On Tuesday of this week Samsung shocked much of Wall Street. The South Korean mobile giant said it would bring in a profit of $3.8 billion for the quarter compared to analyst expectations of about $5.2 billion. This also represents a year over year decline of about 60%, so it's a huge downward swin
For quite some time, Samsung has been the dominant name in Android land. In North America and Europe, where there is a larger appetite for high end phones, Samsung made a ton of money because they priced products similar to Apple's iPhone. Presumably they pulled in similarly thick profit margins on their hardware.
Samsung also has the advantage of controlling much of its supply chain, unlike smaller Android phone makers like HTC or Motorola, and scores of lesser known Indian or Chinese suppliers. But with such a big shift away from feature phones and towards low end smartphones around the world, Android volumes are steadily rising and the supply chain is maturing. Perhaps Samsung's advantage is diminishing at the low end? And at the high end the iPhone 6 and iPhone 6 Plus has essentially closed any of the big gaps left that would cause a would-be iOS user to adopt Android instead. Screen size was a big factor here.
Because Samsung and other Android vendors don't have any particular differentiation to offer outside of hardware. which is arguably becoming more of a commodity, how can we expect any one vendor to generate significantly higher gross margins?
I don't think we can, and it's finally starting to hurt Samsung.
Just like Microsoft controlled the software (and much of the profit) on Windows PCs in the last few decades, Android now holds that position in mobile. Where Microsoft was once the "barely debugged stack of drivers" to manufacturers the world over, now there's Google, and the hardware vendors are again fighting for thin margins because they don't control the entire user experience like Apple does.
In fact, for Apple, things are very much like they were in the PC space. They're the #2 player by operating system volume, and they command huge margins because they control everything. Android's largest supporter, Samsung, is seeing a collapse while Apple is growing and posting awesome numbers.
I also think the big difference between the PC space and the mobile industry is the idea of digital app delivery done through a single store. Microsoft never was able to make much money from software that it didn't write itself. But Google has replaced Microsoft in the transition to mobile and they do profit, as does Apple, from all app sales.
Long story short: Google and Apple remain powerful because they control the operating systems, app stores and digital sales. Vendors who make hardware that is as good as Apple's are unlikely to ever make the same kind of profit. They simply don't control enough of the experience to command Apple-like margins.
Get the Aviary Twitter app for just $1.99, today only!
You haven't lived until you've used a third-party Twitter app like Aviary. You want to live, don't you?
Apple's Black Friday iPhone SE sale essentially makes the price $290
The iPhone SE is already an incredible price, even without any discounts, but with Apple's Black Friday sale, you can get one for a song.
Which AirPods should you buy on Black Friday?
Thinking of buying AirPods for Black Friday but can't decide which ones you should get? I've got some advice that should help you decide.
These are the best wireless mouse choices for your Mac
Cut the cord, the mouse cord that is, with the best wireless mouse for your Mac! Here are some of our favorites.