Samsung's announcement of the Galaxy S5 could hardly have been more low key. After the disaster that was the S4 show, Samsung played this launch straight, letting the phone speak for itself. And certainly the S5 is a nice, evolutionary upgrade over its predecessor. But that's all it is. To a point, Samsung deserves some credit for this. The S4 brought with it a host of gee-whiz features that never gained much adoption and often weren't completely intuitive. Repeating that error would have been throwing good effort after bad. And by including waterproofing Samsung will save a lot of phones from accidental destruction. On the other hand, another dull plastic enclosure and a similar overall design will now have Samsung fans echoing a familiar Apple complaint: It looks like last year's model.
Apple almost certainly won't have the iPhone 6 on the market before its typical September refresh, but it already knows that absolute unit growth has been hard to come by with its current pricing. While there is no chance it will follow Samsung's scattershot approach of making dozens of models to hit nearly every price point, CEO Tim Cook seems to have opened the door to more flexibility on how the company will tackle things going forward. The real mystery with Apple is whether it chooses to make a break with Wall Street's obsession over margins. The latest data from Kantar suggests that after the early adopter wave ended, the iPhone 5c picked up in popularity relative to the 5s. The latter outsold the former 3:1 in the U.K. at first; the ratio is now down to 2:1.
Clearly, Apple concluded the 5c was a product it was proud of, calling it "unapologetically plastic." It even gave it 50+% margins like its typical metal-bodied phones and sells it for about $550 wholesale. There's no doubt a significant price cut would erase much of that margin but there is similarly no doubt it would expand the market for the 5c -- or whatever its successor might be come September. The Kantar data showed Apple losing market share in the U.S., Germany and France versus a year ago, suggesting that the flight to less-expensive smartphones isn't just an emerging-markets phenomenon any longer (though the prices of those emerging markets phones are radically lower and a $400 iPhone 5c might well be a sufficient answer for Apple).
It remains the case that market share isn't an endgame, but everything Apple appears to be setting itself up for is centered on having as many customers as possible. And, indeed, the company should be interested in everyone who is a regular user of their smartphone, as Cook has said. Samsung is finding itself struggling with exactly how to pick up as many of those people as possible without actually gaining much for doing so. Apple, on the other hand, has quietly pieced together an App Store empire that it's about to develop into a juggernaut. Now is not a great time for the company's phone business to be losing momentum. We've seen Samsung's move; Apple is up next.
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