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Carrier subsidy ratios for Samsung handsets higher than Apple and HTC, study finds

post #1 of 38
Thread Starter 
The average implied subsidy for Samsung smartphones sold in the U.S. substantially higher than comparable product sold by Apple and HTC, says one study, suggesting the Korean company is heavily relying on aggressive pricing strategies to squeeze out the competition.

ABI


According to market intelligence firm ABI Research (via BGR), Samsung and its partner carriers lead the market in offering device subsidies at percentages substantially higher than their nearest competitors.

The latest research shows Samsung products are subsidized by an average of 84 percent, while Apple and HTC are at 74 percent and 80 percent, respectively.

?Samsung continues to squeeze its competitors at every turn," said ABI chief research officer Stuart Carlaw. "The Samsung Galaxy SIV is now considered on a par with Apple?s iPhone 5. Coupled with better subsidy, the breadth of its device portfolio, increasingly savvy marketing, and its excellence in channel execution, it is little wonder Samsung is dominating the mobile handset market from top to bottom.?

While the latest iPhone products average a higher absolute subsidy value that is $110 higher than Samsung's devices, most of the Korean tech giant's devices come at a cheaper initial cost.

Samsung's aggressive pricing strategies are reportedly hindering less well-established vendors from entering the market.

?The smartphone market in particular is entering a new phase focusing on execution and price, rather than innovation and value," said ABI's senior practice director for devices, Nick Spencer. "Samsung?s scale and supply chain excellence is allowing it to put its competitors under increasing price pressure and win market share. This is a major concern for the rest of the market, especially for smaller, less efficient vendors, as margins will be squeezed and overall market value reduced.?

A teardown of the latest Galaxy S4 model revealed a build cost higher than that of Apple's flagship iPhone 5. It should be noted, however, that the averages from ABI take into account Samsung's entire lineup, which is far more expansive than Apple's three offerings.
post #2 of 38
Is anyone surprised?
post #3 of 38

how is it more expensive? It's plastic, the phone itself does everything slower, they do not have to build their own OS, the screen is amoled pentile crap, the processor is a generic qualcomm (there's no "tweaks" in that model), they do not take into account Apple's "bigger" muscle at securing and getting components, plus the excellence of well trained and efficient manufacturing... 

 

I don't get these analysts. As long as samsung pays them, they post anything.

post #4 of 38
Where's the DOJ when you really need them?Oh, that's right, protecting the Amazon monopoly from those pesky competitors like iBooks.
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post #5 of 38
Quote:
Originally Posted by AppleInsider View Post

Samsung continues to squeeze its competitors at every turn," said ABI chief research officer Stuart Carlaw. "The Samsung Galaxy SIV is now considered on a par with Apple?s iPhone 5.

 

Sounds like Stewie may have mispoken or is not in tune with the leap frogging that takes place.  The iPhone 5 was Apple's answer to the Galaxy S3.  The S4 was Samsung's answer to the iPhone 5.  The next iPhone (5S?) will be the phone to compare to the S4.

post #6 of 38
Ditto to all above posts!
post #7 of 38
Quote:
Originally Posted by DroidFTW View Post

 

Sounds like Stewie may have mispoken or is not in tune with the leap frogging that takes place.  The iPhone 5 was Apple's answer to the Galaxy S3.  The S4 was Samsung's answer to the iPhone 5.  The next iPhone (5S?) will be the phone to compare to the S4.

 

Well that can''t be right, because it would mean Samsung releases its product, and then Apple releases a product to compare to it afterwords....  Clearly its the other way around, the S4 has to be compared to the iPhone 5 because that is the Apple product it copied.

 

The source article referenced is another clever play on numbers.  'Percentage subsidy per phone'......   ???  Why not just talk about total subsidy $?

post #8 of 38
LOL no surprise there. Samsung's phones almost always have pretty big markdowns on them compared to the iPhone.
post #9 of 38
It's a pretty sad year for Apple loyalists and shareholders. Timid Cook just let Samsung up and steal their whole smartphone empire away in just half a year. I doubt Samsung will be able to hold on to their gains for another six months, though. It costs lots of money to run blitz campaigns quarter after quarter. Apple has the long-term advantage with its retail stores and good customer service.

