Samsung Faces 'Perfect Storm' Due To iPhone 6 And Emerging Chinese Vendors

Since the announcement of the Galaxy Note in 2011, Samsung has had the upper hand over Apple when it comes to big-screen smartphones.

That is about to change on Sept. 19, when the iPhone 6 and the iPhone 6 Plus hit stores.

Apple finally announced its first big-screen smartphones to tap into the market of large-screen lovers on Tuesday, when the company unveiled the 4.7-inch display on the iPhone 6, and the 5.5-inch screen on the iPhone 6 Plus.

Related: It's Here: New iPhone 6, iPhone 6 Plus and Apple Pay System

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"Apple has answered a hole in its market," said Raul De Arriz, national government sales manager for Small Dog Electronics, Waitsfield, Vt., one of the top Apple specialists in the country. "There are people who buy phones for reasons like a bigger screen. Apple could have done this sooner, and Samsung has had that market pull for a long time. Now Apple has big-screen phones, so users have options."

Samsung is still the worldwide leader in smartphone sales, with 25.2 percent of the market share in the second quarter, according to IDC, but that number is down from 32.3 percent in the year-ago quarter. IDC said despite the 23.1 percent growth in the market in the past year, Samsung actually is selling fewer phones worldwide than it did in the second quarter of 2013.

During the company's second-quarter earnings report in July, Samsung revealed a 20 percent drop in profits, despite the launch of the Galaxy S5 in April.

Both Samsung and IDC pinned the disappointing earnings and drop in global market share on slower sales by the company in international markets, specifically China.

With the growth of Chinese vendors, such as Lenovo and Huawei, Samsung has faced stiffer competition.

Lenovo's market share grew by 38.7 percent in the second quarter of this year, while Huawei's went up a staggering 95.1 percent, making it the third-largest smartphone vendor of the quarter, according to IDC.

With Chinese vendors battling Samsung in developing markets, and Apple releasing iPhones with bigger displays in mature markets, analysts and solution providers alike said the Korean conglomerate could be entering some rough waters.

Next: 'More Dark Clouds' For Samsung

"It's more dark clouds on the horizon for Samsung. It's a perfect storm and a bit of a pile-on at this point," said Patrick Moorhead, president and principal Analyst of Moor Insights & Strategy, a leading tech analyst firm based in Austin, Texas. "Chinese vendors are biting them from the bottom and, of course, Apple is a huge competitor at the top. Apple did exactly what it had to do to get back some market share from Samsung. I don't think people really realize how big of a deal this is for a preference in market share."

Moorhead, who was just one of five tech analysts invited to the Apple launch event on Tuesday, said that Apple "plugged a competitive hole" by putting bigger screens on the iPhone, but the real attention-grabber was the internal specs. He said the powerful A8 chip and boost of up to 14 hours of battery life in a 7.1mm thin case is impressive.

Allen Falcon, CEO of Westborough, Mass.-based solution provider Cumulus Global, a reseller of Google apps, said that Apple is still playing catch-up to Samsung, despite finally having big-screen smartphones.

"I think it changes the competitive landscape for Samsung a little bit, but I think the impact will be minimal," he said. "Apple having applications with different views, horizontal and vertical, I don't see as that innovative. Certainly, the radical increase in storage is a nice feature as these devices move into business. What was missing from the event is how these devices are really more of an integrated business tool. Part of the story with the Android platform is how well it integrates with business applications."

Nevertheless, Falcon said he was impressed with the 128-GB storage option on the iPhone 6. "I have not seen that native on other devices. I think that's pretty awesome," he said.

Michael Oh, CEO of Tech Superpowers, an Apple partner based in Boston, said that the new screen on the iPhone 6 will have a pretty negative affect on Samsung as people will have one less reason to buy Samsung and one more reason to buy Apple.

"It obviously removes people who object to being on iOS solely due to screen size," he said. "You also have the potential to bring back people who went to Android because they wanted the screen size. If that is even 3 percent of Samsung's shares, they can't afford that right now. Some reasonable portion of Samsung's sales, especially in their larger devices, is because Apple doesn't have one. Now we will find out what percentage that is."

Samsung did not respond to a request for comment.

PUBLISHED SEPT. 11, 2014