David Garrity on BNN: The Smartphone Convergence?

Samsung Galaxy 8 Early Orders Surpassing Previous Versions

After being forced in 4Q16 to withdraw the Galaxy Note 7 smartphone from the market due to product safety issues, Samsung has lost strategic ground to Apple with its September 2016 iPhone7 launch. Consequently, in 4Q16 Apple took market share from Samsung and simultaneously the Google Pilex had a better market reception than it otherwise might. Now, following the Galaxy S8 smartphone’s Wed 3/29 launch, pre-orders for the Fri 4/21 introduction are running ahead of prior versions. Featuring a large 5.8″ screen with no additional weight, a voice-sensitive AI assistant, Bixby, and a rear-mounted home button at prices starting at $750, the Galaxy S8 is coming to market shortly ahead of the expected September 2017 Apple iPhone8 marking the 10th anniversary of the iPhone’s market introduction. This short window allows Samsung only a limited amount of time to recover the 4Q16 market share lost to Apple. As such, strong near-term Galaxy S8 pre-orders are likely stemming from Android consumers who delayed purchasing decisions following the Galaxy Note 7 recall.

Will Apple iPhone8 Provide Sufficient Differentiation To Prevent Smartphone Convergence?

Product categories tend to standardize around specific sets of features over time. In this respect, it is appropriate to ask whether smartphones have reached the point of product convergence where they become commoditized. Note the Galaxy S8 shares a larger number of product specifications identical to those expected in the Apple iPhone8 and is priced at a 15-25% discount. However, while Apple has historically been slower to introduce new technology features as part of its risk mitigation strategy, the strength in Apple’s premium market position lies in its iOS software/hardware integration which supports a better user experience along with its strong ecosystem. Not something the Galaxy S8 appears set to displace, so for now Apple continues to enjoy a substantial strategic lead that the iPhone8 will likely serve only to strengthen.