It seems like the only way for Apple and Samsung to grow more and to outplay each other in the future is to compete in the lower cost segment. While they have both made a fortune with their flagship products, it is now time to focus on other market segments, as an increasingly high percentage of potential smart phone users, especially in developing countries, are veering towards cheap, more affordable devices rather than the latest Samsung Galaxy or iPhone.
The iPhone5 and the Galaxy S3 dominate more than 50% of the smart phone market and nearly all the profits. However, it seems like further growth will depend on other products. In emerging markets, such as China and India, many consumers are buying their first smart phone, and for them feature-packed expensive devices are simply not an option.
The low-end market is challenging for both companies, as there are countless established competitors, who know exactly how to sell in this market. China`s Huawei is just one of the successful players in the market and they have experienced a recent increase of 40% in market share. The signs of an upcoming change are obvious: Apple`s average selling price dropped $28 in the first quarter of this year and more and more customers now opt for the cheaper iPhone 4 instead of the latest iPhone5. Samsung, on the other hand, achieved quite good results in the first quarter, but they were also warned that they “may experience stiffer competition in the mobile business due to expansion of the mid- to low-end smart phone market”.
With more than 170 million people in China below the $1.25 per day poverty line, it’s clear that many customers in this area simply cant afford a $600 smart phone. So the question remains, which of the two rivals will perform better in this highly significant market segment? Apple is now even considering launching a lower-cost iPhone, even though they refused to do so in the past. However, Samsung currently take the lead in China as the largest smart phone vendor.
So what are you thoughts? Should Apple release a cheaper alternative of the iPhone?