The mobile space is dominated by two brands: Apple and Samsung.
Each has reached such a large market that continuing to increase market share basically requires the other company to falter.
Both have ‘hit the wall’ in terms of market share in the mobile space, with further grown thin market share a real challenge.
For Apple the challenge is growth. In the last few years, Apple stock has more than doubled in value rougly every 3 years. Even if Samsung stop selling phones the Samsung market share was taken over entirely by Apple, this would on allow for one more doubling. Instead, Apple needs to find new markets. If Apple finds a new market every three years to fuel growth, then that new market has to be twice as large as the previous new market. The alternative to new markets or growing market share is to stop growing and that brings its own pain. I will soon do another post specifically on the growth challenges for Apple, but surfice for now that reaching a market share that is difficult to significantly increase is a problem for Apple.
So now to Samsung!
Samsung is a very different company and despite sharing the dominance in mobile devices, Samsung is in a very different position.
As a company, Samsung is far more diverse than Apple, and mobile devices are a far smaller percentage of revenue. Despite this greater diversity, and Samsung actually selling more devices than Apple, the market cap of Samsung is far smaller than that of Apple and there is not the same historic rate of growth to maintain.
As a mobile device company, the big difference is that unlike Apple, Samsung does not have its own ‘ecosystem’ to generate additional profits from those mobile devices. Instead, Samsung faces competion from other device manufactures competing within the same ecosystem. Within the Android market, Samsung holds a level of market share impossible to significantly increase, and extremely difficult to maintain. Within Android there is no great barrier to consumers switching brands and running an idenitcal platform reduces the ability for product differentiation placing Samsung at the risk of simply losing market share as fashions change.
The answer for Samsung is Tizen.
Tizen can provide Samsung with an ecosystem that Samsung can control and earn ecosystem profits instead of letting google earn profits on all those Samsung devices. Bringing ecosystems to citical mass is extremely challenging and changing ecosystems risks alientating consumers. Samsnug has sucessfully moved its ‘wearable’ devices from an intitial launch on Android across to Tizen but has only had false starts on phones so far.
But owning an ecosystem is realistically Samsungs only way to keep mobile device revenues where they are. A wearables ecosystem could be sufficient if over time wearables become more significant than phones, but I doubt it. Expect Samsung to keep moving with Tizen, or lose mobile device revenues.