Samsung has an 'Edge' over Apple; trend indicates growing appeal compared to the iPhone

Samsung’s recent earnings call revealed a huge bump in profit for the company, the highest they’ve had in two years. It’s also clear that the bump was driven in no small part by the Galaxy S7 and S7 Edge smartphones. Looking closely at the facts and figure, it’s also apparent that there’s a larger force at play here. Clearly, there’s a strong market for flagship devices and even more clearly, Apple is losing its grip on that market. [caption id=“attachment_327277” align=“aligncenter” width=“640”]  Data Source: Samsung. All figures have been converted from trillions of South Korean Won to billions of USD[/caption] Apple’s recent earnings call revealed a 15 percent decline in the sales of iPhones since last year. In the same period, Samsung overtook Apple as the number one smartphone brand in the US. At the same time, Samsung’s profits have seen a dramatic rise (going from 9 percent to around 15 percent) since the launch of the Samsung Galaxy S7 and S7 Edge. [caption id=“attachment_327278” align=“aligncenter” width=“640”]  Source: Apple[/caption] While Samsung hasn’t revealed exact sales figures, one just has to glance at their operating income and sales to realise that their margins have gone up significantly. Samsung’s sales have been relatively constant at around $23 billion, but their profits have varied wildly (between 7 percent and 19 percent). Since sales are constant, the only real factor that can vary is the margin. [caption id=“attachment_327281” align=“aligncenter” width=“705”]  Samsung earnings by division. Source: Samsung[/caption] Samsung themselves report that their flagship S7 and S7 Edge devices had strong sales this quarter. They also point out that the S7 Edge alone accounted for “50 percent of the sales proportion.” Considering that flagship devices are high-margin devices, one can see how the increase in sales of flagships has affected their bottom line. Samsung also says that they’re “maintaining the profitability of mid- to low-end models,” which is another pointer in favour of their flagships. Apple is by no means out of the running yet. Their operating profit of $10 billion in Q2 2016 is more than double that of Samsung’s IM (IT and Mobile Communications) division and about 50 percent greater than Samsung Electronics’ total operating profit. Apple needs to be more wary though. A lacklustre iPhone line-up, high margins (and the resultant high prices) and a lack of innovation might be hurting the company more than they realise. **Switching platforms is not something that comes easy** to a dedicated user, but when that switch happens, it might be harder to get them back. Apple has always maintained its market share and dedicated user base on two things, a great device and a great ecosystem. Android’s already caught up on the devices front, and, arguably, taken the lead as well. It’s just the ecosystem that’s still lacking (ecosystem doesn’t just mean apps). With the rise of streaming services, even that obstacle is being overcome and we aren’t even talking about AI yet. Sure, the iPhone 8 might be mind-boggling, but we won’t see that phone till September next year. Apple seems to be complacent in the belief that a stop-gap iPhone 7 will be enough to tide consumers over till the iPhone 8. If Samsung and the like maintain their current steam, that might not be the case. The iPhone 7 might just end up being the most important iPhone that Apple has ever released, since the first one anyway.