Why Lenovo could be a far bigger threat to Samsung than Apple

Why Lenovo could be a far bigger threat to Samsung than Apple

It's no secret that both the iPhone 6 and the Galaxy S5 will be battling it out later this year, but the two most popular phone makers on the planet, Apple and Samsung, have already shown markedly different trends as of late. Both sold a ton of phones, none more than Samsung. However, while Apple's average selling price rose by nearly $60 quarter-over-quarter, Samsung's fell by $30. Likewise, while Apple's 0% share of the under $400 phone market remained unchanged and their share of the over $400 market rose to 65%, Samsung's under $400 share dropped to 21% and they were left precious little space on the top end. Ben Thompson writes on Stratechery:

The iPhone as a platform is in fine shape: the iPhone is increasing its dominance of high end customers, and its those high end customers who dominate usage. More importantly, they aren't going anywhere. User experience is a sustainable differentiator in consumer markets, and any analysis that ignores iOS and Apple's integrated approach as a differentiator is as useless as a Macbook review that ignores OS X.

Samsung is a different story. They have no meaningful software-based differentiation, and have seen the iPhone's increased distribution eat into their high-end sales. A larger-screen iPhone would likely erode these sales further. Meanwhile, Samsung has to deal with Chinese Android-based manufacturers driving down prices not only in China, but, particularly now in the form of Lenovo, globally. Lenovo is crushing the traditional PC OEMs with both superior cost structures and superior R&D; at first glance there's no reason to expect any different result in smartphones.

Read the rest of Thompson's piece and then let me know — will Apple's strategy of avoiding the low end not only insulate them against race-to-the-bottom competition, but make them the most money at the top?

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Rene Ritchie

EiC of iMore, EP of Mobile Nations, Apple analyst, co-host of Debug, Iterate, Vector, Review, and MacBreak Weekly podcasts. Cook, grappler, photon wrangler. Follow him on Twitter and Google+.

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Reader comments

Why Lenovo could be a far bigger threat to Samsung than Apple


I stood in line and paid my 700 for my first Iphone in 2007. My MacBook Pro, IMac and Ipad are all that I expect. I don't mind spending my money for quality. I don't think Apple should get into that race. If you can't afford it don't cry just buy you something you can afford.

The point of Apple trying to come with a cheaper product is for people crying about the cost of the products.

Trying to compete in the low-end market and trying to appease whiners on the internet are two very different things. Apple is about making money, they are a major corporation, they will do what brings the most revenue. I highly doubt the people "crying" are top priority.

Lenovo isn't a company to underestimate. They have a massive alliance with IBM since purchasing their PC division. Now Lenovo is taking over the SystemX division which will see all Intel servers carry the Lenovo branding (Servers, Blades, chassis, pretty much everything except power and storage). On top of all this they're acquiring Motorola from Google. They are a threat to everyone. They have the resources to dream, develop, test, deploy, and maintain pretty much anything. They're the modern IBM with a hint of Samsung. Any competition should feel threatened. That includes Microsoft, Google, Samsung, and Apple regardless if Lenovo develops products for their ecosystems.

Not only that but Lenovo tends to give you value in their systems, not just a low price. Often the cheapest laptop with a set specs level will be Lenovo. The one area I feel they fail in is industrial design. Other than the Yoga line, which I find very sleek, most of their computers are unattractive blocks. Does this affect performance? No. But people don't buy based on specs alone.

If Apple, and especially its investors are counting on the Chinese market for the future of Apple, then Lenovo could be a bigger threat to Apple than to Samsung. There a far more consumers worldwide to the price range that Samsung caters to than to the price range Apple caters to, so Samsung might also be less sensitive to competition from Lenovo than Apple.

Moreover, no one really cares if Samsung misses a couple of record sales, but if that happens to Apple the consequences to its stock could be disastrous.

The cherrypicked statistics of the original article were also a bit misleading, since the <$400 market tends to be much bigger than the >$400. So it does not really matter if you have a 65% of a smaller and more mature market, if on the other hand you have 0% presence of a huge and developing <$400 market.

