition, one of the most innovative features of the abandoned Note 7.

The Note 8 was expected to resume Samsung’s innovation trajectory with a vengeance, putting even more pressure on Apple to deliver. But this time, the pressure points are both in the handset and the balance sheet. This is one of the key reasons Apple was expected, for the first time, to release three models of the iPhone.

This is yet another example of Apple playing catch-up in a market that's eager for choice, with a wider model range that caters to a wider range of both taste and budget.

Craige Fleischer, head of mobile for Samsung in Southern Africa, put it more philosophically: “We clearly understand that consumers aspire to top-end devices, but we’re looking to democratise this access to technology by creating devices at various price points to suit consumers’ pockets. We’re democratising access both to our ecosystem and to a lifestyle.”

Fleischer acknowledged that the second half of last year 'wasn't too prestigious'. But, in truth, the failure of one product underlined the strength of the company: “We’ve proven that we’re a diverse technology organisation, able to achieve significant growth and bolster profits, despite a massive setback.”

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