Business Technology

Tuesday 25 July 2017

Apple v Samsung: how tech giants match up in global battle for billions

Adrian Weckler on the two-horse race which has seen both companies tighten their grip on the market and eye even greater spoils in 2017

In a black period for Samsung vice-chairman Jay Y Lee was embroiled in a corruption scandal. Photo: Bloomberg
In a black period for Samsung vice-chairman Jay Y Lee was embroiled in a corruption scandal. Photo: Bloomberg
Adrian Weckler

Adrian Weckler

If technology is supposed to experience disruption every five years, it is currently behind schedule. Financial results from Apple and Samsung in the last week show that the world's top two tech companies are strengthening their hold on their respective markets. While Apple saw sluggish iPhone 7 sales ahead of its iPhone 8 model, the company now holds $250bn (€228bn) in a cash pile, the largest in modern corporate history.

It's enough to buy the Walt Disney company outright, a possibility that US pundits are discussing because of a potential change in US tax law this year or next. Although its Apple Watch and wireless Airpods businesses are performing well, the company is said to be on the trail of a major acquisition because of its enormous cash reserves and its increasing reliance on the iPhone for profitability.

For Ireland, Apple's latest €10bn quarterly profit on €48bn in quarterly revenues keeps its Cork operations humming. Chief executive Tim Cook has repeatedly dismissed suggestions that an adverse tax conclusion from EU authorities will threaten the company's investment here or the fate of over 6,000 employees in Cork. Ireland is the only country outside the US where Apple runs its own computer manufacturing plant.

For Apple's main rival, Samsung, 2017 has been a big improvement on 2016. The Korean giant's latest quarterly financial reports showed a complete rebound from the public relations fiasco over its exploding Note 7 smartphone. For the first three months of the year, Samsung recorded almost €41bn in revenue. It also recorded an €8bn profit, a 50pc jump on last year. While this doesn't quite match Apple's earning power, it is as much profit as Google and Facebook combined and significantly more in revenue.

While the engine of the company's profit was driven mostly by its components and display business (it makes phone screens for rivals such as Apple), it also scored a hit with its latest smartphone, the Galaxy S8. It was a much-needed reprieve for the Korean tech giant, which courted worldwide controversy in October last year when its flagship Note 7 device was withdrawn from the market because of overheating batteries.

"The Irish market is in a very different place to what it was last year," said Conor Pierce, Samsung's Dublin-born vice president. "Samsung is in a much stronger position in terms of our premium market share. About 68pc of the value of the market is premium, meaning anything priced over €600. It's a two-horse race between ourselves and Apple."

Pierce says that Samsung has overtaken Apple in premium handset sales in Ireland. However, Samsung and Apple dominate the smartphone business between them, with the pair holding an estimated 75pc of the entire phone market here between them. Other tech hardware companies find themselves battling for scraps and niches.

HEAD TO HEAD: Apple versus Samsung

APPLE

2nd quarter revenue: €48.1bn

2nd quarter profit: €10bn

Strengths: Its high-margin electronics continue to sell very well and customer loyalty levels are high. It has also become the biggest wearables and smartwatch company, with sales of the Apple Watch doubling in the last year. Its enormous cash pile of €228bn puts it in a position of unprecedented corporate strength.

Weaknesses: It is increasingly dependent on the iPhone for the majority of its revenue and profit. Its iPad business is also declining as larger smartphones take over. Finally, it still faces uncertainty with its appeal of the European Commission's €13bn tax ruling against Ireland.

What to look for next: The iPhone 8 launch in September will be the biggest tech event in recent years, with analysts predicting a financial 'supercycle'. This is partially because Apple is expected to unveil something radically different to mark the handset's 10th anniversary. It continues to look at self-driving cars and artificial intelligence, with acquisition targets said to include companies as diverse as Tesla and Disney.

SAMSUNG

Quarterly revenue: €40.8bn

Quarterly profit: €7.9bn

Strengths: Its components, chip and display businesses are going gangbusters. It also scored a hit with its latest Galaxy S8 smartphone with its new all-glass design set to be mimicked by other phone manufacturers, potentially including Apple. It also bounced back strongly from difficulties over exploding Note 7 phone.

Weaknesses: Because it does not use its own proprietary interface, the company still has to fight harder to attract and retain phone customers than main rival Apple.

What to look for next: Samsung could be on the verge of overtaking Intel as the world's biggest chipmaker because of its strength in the mobile market. It is also trying to establish its electronics brand as a high-end premium marque, so look for flashier fridges, cookers and phones.

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