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Samsung takes another page from Apple’s playbook: increase margins

Apple has argued on multiple occasions that Samsung builds mobile products that “blatantly imitate the appearance of Apple’s products to capitalize on Apple’s success.” Courts seem to disagree for the most part, with only a pair of injunctions having been issued despite dozens of complaints Apple has filed around the world. There are some areas where Samsung does seem to take pages out of Apple's playbook, however — Samsung's new anti-iPhone ad strategy is somewhat reminiscent of Apple's famous “I'm a Mac” campaign, for example — and market research firm Allied Business Intelligence may have uncovered another one this week. Read on for more.

ABI recently performed a teardown on Samsung's latest flagship phone, the Galaxy Nexus, and the firm analyzed the components found within the handset. Among them was a new version of Samsung's LTE chipset that is estimated to cost half as much as the chip it replaces.

“The Samsung Galaxy Nexus modem is constructed with the combination of a Via Telecom CDMA/EVDO Rev. A integrated circuit and a Samsung LTE baseband integrated circuit,” the firm wrote in its report. “This combination is now common for Samsung’s Verizon phones, but the Galaxy Nexus sports a new version of the LTE baseband chip. The new chip is estimated at nearly half the cost of the prior chip’s $23 price tag.”

One area where the competition has been unable to keep pace with Apple is profit, and the company's record-setting holiday quarter was thanks largely in part to the huge margins it enjoys on iPhone sales. Asymco's Horace Dediu estimates that Apple took in approximately 75% of mobile phone industry profits last quarter despite accounting for just 9% of global cell phone shipments, or an estimated 23.5% of all smartphone channel sales.

Whether or not Samsung's mobile devices are “copycats” as Apple claims is up to the courts of the world to decide, but Samsung would be wise to follow Apple's lead where margins are concerned. Samsung shipped about as many smartphones as Apple during the holiday quarter, but the $2.32 billion in operating profit it took in from its mobile business pales in comparison to Apple's mobile profits.

Making significant cuts to component costs while still managing to sell 4G devices at premium prices could help the South Korea-based vendor hold its ground in the first quarter while the world awaits the launch of its next-generation flagship smartphone, the quad-core Galaxy S III.

Zach Epstein

Zach Epstein has worked in and around ICT for more than 15 years, first in marketing and business development with two private telcos, then as a writer and editor covering business news, consumer electronics and telecommunications. Zach’s work has been quoted by countless top news publications in the US and around the world. He was also recently named one of the world's top-10 “power mobile influencers” by Forbes, as well as one of Inc. Magazine's top-30 Internet of Things experts.

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