The iPhone 6 Has Samsung Backed Into A Corner

Tim CookAPApple’s newest iPhones are bad news for Samsung.

If the arrival of the iPhone 6 was a boon for Apple, then it was also an ominous day for Samsung, the company’s main competitor in the smartphone market.

The iPhone 6 represents Apple’s attempt to get into the phablet market. Consumers have been clamoring for Apple to make a large-display smartphone for some time now. This is especially true in emerging markets:

Chart of the day phabletsBusiness InsiderThe iPhone 6 Plus will probably do well in China.

Tim Cook’s Apple makes four smartphones. Even Goldilocks could find one that fits just right. But Apple’s foray into the phablet market is bad news for Samsung, because up until now, that was the only area where the two tech Goliaths didn’t compete in the smartphone market.

Obviously we’ll have to wait for iPhone 6 sales this fall — especially around the holidays — before we know if the 6 is a hit with consumers or not.

But as Jackdaw Research Chief Analyst Jan Dawson writes in a recent blog post, Apple’s addition of large-display smartphones means it offers nearly all of the same features as its South Korea competitor. You can see how Apple has progressively taken its competitors’ features and incorporated them into the iPhone in this chart:

Apple windows of opportunity Jackdaw ResearchJackdaw ResearchThe arrows in this chart represent windows of opportunity for Apple’s competitors.

As you can see, Apple has its bases covered with regard to smartphone features.

“The impact will be that competitors which have differentiated on screen size will now need to find something else to compete on,” writes Dawson.

Unfortunately for Samsung, that something else will probably have to be price.

Apple has always dominated the high end of the smartphone market, but it’s extended its reach with the iPhone 6. It’s also worth noting that the iPhone 5C — now available for free — gives consumers an affordable alternative to the iPhone 6/6 Plus.

That leaves Samsung between a rock and a hard place. It will either have to innovate itself out of a corner, or become the dominant downmarket smartphone company.

As shown above, Samsung can only stay ahead of Apple on features temporarily. That leaves Samsung with price to compete on.

Forcing Samsung downmarket will lower revenues and impede its ability to compete with Apple. And as you can see, smartphones are Samsung’s bread and butter:

Samsung operating profits chart of the dayBusiness InsiderThe vast majority of Samsung’s profits come from smartphones.

Given that the iPhone 6 is expected to be hugely popular, this is officially Apple’s game to lose.

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