Although shares of Apple Inc. (NASDAQ:AAPL) have recovered somewhat since dipping below $400 in April, they’re still far removed from their peak above $700.
The tremendous rally Apple Inc. (NASDAQ:AAPL) shares experienced in recent years was mostly on the strength of iPhone. Now that competent competitors have emerged, investors may be looking to bet on other device makers.
But that could be a mistake. Increased competition in the smartphone marketplace is certainly good for consumers, but not necessarily the companies themselves.
Samsung’s S4 Margins
Samsung Electronics’ margins on the Galaxy S4 could be less than Apple Inc. (NASDAQ:AAPL)’s margins on the iPhone 5, according to a report from IHS. Evidently, it costs Samsung about $237 to build the 32gb version of the Galaxy S4 — which it then sells for about $700. An unlocked 16gb version of the iPhone sells for roughly the same, but Apple Inc. (NASDAQ:AAPL) only spends about $205 making it.
There are other problems with investing in Samsung — you aren’t really buying a smartphone company.
While over half of Apple Inc. (NASDAQ:AAPL)’s revenue and most of its profits come from the iPhone (thus making it a more pure smartphone play), Samsung Electronics is a conglomerate. In addition to its Galaxy devices, the company is also involved in TVs, cameras, and computer parts. It’s also a major supplier to its competitors.
Further, any investors interested in Samsung should spend some time researching the concept of the South Korean chaebol. Samsung is one of these chaebols, which means that although Samsung Electronics is an independent company, it has ownership ties to the rest of the Samsung family — businesses involved in such diverse industries as life insurance, heavy machinery, and amusement parks.
Can One phone boost HTC?
HTC has received a lot of attention lately for its new phone — the One. Many major tech reviewers have labeled the One the best available Android smartphone, superior to Samsung’s flagship Galaxy S4.
But will those reviews translate into great sales? Samsung has a bigger advertising budget and a more established brand name. What’s more, the One isn’t even available on Verizon Communications Inc. (NYSE:VZ) — the biggest carrier in the US.
Further, the One might be more of an aberration, rather than trend for HTC. While Samsung has found success with its entire Galaxy lineup, HTC has had more duds than hits.
Take its recent experiment with Facebook Inc (NASDAQ:FB) — the HTC First. In terms of specifications, the phone was a decent value for the $99 price tag it once carried (on contract). Yet, clearly the phone has been a tremendous failure, as its price has been cut to $0.99 less than a month after being released.