Samsung Boasts of Higher Sales Than iPhone's

Management at Samsung recently boasted that it sold 20 million handsets in the past quarter, compared with Apple’s (NASDAQ: AAPL) 17 million iPhone sales, the Wall Street Journal reports. The boast does not mean much. Samsung has been unable to demonstrate that it has anywhere near the margins that Apple has. Margins for the South Korean handset maker are estimated at 13.7%. Apple’s are more than double that.

One of the reasons Samsung’s sales volume is not impressive is that wireless carriers still spend large sums for the iPhone. In some cases those fees are estimated to be $500 per unit. Samsung, however, gets nowhere near that much per unit. Neither do any other smartphone makers.

One fact that companies in the smartphone race like to disclose is how well their unit volume has been as they introduce new Google (NASDAQ: GOOG) Android-based devices. Most of these manufacturers say that Android’s market share is much larger than that of the Apple iOS. The market share argument is true because Android runs on so many devices.

Samsung can claim it has more Android-based devices that any other company in the business. That is not much of a claim. Android may be popular, but the product still lacks many of the features Apple has. The most important of these is Apple’s App Store. The software sold there helps tether the company to customers as they customize their iPhones and iPads. Samsung does not mention this disadvantage. That would only further tarnish its claim that sales volume is some kind of victory over Apple.

The most convenient way for competitors to try to convince investors and analysts that the iPhone’s best days are behind it is to ignore the Apple smartphone’s advantage by not acknowledging the important ecosystem Apple has built around the phone. This ecosystem allows Apple to charge a premium for the iPhone. Samsung can keep its sales lead. It barely makes a profit on each handset it ships.

Douglas A. McIntyre