Why Isn’t Samsung Worth Trillion Dollars Even Though It Has Many Clients Than Apple?

Samsung Electronics recently announced a 22% decline in mobile revenues and a 34% loss in year-over-year earnings in its IM segment, which encompasses smartphones, tablets, PCs, watches, and other items similar to Apple’s. On the other hand, Apple’s revenues and earnings increased by more than 17% during the same time. Why is the world’s largest phone manufacturer doing so poorly in revenue?

How Do The Two Businesses Compare In Terms Of Revenue?

Samsung And Apple Revenue

Samsung has a $326 billion market capitalization. Samsung’s net worth is estimated to be $300 billion in 2021. Samsung has significantly impacted South Korea’s economic development as a large corporation. Samsung has impacted politics, the media, and culture in South Korea.

Apple Inc. became the first corporation to reach a market valuation of $1 trillion, and it surpassed the $1.3 trillion milestones in December 2019.

What is the value of Samsung? Samsung is currently valued at $200 billion, yet the market capitalization difference with Apple remains. With its Galaxy S and Note lines, Samsung has been Apple’s largest smartphone competitor. Apple could purchase Samsung for $1 trillion in cash, worth around $289.4 billion in US currency.

How Samsung And Apple Are Performing In The Market

According to reports, Samsung’s smartphone income climbed 11% to $72 billion in 2021, up from $64 billion in 2020.

Despite having twice as much income as Samsung IM mobile, Apple’s sales are expanding considerably. In 2021, Apple’s iPhone sales increased by 35% to $196 billion. 

In 2021, Apple’s iPhone division accounted for about 44% of worldwide smartphone revenue. Because of the demand for the 5G-enabled iPhone 12 and 13 series, Apple’s ASP increased by 14 percent to $825 in 2021. Apple has expanded its market share in important emerging economies, including India, Thailand, Vietnam, and Brazil.

Samsung’s IM operating earnings comprise its mobile business, which is comparable to Apple’s and its commercial networking equipment business, totaling 2.67 trillion KRW ($2.4 billion), compared to Apple’s $12.612 billion in the same time. Despite having twice the revenue, Apple’s operational earnings were five times greater than Samsung’s.

Sales of smartphones account for most of both companies’ income and earnings. Samsung sold 71.5 million units in the second quarter of the year. Apple sold 41.3 million iPhones in the second quarter, accounting for under 60% of Samsung’s total sales. How does Apple manage to make so much money while selling fewer phones?

1. Samsung Developed High-Priced Smartphones That It Can’t Sell

Samsung High Priced Smartphones

Since Cook’s statements regarding higher-end smartphones in the second half of the iPhone decade, Apple’s average selling prices have grown considerably, especially with the release of the bigger Plus models and the most recent luxury-class iPhone X models.

On the other hand, Samsung was the first to raise the pricing of its most costly Galaxy S and Note lines over Apple’s normal iPhone price threshold. Samsung generally has credit for popularizing the huge phone and giving it a new, higher price tier, even though it wasn’t the first to produce giant “phablet” devices.

2. Premium iPhones In Demand

It’s partly due to Apple’s ability to focus on a lucrative market sector. That’s not to say Samsung hasn’t sought to appeal to more upscale customers with higher-priced phones; it just hasn’t been able to compete with Apple.

A cynical observer would conclude that Apple’s higher-profit iPhone sales are due to constant, sophisticated marketing that tricks consumers into not purchasing less-priced Android devices.

On the other hand, Samsung lavished on advertising, marketing, and celebrity endorsements until it became unsustainable to continue spending $14 billion yearly to promote the Galaxy brand.

In 2013, Samsung spent around $1 billion on advertising as it neared the height of Galaxy sales, while Apple spent about $1 billion on advertising and relied heavily on brand loyalty to maintain sales.

Years later, Samsung’s second-quarter phone sales have dropped to their lowest level since 2013, or nearly 6 million less than in the same quarter five years ago. Apple’s most recent Q2 iPhone sales were more than 10 million units greater than the previous year’s Q2.

This peak Galaxy was also the apex of analyst worry that Apple had “lost its capacity to innovate” while insisting that the business make low-end iPhones for about $300.

“Our growth will come from new services and devices,” Apple CEO Tim Cook said in a conference call at the time, adding, “I don’t subscribe to [the assumption that] the top end of the smartphone industry has reached its peak.”

