Smartphone Juggernaut Spawned Industry Giants in Apple, Samsung

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By Erik Pineda | November 20, 2012 2:25 PM EST

Smartphone served as the tech industry juggernaut in the past five years that it catapulted tech firms to record revenues and profits, according to Asymco managing director Horace Dediu.

The last half-decade, Mr Dediu said in a speech delivered at the Guardian Mobile Business Summit 2012 in London, was generally characterised by a phenomenon known in the business world as 'disruption theory', in which the emergence of smartphones and with global consumers purchasing them in large numbers led to the displacement of former leaders and the ascension of new ones.

The rise of Apple, Google and Samsung also saw the decline of former industry movers and shakers, foremost of them are Nokia, which held the sway for 14 years, and BlackBerry maker Research in Motion (RIM).

The quick changing of the guards was due to the fact that Nokia did not anticipate that Apple would reconfigure the industry make-up when it rolled out the first iPhone in 2007. In the same vein, Apple was caught off-guard when Samsung issued the first of the phenomenal Galaxy S smartphone series in 2010

The latest edition of that product line, the S3, is now the bestselling smartphone brand, as Strategic Analytics recently reported, capping Samsung's reputations as the biggest mobile phone player, a position that the company actually secured by Q1 2012.

While in terms of profit margins, Apple still dwarfs Samsung at close to 50 per cent for the former to the latter's 21 per cent, Mr Dediu noted that the South Korean tech giant's performance in the past two years was nothing short of remarkable.

In an interview with Bloomberg, Mr Dediu said Samsung's success is so glaringly undeniable that in the latest profit comparison with Google, maker of the Android platform that powers most if not all of Samsung smartphones, the former's mobile business has surpassed that of Google's.

New data showed that Samsung pocketed more than $US5 billion in profit for selling smartphones alone while Google's overall business only amounted to incomes of less than $US3 billion, Bloomberg said.

Four things were working for Samsung's success, according to Mr Dediu, and chief of them was the company "saw where the puck was going ... (and it) moved aggressively into smartphones, jettisoning the lower-margin feature phones to which other manufacturers held on to support their business."

It also helped tremendously that Samsung has the means to quickly produce in large amounts, back its products with effective global advertising and partner with established distributors and telcos in various markets, the Asymco founder added.

As best-represented by Samsung's success story, which barely sold any noteworthy smartphone prior to the Galaxy era, "Android has created a very interesting industry," Mr Dediu said.

With mobile devices, and a great majority of them running on Android, set to dominate the overall computing product shipments by the end of 2012, it is likely that the smartphone market will continue to flourish well beyond the near-term projections, he added.

The only major issues currently seen on the horizon are smartphone saturation and the capabilities of telcos around the world to provide reliable and stable online access, which for Mr Dediu is the backbone of mobile device usability.

"We think of these (mobile gadgets) as computers, but they need to connect and act as computers on the network, and we all know the difficulty of doing that even in developed markets," The Guardian reported him as saying.

As for Samsung, more things are lined up for the company lest it stumbles on its own missteps, Mr Dediu said. In his article published by Technology Spectator, he posed the question: "What would happen if Samsung soaks up so much profit from mobile that it's in a position to acquire Google and control the trajectory of their enabling platform?"

Answers to that is indeed an exciting spectre to witness as they unravel in the quarters and years ahead.

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