For the past few years, Samsung has been riding high atop the smartphone leaderboard when it comes to units shipped. However, during 2014, we started to see a bit of weakness in Samsung’s smartphone portfolio. Its flagship Galaxy S5 smartphone was little more than a warmed over version of its Galaxy S4 predecessor, and sales were more than disappointing for the company. Samsung saw its sales lead in China wither away as local OEMs like Huawei and Xiaomi attacked its smartphones with cheaper alternatives. It also recently lost its smartphone sales lead in India and the U.S.
Samsung is looking to right the ship with more premium smartphones — as witnessed by the Galaxy Note 4, the Galaxy Alpha series, and the upcoming Galaxy S6/Galaxy S6 Edge — but some feel that Samsung may never recover to be a dominant force in the smartphone sector. In fact, some believe that the era of high-priced smartphones isn’t sustainable and OEMs that focus more on products that are easier on consumers’ wallets will rise to lead the market.
Samsung's Galaxy S5
In an interview with Forbes, Motorola president and chief operating officer, Rick Osterloh, talked about his company’s recent blowout quarter. Free from its stint under Google’s stewardship, Motorola’s fiscal third quarter smartphones sales soared to 10 million units, representing year-over-year growth of 118 percent. This was definitely great news for Motorola's new parent, Lenovo.
Motorola is gearing up for a big smartphone fight in China, and it will have to take on the incumbents like Huawei and Xiaomi. It will do so with budget-minded devices like the Moto E, Moto G, and Moto X which are priced at $119, $179, and $399 respectively off-contract in the U.S. Compared to smartphone offerings from Apple and Samsung, Motorola’s smartphones — which come free of carrier bloatware — look like great bargains.
Motorola's second generation Moto G
And this is where Osterloh brings out his crystal ball, predicting the decline in high-priced, “premium” smartphones as affordable, competent alternatives flood the market. “Every seven years, the person who’s been on top of the market has gone away,” Osterloh mused. He pointed to the fact that Nokia and Blackberry both once ruled the roost when it came to mobile phone sales, only to fall into irrelevancy once new, more nimble competition entered the fray.
“We are going through one of those fascinating shifts where people are starting to realize that you don’t need to pay $600 for a top-tier phone to get a top-tier experience,” Osterloh added. “We are an alternative to other premium brands at a much better value. We are very confident in our approach.”
While Osterloh may have a point that there are plenty of price-conscious consumers out there, especially in developing countries, there is still a large market for premium-priced smartphones from OEMs like Samsung and Apple. The Galaxy S5 might not have been the sales champion that Samsung originally expected, but the tech community eagerly awaits the Galaxy S6. And we can’t forget Apple, which recently posted its highest quarterly profit ever on the back of record iPhone sales (75 million iPhones were sold during the quarter). The average selling price (ASP) of iPhones actually soared during Apple’s fiscal Q1 thanks to the higher priced iPhone 6 and iPhone 6 Plus.