I don't know what's going on internally at Apple, but from the outside it looks like Apple just threw up its hands and gave up the smartphone industry to Samsung. I hope that isn't the case. I think that Apple only needs a well-made smartphone with long battery life and an easy to use interface. I don't think most consumers are looking for whiz-bang features that the GS4 offers. No point in crying over spilt milk. Maybe Apple will have something up its sleeve to attract a lot of iPhone buyers. I wanna believe.
post #10 of 38

Apple holds 39% of US smartphone market, far ahead of Samsung's 23%

post #11 of 38
Let them internal haemorrhaging to stay number one all they like! And they also have to compete with their rival siblings, HTC, Sony, LG, big fat GooMot... That will help dries their piggy bank and go belly up.....yaaaa
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post #12 of 38

This is such a silly article.  If there's any complaining to be done, it's that Apple's absolute subsidy is more than $100 higher than Samsung's.  The carriers shoot for a subsidized price of $200 to $300 for high-end models.  The ratio of subsidy to MSRP does not matter.

post #13 of 38
Who's footing the bill for the $50 gift card you get for buying an S4 at Best Buy?

Why does such a popular phone have to be pimped so soon after its launch?
post #14 of 38
Quote:
Originally Posted by Pendergast View Post

Why does such a popular phone have to be pimped so soon after its launch?

A phrase just popped into my head that I think describes Samsung's lineup:

Whore of the Month Club.

Originally posted by Marvin

Even if [the 5.5” iPhone exists], it doesn’t deserve to.
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Originally posted by Marvin

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post #15 of 38
Quote:
Originally Posted by Tallest Skil View Post

A phrase just popped into my head that I think describes Samsung's lineup:

Whore of the Month Club.

Maybe Samsung should just do a subscription service, where you get the latest version of the S4 each month.
post #16 of 38
This is no surprise especially sinse the galaxy 4 looks like $$$$ for buyer but Samsung pays $ and makes your $$$. These specs look like a way to add money more than experience.
post #17 of 38
If you look at the report, the absolute subsidies are the same.
post #18 of 38
Quote:
Originally Posted by pedromartins View Post

I don't get these analysts. As long as samsung pays them, they post anything.

Samsung doesn't play analysts. Analysts play the stock market and Apple's stock price because they know too many ppl who don't understand Apple and its products bought the stock and are therefore easily scared.
As a result the play Jojo with the stock price, making money on the up and down as they please.
post #19 of 38
The issue here is really for android folks. The people that want "open" and choices are going to end up with 30 choices from Samsung, 2 choices from HTC, one X-phone from Google/Mototrola, and a few by each of the smaller players, Sony,LG etc....

How is this good for an industry? It's like cheering that HP is going to run Dell out of business. That's not good for competition or consumers. Samsung has a huge advantage as both a component maker and smartphone maker.

Samsung is the new Sony, and the old Sony is almost dead in HDTVs and smartphone.
How long until ZTE or Huwai, with the massive financial backing of the Chinese Government, become the new Samsung? What if the Chinse government declare that it 's citizens can only buy smartphone from Chinese owned businesses? How long until Chinese companies can provide all of their own components and not rely on Samsung?

Food for thought?
post #20 of 38
When I am eligible to upgrade my phone I will be able to sell my iPhone for more than $200 and Samsung GS4 owners are mad when the get $50. This whole thread will show how a phone made by 6 year olds in China WAFFLESTOMPED a phone that the govt of Korea backed so earnestly. Galaxy phones are crap. All of the "smart gestures" are some crap people will jack around for a week tops. And your bigger screan is amoled... Wtf? Didn't Apple just contract sharp for their next screens? Quattron > Samsung ALLL DAYY!!
post #21 of 38
Quote:
Originally Posted by Constable Odo View Post

It's a pretty sad year for Apple loyalists and shareholders. Timid Cook just let Samsung up and steal their whole smartphone empire away in just half a year. I doubt Samsung will be able to hold on to their gains for another six months, though. It costs lots of money to run blitz campaigns quarter after quarter. Apple has the long-term advantage with its retail stores and good customer service.

