Samsung Trouncing Apple
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English: Samsung Logo Suomi: Samsungin logo (Photo credit: Wikipedia)
Samsung is a formidable foe for Apple.
After all, Samsung’s latest financial report suggests that Apple is falling behind fast. Samsung — the world’s leader in computer memory chips, televisions, mobile handsets and LCD panels — took a huge chunk out of Apple’s hide in the first three months of 2013.
How so? According to Strategy Analytics, Samsung controlled about 33% of the global smartphone market in the first quarter to Apple’s roughly 18%. And while Samsung’s smartphone sales surged 56% to 69.4 million units, Apple shipments grew a mere 6.6% to 37.4 million units.
And Samsung is not giving up profit as it gulps Apple’s market. According to the New York Times, about 75% of Samsung’s profits came from “the division that makes smartphones, tablets, personal computers and cameras.”
And compared to Apple, Samsung’s revenues and profits are soaring. While Apple revenue rose 11%, Samsung’s sales spurted 17% to $47.6 billion. And as Apple’s net income fell 18%, Samsung enjoyed a 42% profit explosion to $6.5 billion.
What is behind Samsung’s massive success? It certainly doesn’t help that Apple is turning into a lumbering dinosaur — it has no plans to introduce any major new products until the fall of 2013. And if the iPhone 5 that it introduced last fall is any indication, that may not be much to get excited about.
Meanwhile, Samsung — that launched its positively-reviewed Galaxy S4 smartphone in South Korea on April 26 and will introduce it in the U.S on April 27 — has been “flooding [the smartphone market] with a range of models with a variety of screen sizes and prices and updating its versions faster than Apple ever has,” according to the Times.
Samsung management spurs an intense focus on winning. A Harvard Business School Case, Samsung Electronics, that I have been teaching for the last several years, reveals that Samsung’s former Chairman Kun-Hee Lee was fanatically devoted to product quality and getting ahead of its competitors.
In 1996, Lee was so frustrated with a batch of defective cell phones Samsung made that he visited the plant in Gumi, Korea and made all 2,000 employees wear headbands that said “Quality First.”
Lee then took its 2,000 employees to the courtyard where the plant’s entire $50 million inventory was stacked. A banner in the courtyard read “Quality is my Pride.” Next, Lee lit the inventory on fire and forced the employees to watch it burn.
The HBS case also highlights the dual advantage — high price and low cost — that Samsung enjoyed in semiconductors. Not only could Samsung charge a higher-than-industry-average price, but it could also make the chips at a cost that was well below that of competitors.
Samsung’s engineers worked on frontier products — chips designed to solve knotty technical problems that competing designers could not tackle. Not only that, but Samsung’s focus on quality and efficiency meant that its costs were lower than competitors’.
For a company that is so successful, its fear of complacency and healthy paranoia about competition mean that Samsung has the best of both worlds. It has the market outlook of a start-up trying to survive in a world of fierce competition. Yet it has the massive capital, technology, and human resources of a big company.
When it comes to retaking its mojo, Apple not only needs to deal with its internal weaknesses, it must also out-innovate a powerful competitor that is firing on all cylinders.
