New York - The once-sexy iPhone is starting to look small and chubby.
That's become a problem for Apple, which revealed last week that iPhone
sales have slowed. Part of the problem is that the competition has found a formula
that works: thinner phones with bigger screens.
For a dose of smartphone envy, iPhone owners need to look no further than
Samsung Electronics, the No 1 maker of smartphones in the world.
newest flagship phone, the Galaxy S III, is sleek and wafer-thin. It can run on
the fastest networks and act as a "smart wallet" too - two things
the Apple's iconic phone can't do.
Ramon Llamas, an analyst with research firm IDC, says the iPhone "is
getting a bit long in the tooth".
Apple has become the world's most valuable company on the back of the
iPhone, which makes up nearly half of its revenue.
The iPhone certainly has
room to grow: only one in six smartphones sold globally in the second quarter
had an Apple logo on its back.
When Apple reported financial results for its latest quarter last week, a
new phenomenon was disclosed: buyers started pulling back on iPhone purchases
just six months after the launch of the latest iPhone model.
Apple executives blamed the tepid sales on "rumours and
speculation" that may have caused some consumers to wait for the next
iPhone, which is due in the fall.
But in the past, iPhone sales have stayed
strong nine months after the new model is launched, then dipped as people began
holding off, waiting for the new model.
In the April to June period, Apple sold 26 million phones, 28% more than it
did in the same quarter last year.
Most other phone makers "would kill" for those numbers, says
Stephen Baker, an analyst with research firm NPD Group. But since the iPhone's
introduction in 2007, the average annual growth rate has been 112%.
The competitor that doesn't need to kill for those numbers is Samsung, which
has solidified its position at the world's largest maker of smartphones.
Analysts believe it sold just over 50 million smartphones in the second
quarter, or nearly twice as many as Apple. (The company doesn't release
specific figures.) Its smartphone sales have nearly tripled in a year, from
18.4 million, according to IDC.
Most of Samsung's sales comprise cheaper smartphones that don't compete
directly with the iPhone. Its flagship phones, though, have emerged as the
iPhone's chief rivals.
Samsung and Apple have a complicated relationship. They're rivals in the
smartphone and tablet-computer markets, and are set to square off in a
high-profile trial over mobile patents in San Francisco this week.
one of Apple's largest suppliers of chips and displays, and Apple is one of
Samsung's largest clients.
Together, Samsung and Apple make half of the world's smartphones, and since
competitors are losing money or breaking even, they account for nearly all of
the profits in the industry.
Though Apple is known as a relentless innovator, the iPhone's screen has
been the same size - 3.5 inches (8.9 centimeters) on the diagonal - since the
first iPhone came out. It was a big screen for the time, but among the
competition, screen sizes have crept up.
Samsung has increased the screen size of its Galaxy series with every model
since it debuted in 2010. The Galaxy S had a screen that measured 4 inches (10
centimeters) diagonally, and was followed by the S II, at 4.3 inches (10.9
The S III, the latest model, measures 4.8 inches (12.2
centimeters). The screen is nearly twice as large as the iPhone's. Yet the
Galaxy is slightly thinner than an iPhone - 8.6 millimeters versus 9.3 - and
lighter - 133 grams versus 140 grams.
Samsung has also achieved surprising success with an even bigger phone, the
Samsung Galaxy Note.
Its 5.3-inch (13.4-centimeter) screen makes it somewhat awkward
to hold to the ear, but customers don't seem to mind, or perhaps they value the
large screen and included stylus more.
Aside from design, Apple is inflexible in another way: by releasing a new
phone only once per year, it lets the competition create new phones with
features the iPhone doesn't have and lets them go unchallenged, at least until
the new iPhone comes out.
"Apple's schedule leaves the other 10 or nine months of the year wide
open for everybody else," says Llamas.
For instance, the newest Samsung phones can use the latest high-speed data
networks in the US, and it can act as smart "credit card" at payment
terminals in stores, two features the iPhone doesn't have.
Samsung times its product launches to take maximum advantage of the lull in
iPhone sales that usually precedes the launch of a new model. The S III went on
sale in Europe in May and in the US in June.
The rest of the competition is in disarray, and hasn't been able to
capitalise in the same way on Apple's rigid release schedule and conservative
design. Nokia, until recently the world's largest phone maker, is in sharp
retreat and is conducting a complete revamp of its smartphones.
Motion is stuck with outdated software for its BlackBerrys at least until it
launches a new operating system next year. HTC of Taiwan is suffering from
marketing missteps in the last few years.
LG Electronics, another Korean
company, hasn't been able to keep up with Samsung when it comes to high-end
phones, or with cheaper manufacturers on the low end.
Samsung, LG and HTC all use Google's Android operating system, which is seen
as the main alternative to Apple's own software. But Samsung is emerging as the
company that's able to turn Google's free software into profits.
"Samsung is the only company that didn't really buckle under the weight
of the iPhone 4S. Good, solid devices and good, solid marketing behind
them," Llamas says.
Analysts now expect the new iPhone to arrive in September or October,
probably with a slightly bigger screen. Sticking to one screen size has served
Apple well, Baker says, but he sees the company moving with the times, as it's
done many times before.
"When they have the reputation and the brand loyalty that they have,
you don't have to be the first to market" with new features, Baker says.
"You don't have to take that risk."
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