I don't know what's going on internally at Apple, but from the outside it looks like Apple just threw up its hands and gave up the smartphone industry to Samsung. I hope that isn't the case. I think that Apple only needs a well-made smartphone with long battery life and an easy to use interface. I don't think most consumers are looking for whiz-bang features that the GS4 offers. No point in crying over spilt milk. Maybe Apple will have something up its sleeve to attract a lot of iPhone buyers. I wanna believe.

Nope: Apple says they want to make the best product. You want Apple to make the most. Because you're afraid to be seen with an unpopular product, even if it is the best.

"Apple should pull the plug on the iPhone."

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post #22 of 38
Quote:
Originally Posted by rcfa View Post


Samsung doesn't pay analysts. 

How do you know exactly? They may not pay analysts, bloggers or writers directly but how do you know the massive advertising money they poured to publications have no effects on the reports?

Or do you think all Bloomberg writers are just anti-Apple?

post #23 of 38
Quote:
Originally Posted by Tallest Skil View Post

Quote:
Originally Posted by Pendergast View Post

Why does such a popular phone have to be pimped so soon after its launch?

A phrase just popped into my head that I think describes Samsung's lineup:

Whore of the Month Club.

All they all come with rounded corners, motion sensors, vibration alert and even can go to sleep when you're loosing attention.
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post #24 of 38
Quote:
Originally Posted by Spacepower View Post

The issue here is really for android folks. The people that want "open" and choices are going to end up with 30 choices from Samsung, 2 choices from HTC, one X-phone from Google/Mototrola, and a few by each of the smaller players, Sony,LG etc....

How is this good for an industry? It's like cheering that HP is going to run Dell out of business. That's not good for competition or consumers. Samsung has a huge advantage as both a component maker and smartphone maker.

Samsung is the new Sony, and the old Sony is almost dead in HDTVs and smartphone.
How long until ZTE or Huwai, with the massive financial backing of the Chinese Government, become the new Samsung? What if the Chinse government declare that it 's citizens can only buy smartphone from Chinese owned businesses? How long until Chinese companies can provide all of their own components and not rely on Samsung?

Food for thought?
you know this is crap. Show me one place where the galaxy s4 is selling for that price.
post #25 of 38
This might be the most confusing and useless article ive read in a while. The article tries to imply that samsung gets better subsidies than their competitors, but the truth is that apples phones are subsidized far more than their competitors. The only thing this article says is that samsung sells lots of "value" phones that are fully subsidized by the carriers. However that would be better illustrated by comparing average price per phone.

Considering that the iPhone is subsidized $100 more than most android devices, does it surprise anyone that apple does so well in countries that subsidize phones? By the same logic, is it any surprise that samsung phones are more popular than apple phones in countries without subsidies? Even if the iphone 5 is better than a samsung 4s, is the average consumer willing to pay $100 more for an apple logo? Im actually amazed us carriers are willing to subsidize iphones so heavily, especially considering countless studies show that iphone users use the web more than competitors. As a carrier id have to wonder why im paying more for costumers who cost us more than the competitors (mor data usage tends to mean lower margins on iPhone data plans).

It will be interesting o see how things go moving forward, especially as last generations phones are increasingly good enough for most people.

Philp
post #26 of 38
Quote:
Originally Posted by matrix07 View Post

Quote:
Originally Posted by rcfa View Post

Samsung doesn't pay analysts. 
How do you know exactly? They may not pay analysts, bloggers or writers directly but how do you know the massive advertising money they poured to publications have no effects on the reports?
Or do you think all Bloomberg writers are just anti-Apple?

They are neither pro Apple nor anti Apple. They are pro trading profits. Talking companies up, then talking them down, then talking them up, etc. makes a lot of money if you're part of the gang doing the game on the clueless public.

No analyst can be that stupid:
a) they claim they dump Apple because Apple has slowing growth, so they stock price goes down.
b) even at the peak of the stock price, Apple paid a good dividend and kept still piling up cash
c) so in other words, Apple doesn't need to grow at all to reliably pay handsome dividends, and it had a low P/E ratio even then
d) so Apple's sales and profits would actually have to shrink for their P/E ratio to come into more normal ranges, and to stop piling up cash while even paying the same dividends.

