Is it Google? Apple outsells Google on everything but advertising. Is it Microsoft? Apple owns half the PC industry’s profits. How about smartphones and tablets? Let’s go with that one since that’s the source of most of Apple’s revenue and profits. So, who is the #1 bad guy?
Squeezed From High End
Hand it to the executives running Samsung because they properly identified Apple as the tech gadget company to copy.
Wow, did Samsung ever copy Apple; iPhone, iPad, with an occasional attempt here and there to copy Apple’s famed cool cachet.
It didn’t take long for Apple to stake out the premium end of the smartphone and tablet market, with Samsung nipping at the Cupertino company’s heels.
In an effort to out Apple Apple, and to gain marketshare, mind share, and profit share, Samsung decided to spend 10 times what Apple spends on advertising and promotion.
As the battle raged, Samsung sold more smartphones and tablets than Apple, but to do so the company had to cut prices. You see, Apple’s aluminum bodied iDevices smack of premium, and Samsung’s plastic smacks of cheaper.
Cheaper sells, of course, so Samsung sold a boatload of smartphones and tablets after spending a boatload of potential profits to get there.
Squeezed From The Low End
Unfortunately, while Samsung sells more plastic than Apple sells aluminum, it didn’t make as much gross profits on each device. Why?
Apple’s status as premier and premium brand means the profits stayed with Apple– Samsung was squeezed down from the high end. Samsung’s profit margins were squeezed from the low end of the product spectrum because, well, cheaper sells.
Cheaper knockoff plastic smartphones all tend to look and feel much alike, and unlike Apple, Samsung’s brand was not enough of a differentiator. For the second straight quarter Samsung will report lower than expected profits on smartphones and tablets, which some financial experts estimate to be about one fourth of Apple’s growing profit share of the industry.
Poor Samsung. Squeeze from the high end, squeezed from the low end, and no place to go but down.