3. Apple’s Eco-System

Samsung’s failure is due to its inability to develop high-end phones that draw attention.

Samsung’s IM mobile division also makes Windows PCs, Galaxy Book Windows tablets, Chromebooks, Android tablets (including new Android KitKat tablets from 2013!), Tizen smartwatches, fitness bands, wireless headphones, virtual reality cameras and headgear, wireless chargers, and a variety of “smart home” hubs, sensors, and outlets.

Despite this, the total value of all of these items is negligible. Samsung’s revenues and profitability are nearly entirely dependent on smartphone sales. At the same time, the rest of the company’s goods are essentially placeholders attempting to break into a new market.

In more than ten years of progressively competing with Apple, Samsung has never released an actual new, commercially successful product from its IM department since the iPhone arrived and profoundly upset the phone industry.

Apple’s Mac business nearly doubled in size over the same period. Apple announced the iPad as a whole new platform, with 11.5 million devices sold in the prior quarter. Both companies contribute around $5 billion in quarterly sales, half of Samsung’s whole IM mobile operation.

Samsung’s wide range of Windows, Android, and Chrome computing devices account for a small portion of its overall mobile unit sales and profitability.

Besides the traditional computer equipment, Apple offers the Other Products category with $3.7 billion in sales in the most recent quarter. Some products are iPod, Apple TV, Apple Watch, AirPods, HomePod, and other accessories. 

Samsung produces numerous of the same gadgets, but none contributes enough to warrant their category. When discussing earnings, Samsung never mentions them to its investors because they don’t add much to its bottom line.

4. Huge Profit Margin On iPhones

iPhones and MacBooks are where Apple makes the most money. Phones outsell laptops by 5.5-to-1, but the latter’s enormous margins make the battle more or less a wash.

The profit center for Samsung is more obvious. The company’s operating profit is accounted for by mobile phones, which account for 21% of the total. Samsung may have a bigger market share for mobile phones (20% vs. 14%), but Apple gladly sells fewer phones than Samsung due to its superior profit margins on each phone sold.

However, other divisions have begun to account for a larger amount of Samsung’s income in recent quarters. The semiconductor unit has been spearheading the drive. The unit accounted for 36 percent of revenue and 64 percent of operating profit in the third quarter of 2021. Only so many facilities can provide data storage, a valuable and more in-demand commodity.

5. On The Shelves Of Stores And In The Courts

The relationship between Apple and Samsung is weird. That hate isn’t unfounded either. Apple sued Samsung in 2011, alleging that the Galaxy S and Galaxy Tab were clones of the iPhone and iPad. A week later, Samsung countersued, claiming that Apple had stolen its wireless networking technology.

The corporations sued each other a half-dozen times in four continents that year. In its original North American litigation, Apple obtained a $929 million verdict in 2014, which Samsung subsequently appealed. Apple won the lawsuit in 2018, and Samsung was forced to pay $539 million in damages.

Apple went on to win a second lawsuit. The corporations achieved a sort of truce that summer, dismissing all charges outside the US but continuing their court fights in the country where litigation is the main pastime.

Do The Two Companies Have A Symbiotic Relationship?

The plaintiff and defendant enjoy a profitable and symbiotic relationship, making this case (or series of cases) unique. Samsung distributes parts for the Apple mobile devices it is accused of copying without permission through its various subsidiaries.

Apple was formerly Samsung’s most important customer for various reasons, some of which were strategic. Because of its size, Apple can have the first pass at supply in times of strong demand, allowing smaller competitors to worry about finding components.

Samsung made the majority of Apple’s A4 and A5 CPUs. Those processors, on the other hand, were popular several generations ago. No matter how profitable and mutually beneficial a hostile relationship is in business or life, the principals will eventually seek fulfillment elsewhere.

After years of speculation, Apple eventually confirmed in the summer of 2014 that it was doing business with Taiwan Semiconductor Manufacturing Company (TSM). Apple currently develops its CPUs, all produced by Taiwan Semiconductor Manufacturing Company (TSMC).

Despite ceasing to manufacture processors for Apple, Samsung continues to provide screens for the company’s phones and laptops.

Apple has grown to an extent where it can exist without Samsung. On the other hand, Samsung does not need to be an Apple reseller to succeed. They’ve placed life-changing technology into the hands of hundreds of millions of people as rivals in the marketplace. They’ve spent vast sums of money establishing their supremacy in the halls of justice as rivals. Both firms are likely to keep innovating for decades to come.

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