Samsung leaves Apple flatfooted in smartphone wars

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The demand for shiny and sophisticated smartphones appears to be unstoppable. Samsung Electronics and Apple have both revealed very healthy growth, with analysts predicting the South Korean firm sold around 63 million smartphones in the fourth quarter, while Apple achieved a new record by selling 47.8 million iPhones.

But are the wheels about to become detached from this highly lucrative bandwagon?

While Samsung announced quarterly profits up 76 per cent on the back of Galaxy smartphone sales, it also indicated that these golden days might be nearing an end. "The furious growth spurt seen in the global smartphone market last year is expected to be pacified by intensifying price competition, compounded by a slew of new products," Samsung said in announcing its earnings statement.

The company's share price fell 2.5 per cent on this signal that a slowdown is likely in Samsung's first quarter of this year.

Apple fared even worse. iPhone shipments fell below analyst forecasts of 50 million units for the quarter, and growing fears that the company has no new products on the horizon caused its share price to nosedive.

Despite reporting record quarterly revenue of $54.5 billion (€40.5 billion) and a record quarterly net profit of $13.1 billion , Apple's stock fell 12 per cent after it reported earnings, the biggest percentage drop in over four years, removing more than $50 billion from the company's market value.

Jefferies analyst Peter Misek analyst said that Apple is facing an iPhone slowdown that was "real and material" and here to stay. Misek noted: "We think Apple is losing the screen-size wars," pointing to the screens of 5 inches offered by rivals such as Samsung, HTC and Nokia.

Perhaps in an attempt to steady the market, Apple announced that 36 operators would be gaining LTE support next week for the iPhone 5. This includes service providers in Italy, Denmark, Finland, Switzerland, the Philippines and several Middle Eastern countries.

Gone are the days, perhaps, when Apple called the shots and decided on which operator would gain the privilege of marketing its smartphone, and then only after very senior executives had travelled to Apple's headquarters in California to plead their case.

What is increasingly being whispered, or more likely shouted at Apple's marketing department, is the need for a low-cost iPhone that can appeal to customers in developing countries where operators don't subsidise handset purchases.

While this might be under discussion within Apple, Samsung has already told its investors that it will focus on emerging markets for new growth by offering affordable smartphones and tablets.

Some industry observers already believe that the iPhone has begun to lose its "innovation" leadership position, albeit that it still represents the competitive standard in the industry.

To establish its claim as the industry's innovation bellwether, Informa Telecoms & Media analyst Andy Castonguay said that Apple must push into new and exciting territory or risk continued declines in its stock price and position as the vanguard of mobile device design.

The days of Apple's smartphone dominance seem truly challenged--a move that should be welcomed by the cellular industry that loathes the constricting baggage that comes with this level of market leverage.--Paul