In other words, for Apple's stock price to be where it's now, it would actually have to see its business collapse, but Apple is growing. So the valuation is factually wrong. But the market isn't about facts, it's about psychology, and if people know how to talk a company up and down, they can make massively profitable trades; and that's what's happening. This was particularly obvious when they chose to ignore the different length of Q4 last fiscal year, or when they chose to ignore the effect of the timing of new product releases into the sales and revenue and profit margins. These things follow known patterns and need to be averaged out to be meaningful, but they choose not to do that, when it serves their narrative.

Everyone looking at the figures knows Apple isn't going anywhere. The eco system is too sticky, the products are too good, the company financially too healthy, too much R&D going on, etc. Just because feature phones are being replaced with low-end smart phones that hardly see any use besides a bit of Facebook reading doesn't mean Apple's real market is being taken away from them.
Of course, ANY MARKET that a company creates will see competition eventually, and competition will always take some part of that market, regardless of the relative qualities of the competing products. There are always enough people who don't get the difference between a better and a worse product, or people who just want to be different, or products that fulfill some very special requirements and thus gain some customers.

None of that is new or surprising, but if you're in the business of talking companies up and down for trading profits, then you can spin all of these obvious facts in various ways to suit your goals, and you will succeed when too many clueless people buy stock and get spooked by these analysts.

Unfortunately, there's much too little investigation in these things. Just like the rating agencies played a huge part in the mortgage securities scam (and thus the collapse of the housing market), so the analysts play a huge part in the stock market scam. We had that sort of pattern already before the tech bubble burst way back when: analysts talked companies up for profit, until things collapsed. Now they are a bit smarter: they don't talk entire sectors up, they talk individual companies up and down, that way they prevent the entire market from melting down, but they can still make their profits.

Short of Samsung speculating with Apple stock, they have nothing to gain or lose from Apple's stock price. Not even Apple cares about the stock price. Both companies care about marketing, sales, profits, products and intellectual property, everything else is a side show. Neither Apple nor Samsung does better or worse because their stocks are up or down. They do better or worse when their profits are up or down.
post #27 of 38

I'm curious what Samsung's profit in mobile department will be after Apple departed with their parts to other suppliers.

post #28 of 38

What does the percentage matter?  The absolute value of the subsidy is the important thing, especially if the contracts the phones are offered are the same, or similar, since that's where the subsidy is paid off..

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post #29 of 38
Quote:
Originally Posted by ealvarez View Post

Is anyone surprised?

Not me. They are playing a dangerous game. In the end when Wall Street finally get to look at their real numbers there will be a loud sucking noise.
Been using Apple since Apple ][ - Long on AAPL so biased
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Been using Apple since Apple ][ - Long on AAPL so biased
nMac Pro 6 Core, MacBookPro i7, MacBookPro i5, iPhones 5 and 5s, iPad Air, 2013 Mac mini, SE30, IIFx, Towers; G4 & G3.
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post #30 of 38
Quote:
Originally Posted by copeland View Post

I'm curious what Samsung's profit in mobile department will be after Apple departed with their parts to other suppliers.

 

It is actually likely to increase Samsung's profit in the mobile department.

 

Samsung doesn't count semiconductor manufacturing in its mobile department.  Apple leaving Samsung is unlikely to affect them- Samsung can't keep up with its own demand for processors and currently outsources I believe more than 50% of its production to foundries.  So Samsung is just going to make a larger percentage of its own processors and have to spend less outsourcing to the foundries.  As long as demand for devices exceeds production capabilities, customers moving from one manufacturer is largely just a shell game- 100% of their capacity will still be utilized.

 

Since Samsung can make its own processors cheaper than outsourcing them, their manufacturing cost per phone will go down, and the mobile unit will record higher profit (the semiconductor/electronics unit will 'lose' the Apple income directly, but spend less buying processors- so its a wash for them). 

 

If there was nothing to fill the excess capacity from Apple leaving it would have hurt a little.

post #31 of 38
Quote:
Originally Posted by Frood View Post

It is actually likely to increase Samsung's profit in the mobile department.

...

 

As long as demand for devices exceeds production capabilities, customers moving from one manufacturer is largely just a shell game- 100% of their capacity will still be utilized.

 

Exactly.  

 

Years ago, Apple leaving would've probably meant some factories laying idle.  But things have changed.  Now mobile chips are needed by more companies than ever before.

