Never shy about hype, on September 12 Apple CEO Tim Cook presented the company’s latest iPhones to a packed auditorium in its glitzy new headquarters in Cupertino. He made a grand prediction: Its new, premium phone, the iPhone X (pronounced “ten”), will “set the path of technology for the next decade.”
Set to be released this November, 10 years after the first iPhone launched, the iPhone X has new features including an edge-to-edge OLED screen—a thinner screen that does not use a backlight—as well as wireless charging, facial-recognition technology and a dual-lens camera.
On the same day Samsung, a rival smartphone-maker, held a lower-key event in Seoul. Koh Dong-jin, president of Samsung Electronics’ mobile business, announced that next year Samsung may reimagine the smartphone entirely and launch a new design with a foldable screen which can close like a small book. On September 15 its latest premium smartphone, the Galaxy Note 8, went on sale, boasting many of the same features offered by the iPhone X.
Both are trying to convince consumers to spend around $1,000 for their new gadgets. Samsung’s new phone will cost $960, while Apple’s high-end iPhone X will cost $999, 45 percent more than the average selling price of an iPhone in 2016. The iPhone 8, simpler than the X and available for sale in September, will start at $699.
The competition to wow consumers has been intensely fought between Apple and Samsung Electronics for years. They claim a duopoly over the premium part of the smartphone market: Together they control around two-thirds of the global market, with Apple claiming 44 percent of smartphone revenues and Samsung 22 percent. The two companies have tussled in courts around the world over intellectual property, with Apple accusing Samsung of infringing its smartphone patents.
Last year Apple seized share in premium phones when Samsung struggled with its Galaxy Note 7, for which it was forced to issue a global recall due to its batteries’ habit of overheating. Samsung’s new phone is expected to win back users. The company used to copy Apple’s innovations, but now often is ahead on new features, said Werner Goertz of Gartner. Samsung was the first to release an OLED screen, for instance.
The rivalry between the two will only grow fiercer, even though Samsung also is among Apple’s most important suppliers of components, and is expected to provide OLED screens and chips for Apple’s latest phones.
In rich countries the market for smartphones is maturing: Many of the companies’ gains will come from stealing each other’s customers. In emerging markets, especially China, they will compete to persuade consumers to trade up from cheaper phones. Apple globally claims an 82-percent retention rate, compared with Samsung’s 67 percent. This is significantly higher than other companies’, especially Chinese manufacturers such as Xiaomi and Oppo, whose less expensive phones have gained share among Chinese consumers in recent years.
There is unlikely to be one winner. Samsung is well hedged: Its strong chip and smartphone-components businesses will insulate the company if mobile-phone sales slow. Apple lacks this diversity, but its mobile devices project luxury, and its customers are less likely to defect because iOS runs across all their devices.
Cook may be right that Apple’s phones will set technology’s direction, but his company will feel Samsung’s breath on its neck all the way.
© 2017 Economist Newspaper Ltd., London (September 16). All rights reserved. Reprinted with permission.
Image credits: Jim Wilson/The New York Times, Jung Yeon-Je/Agence France-Presse/Getty Images