Samsung Beats Apple as World’s Most Profitable Smartphone Maker

The fight between Samsung and Apple just got yet another wrinkle, as Strategy Analytics, an independent research firm, announced that the Korean electronics manufacturer has eclipsed its American rival to become the most profitable smartphone maker in the entire world. This is the first time this has happened in four years, and ensures that this conflict isn’t going to go away anytime soon.

According to a post on CNET today, Strategy Analytics reports that Samsung’s mobile division managed to earn $5.2 billion in profits during the second quarter, while Apple earned “only” $4.6 billion. So why has Samsung’s mobile phone division become so profitable? Because of its “strong volumes, high wholesale prices, and tight cost controls.” Of course, to my eyes, “tight cost controls” looks whole heck of a lot like “uses cheap materials.”

Now, I’m definitely projecting some of my own personal experience Samsung’s way. My first smartphone (after my breaking my third late, lamented Palm Centro) was a Samsung Epic 4G, an Android-powered phone with a slide-our keyboard that worked most of the time, but eventually kicked the bucket when pieces of it were literally breaking off. Yes, it was subject to more abuse because it featured moving parts, but at the end of the day, it was likely a result of Samsung using “tight cost controls.” After that, I made the switch to HTC…which has its own problems, but I think those are more software-based rather than hardware, but I digress.

The CNET post also quotes Strategy Analytics Executive Director Neil Mawston, who explained what Apple ought to do moving forward:

“Apple is now under intense pressure to launch more iPhone models at cheaper price-points or with larger screens to fend off the surging competition and recapture lost profits in the second half of 2013.”

That may be true when it comes to satisfying the folks who own Apple stock, but I’m honestly not so sure that Apple really ought to do that. Apple has never really succeeded by imitating the competition, and releasing 1) cheaper and 2) bigger versions of the iPhone are straight up copycat moves. While I’m not a fan of the iPhone myself, I understand the device’s appeal, and a lot of that has to do with its small, engaging form factor.

Case in point: when shopping for a new cell phone with my girlfriend, the iPhone was a serious contender because of how easily it would fit in her hand. She eventually chose the Samsung Galaxy Victory because it’s roughly the same dimensions of an iPhone, and also because—you guessed it—it’s way cheaper. Furthermore, while she considered the Samsung Galaxy SIII, that handset was rejected because it was too big for her hands.

Another reason for the iPhone’s success? It’s uniformity. All of the apps made for iOS devices tend to work across nearly all devices running the platform, simply because there’s no room to screw it up. Compare that to Android apps, which have weird hiccups and hinky problems depending on which device is running it, and the result is frustrated customers, and tons of apps that don’t work as advertised.

All of this is a long way of saying that Samsung may have won the battle, but it’s far from winning the war. To be quite honest, I’m not a business expert, and I don’t know what the right move is here from that perspective. But I know that if it does follow Samsung’s lead with multiple options, it’ll lose that edge it’s had over its rivals for years: being Apple.