 

Samsung parts, being of high quality (thus the reason why Apple chose them in the first place... and still use them), are usually in high demand.

 

So as Apple begins to take up capacity at other chipmakers, at least some of those makers' customers will likely move (back) over to Samsung.

 

Net likely effect: Samsung can sell chips at a higher price than what had Apple negotiated via quantity.

post #32 of 38
I'm just waiting for the other shoe to drop: Samsung Galaxy Tizen edition. Samsung is now big enough name that people don't necessarily care if it runs Android.
post #33 of 38
Quote:
Originally Posted by winstein2010 View Post

I'm just waiting for the other shoe to drop: Samsung Galaxy Tizen edition. Samsung is now big enough name that people don't necessarily care if it runs Android.
Yes we might see more windows 8 devices from them, just more failures however.
post #34 of 38
Quote:
Originally Posted by winstein2010 View Post

I'm just waiting for the other shoe to drop: Samsung Galaxy Tizen edition. Samsung is now big enough name that people don't necessarily care if it runs Android.

The sooner the better: more competition, better for Samsung, better for Apple, a kick in the balls for Google.
The more competition, the bigger the incentive for someone to adopt a truly open system that doesn't require to be rooted/jail broken.
post #35 of 38
Quote:
Originally Posted by winstein2010 View Post

I'm just waiting for the other shoe to drop: Samsung Galaxy Tizen edition. Samsung is now big enough name that people don't necessarily care if it runs Android.

You mean Samsung Galaxy OS, coming in 2014, that will run exclusive Samsung apps and be compatible with all your legacy Android apps?
post #36 of 38
"Samsung and its partner carriers lead the market in offering device subsidies at percentages substantially higher than their nearest competitors. "

That's an incredibly twisted and misleading interpretation of the data. In fact Samsung receives a much LOWER subsidy, which is only bigger in percentage terms because they sell their phones at huge DISCOUNTS

In fact the iPhone remains the most desirable phone for carriers' customers and attracts subsidies 25% LARGER than Samsung, because iPhone customers are by far the most profitable for carriers as can be seen by the way the iPhone 5 already accounts for 75% of 4G traffic (see latest Chitika data)

There have been many reports that the S4 is selling badly, which appears to be confirmed by Comscore who say that in May the iPhone took 39.2% US market share, which is 70.4% MORE than Samsung's 23%..

This is especially bad for Samsung considering that

1) They have just released their S4 and yet is is still being outsold by iPhones by a huge margin in the the world's most sophisticated market

and

2) Samsung's 23% market share includes many cheaper phones which are given away at huge discounts and special offers, which are used mainly as feature phones.
post #37 of 38
Quote:
Originally Posted by Secular Investor View Post

"Samsung and its partner carriers lead the market in offering device subsidies at percentages substantially higher than their nearest competitors. "

That's an incredibly twisted and misleading interpretation of the data. In fact Samsung receives a much LOWER subsidy, which is only bigger in percentage terms because they sell their phones at huge DISCOUNTS

In fact the iPhone remains the most desirable phone for carriers' customers and attracts subsidies 25% LARGER than Samsung, because iPhone customers are by far the most profitable for carriers as can be seen by the way the iPhone 5 already accounts for 75% of 4G traffic (see latest Chitika data)

There have been many reports that the S4 is selling badly, which appears to be confirmed by Comscore who say that in May the iPhone took 39.2% US market share, which is 70.4% MORE than Samsung's 23%..

This is especially bad for Samsung considering that

1) They have just released their S4 and yet is is still being outsold by iPhones by a huge margin in the the world's most sophisticated market

and

2) Samsung's 23% market share includes many cheaper phones which are given away at huge discounts and special offers, which are used mainly as feature phones.

I think the S4 is selling, but not nearly as well as Samsung predicted. They claim 10M shipped, so maybe there are a lot of S4s sitting on shelves, maybe explaining all the $50 discounts I'm seeing ("Buy a Galaxy device and get a $50 gift card..."), which seems odd for such a new phone. I wonder who's footing that bill, Samsung or the retailer?
post #38 of 38
Quote:
Originally Posted by Secular Investor View Post

the world's most sophisticated market

 

Japan?

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