SYDNEY/SINGAPORE/LONDON, January 09 (Fitch) Recent media
reports of Apple potentially releasing a low-end iPhone towards
the end of 2013 suggest a shift towards a strategy focused more
on market share - which could have an impact on Samsung
Electronic's (Samsung, 'A+'/Stable) leading position in
smartphones from 2014 and place downward pressure on industry
Samsung gave indications this week of record operating
profit for the fifth consecutive quarter. These preliminary
numbers showed sales for the full-year 2012 up by 22%, and the
operating profit margin rising to around 14% from 10% in 2011.
Smartphone sales were the key driver, as the company's global
market share rose to 32% in Q312 from 23% in Q311 - led by the
success of its Galaxy S3 and Galaxy Note II models in
particular. Apple's smartphone market share was half that of
Samsung, at 16%, although this is likely to have risen during Q4
with the release of its iPhone 5 model.
Fitch expects Samung to extend its lead over Apple in 2013.
Samsung has a wider variety of handsets in terms of both price
and screen size. It also commands a greater geographical
exposure, particularly in emerging markets where pre-paid plans
are the norm and many people cannot afford high-end phones.
Thirdly, Samsung's status as the undisputed leader for several
key smartphone components - including display, processor and
memory chip technologies - reinforces the likelihood that its
future smartphone models will be equipped with cutting-edge
technology. For example, Samsung's pending transition to
smartphones with unbreakable and flexible AMOLED screens is one
important development likely in 2013.
In this context, Fitch believes the media reports of Apple's
low-end iPhone make sense, particularly if Apple aspires to take
a reasonable market share in major emerging markets including
China and India. Samsung's operating margins improved in 2012,
but Fitch expects intensified competition among the major
smartphone manufactures to limit the extent of such improvement
in 2013. Moreover, if Apple does release a low-end iPhone, then
not only are its operating margins likely to narrow, but this
could also pull down the margins for Samsung and other
smartphone manufacturers in 2014.