Samsung dominates the planet, for now

There's a new smartphone top dog in town, and it isn't Apple.

New data from research firm IDC confirms that Samsung's 29.1 percent global smartphone market share surpassed Apple's (24.2 percent) for the first time last quarter. Former global mobile device giant Nokia faded to 8.2 percent and Research In Motion continued its descent, at 6.7 percent. HTC (4.8 percent) rounded out the list amid a market that continues to notch torrid growth. All told, 144.9 smartphones shipped last quarter, up 42.5 percent over the year-ago quarter's 101.7 million.

Of all smartphone vendors, Samsung and Apple are the only ones that grew market share in the first quarter of this year compared to Q1 2011, and according to Canaccord Genuity the two vendors now account for 99 percent of all profits in the smartphone market.

Samsung's rise to the top coincides with this week's release of its updated flagship device. The Galaxy S III, expected to hit Canadian store shelves in June, sports a bigger, 4.8-inch screen, faster quad-core processor, and a host of software improvements designed to streamline the user experience and render it more iPhone-like. For example, S-Voice takes direct aim at Apple's Siri voice-controlled interface, while the front-facing camera now detects when you're looking at the screen and keeps the backlight on as long as you're still there. Slow readers no longer need to keep tapping the screen to keep it lit.

Riding the Android wave

Samsung's emergence as a mobile juggernaut similarly coincides with Android's rise as the mobile operating system of choice for a growing number of consumers. According to comScore, just over one in two phones now sold in the U.S. runs Google's mobile OS. Among vendors including Acer, LG, HTC, Motorola, and Sony, Samsung is the only one not currently struggling with falling market share and inconsistent profitability. Motorola Mobility, for example, notched an $86 million net loss in the just-completed quarter amid plummeting cash flow — negative $131 million vs. $57 million in the year-ago quarter — and sinking margins. Sony, fresh off its split with Ericsson, continues to fade from view, while RIM sheds market share and stock value as the market awaits its next-generation BlackBerry 10-based handsets.

If imitation is the sincerest form of flattery, Apple should be proud, as Samsung has borrowed a few ideas from the iOS vendor's playbook, namely strong industrial design, a focus on the end-user experience and a continuous upgrade cycle that ensures no device stays in-market long enough to get stale. Samsung breaks from Apple's limited-menu strategy with a product portfolio that includes a wide range of carrier-exclusive models — and a resulting bump in prime store shelf visibility.

Clouds on the horizon

Despite the currently rosy numbers, however, all is not perfect in Samsung's world. The company faces a number of fundamental risks associated with being only one of many Android vendors. When you're selling devices based on essentially the same operating system as everyone else, the task of differentiating your offerings becomes that much more difficult. Android vendors have typically resorted to developing so-called skins, or exclusive software layers that lay over the basic Android OS and provide a certain degree of interface customization and feature differentiation. But such a strategy comes with its own risks, specifically that it can negatively impact app compatibility.

Beyond the basic interface, Samsung lacks its own comprehensive ecosystem. It may be selling more phones than Apple these days, but once those devices are in consumers' hands, they don't generate anywhere near the same kind of revenue that an iOS device does. Samsung doesn't have an iTunes equivalent, and it largely relies on Google for app sales and growth. The company last year launched Samsung Apps, its own Samsung-specific app store, but it contains barely 40,000 titles. Without any significant after-sales revenue stream from apps and services, Samsung, like virtually every Android-based smartphone vendor, is little more than a hardware play. That makes it all too easy to slip back into the crowd as soon as competitors introduce newer, shinier devices.

Beyond smartphones, slow growth in tablets has hampered Samsung and its Android partners, as well. IDC data confirms market share for Android-powered tablets dropped from almost 50 percent in Q4 2011 to 32 percent in Q1 2012. Apple's tablet market share rebounded from 54.7 percent to 68 percent in the same period.

The new Galaxy S III may be technically superior to the vaunted iPhone in a number of feature-to-feature comparisons, but in a market where competing devices are upgraded on an almost continuous basis, Samsung's relative weaknesses in software and online fulfillment are limiting factors to ongoing per-device revenue generation. They also make the company vulnerable to defection, as the lack of an iOS-like ecosystem could make it easier for current customers to abandon the brand as soon as something better comes along. Top dogs don't stay on top if they fail to set themselves apart.

Carmi Levy is a London, Ont.-based independent technology analyst and journalist. The opinions expressed are his own. carmilevy@yahoo.ca