Anyway, I think its all academic, since Nokia, LG others are already showing us that building a successful smartphone nowadays is no walk in the park. Lenovo will have to bring something completely different to compete, and not just another decent Android smartphone.

I don't understand the sub $400 market, at least in the USA. If all you can afford is a cheap phone, how can you afford the ridiculous data plans?

Apple is enjoying the premium space for now - especially in the States - but I don't think it will last. Our culture doesn't operate on "premium" but instead on "good enough". Some buy some buy what is cheap, some buy what is best (subjectively), but most buy what is good enough. As the services playing field continues to level (in perception more than anything), devices continue to be on par, and competitor costs continue to drop, Apple may place themselves in a position of shrinking market share. I could be totally wrong in this case but if you look at any other consumer technology that has ever been sold it's the highly available, reasonably priced products that are "good enough" that sell best.

That being said I don't think Apple will care that much until their high margins can't make up the difference. Seems to be the case so far anyways...kudos to Apple for as long as it lasts.

"Apple is enjoying the premium space for now - especially in the States - but I don't think it will last."

You mean like what happened with the Mac in the past 30 years? Apple insists their primary goal is not to sell the most of any product. Sometimes they do (iPod) and usually they do not. But either way they have the best (most profitable) business in those product categories.

Totally agree. It's funny how reality doesn't line up with the expectations of "analysts". And I guess what I meant in that first line is that right now premium and "selling the mostest" kind of line up. My thinking is that premium will stay premium and the more mostest sales will shift to the "good enough" that I was alluding to. Either way I get exactly what you're saying.

You can't ignore the eco-system. Apple is not betting simply on device, but: device, software, services and integration. If you want first rung access then you get a first rung device....no frills. If you want complete integration with all your other devices, software, data and services then you have few options. This integration is not reflected in simple device sales metrics.

I don't think Samsung is in danger. Samsung makes a wide range of products from home appliances to oil tankers to skyscrapers. I think they'll be fine.

"However, while Apple's average selling price rose by nearly $60 quarter-over-quarter, Samsung's fell by $30"

You are comparing qoq for apple and yoy for Samsung. Apple ASP fell $6 yoy.

Thompson is just another analyst. He's taking unverified data (from the NYT of all places!) and using that as truth, then making statements based on that. It's blatant ignorance at worst and specious at best.

As for this topic, China is the new battleground and last I checked Apple is focusing all their attention on China. Lenovo is a threat to anyone in that field.

There is no such thing as verified data when looking at Samsung unit sales and hence ASP. The NYT was quoting Sanford C. Bernstein among other analysts and industry research firms. If you're going to denigrate someone, make sure you have the right target next time.

I do agree about China and Lenovo though.

To answer your question, we know what's happening.

iOS just keeps getting better and stronger, and every single important step towards the future of this industry is being taken by Apple since 98, the others just follow.

Apple's ASP aren't coming down in any meaningful way, while iPhones sales are growing. I believe that Apple's single mistake was underestimating the advantages of big screens, but another iPhone line can and will fix that.

Meanwhile Samsung took a surprising hit on the high end on the last two quarters, as yoy net profit and ASP shows.

Samsung, as the massive conglomerate that they are, usually have a nice price advantage on the low and medium end, and when someone tris to offer more standard specs for the same price range, they lose money (motorola).

But a massive Chinese company, with full support from their country, brand power and a open door to the US is Samsung's worst nightmare.

And as usual, the crowd that shouts "cheaper iphone" and Apple is doomed are clueless, as the current Mac situation proves (more money than the top 5 OEMs combined). Apple could and should go even a bit more expensive with a bigger screen.

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Lenovo will be a major player in few years. Especially with now having a door into the US. The new few months should be interesting.

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I disagree that Samsung has no software differentiation. I do not like the bloat that touchwiz introduces, but (particularly with their Note line) they are setting themselves apart from other manufacturers. Not implying these features are better or worse than competing features from other companies, but the differentiation is there.

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