Samsung Leads First-Quarter Smartphone Sales. Should Apple Worry?

This is one company that Cupertino-based Apple (NAS: AAPL) needs to keep an eye on. Korean consumer electronics giant Samsung reportedly sold more smartphones during the first quarter of this year than Apple as consumers increasingly seem drawn to the former's diversity and pricing strategy.

So does Apple really need to worry, or it is secure enough with its lineup of some of the world's most appealing products? Let's find out.

Samsung's rising army of smartphones
If you were thinking the iPhone was the only handset worth mentioning, Samsung sure proved you wrong with the launch of its latest product. The Galaxy S III, which Samsung introduced on May 3, certainly made heads turn, having secured more than 9 million preorders from about 100 wireless carriers worldwide. And with local carriers struggling with the huge subsidies associated with the iPhone, that's something Apple had better take note of.

One of the first things you will notice as you walk into a retailer selling Samsung products is the sheer diversity in screen sizes. The Korean smartphone maker has been churning out a lineup of devices sporting screen sizes ranging from just 2.8 inches to 5.3 inches (as in the Galaxy Note). On the contrary, the iPhone sports a 3.5-inch screen, and that's about it.

At the same time, the pricing policy of Samsung truly lives up to the saying, "There's something for everyone." The company's range of low- to high-end smartphones caters to almost every budget. I know Apple lovers will be emphatic about how the company only caters to the high-end consumer segment, and a drop in prices translates to a drop in brand value. But even then, as more and more handsets with iPhone-like capabilities sell at less than half the price of the original, it's a reality Apple will have to face sometime in the near future.

And then there's China -- Apple's biggest market outside the U.S., and also one of Samsung's biggest strongholds. In fact, Samsung already has a 24.3% market share in China, as opposed to Apple's meager 7.5%. Yet Apple is currently in talks with the nation's largest wireless carrier, China Mobile, to offer the next-generation iPhone 5 to the carrier's vast subscriber base.

A trendsetter turned follower?
Apple finally seems to have woken up to the "screen diversity" factor as it aims to upgrade its newest iPhone 5 with a larger 4-inch screen. There are reports that Apple might also introduce a smaller 7-inch version of its popular iPad in a bid to secure its position in the tablet market, currently flooded by dozens of others running rival Google's Android operating system.

Learning from the past
Apple is certainly not being complacent, because it has seen many once-great companies become virtual nobodies when they failed to stay abreast of the tides of change. One-time market leader Nokia (NYS: NOK) commanded a substantial 40% share of the handset market back in 2008. This year, it accounted for just 19.8% of overall mobile sales during the first quarter, and it also saw its No. 1 position usurped by Samsung for the first time since 1998. Nokia's fall from grace seems to have been replicated by Research in Motion (NAS: RIMM) . The BlackBerry maker's share of worldwide smartphone shipments during the first quarter fell to just 6.9%, as compared to the 19.5% it commanded in 2008.

The Foolish bottom line
Apple needs to stay on its toes, as Samsung's dominance is beginning to become too big an issue to ignore. Hopefully for Cupertino, the launch of the iPhone 5 will live up to the hype and silence its critics. I'll also be keeping a close eye on Apple's deal with China Mobile, which should ramp up sales significantly. You can do the same by adding the company to your free watchlist.

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At the time this article was published Keki Fatakia does not hold shares in any of the companies mentioned in this article. The Motley Fool owns shares of China Mobile. The Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of Apple. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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