It was bad news for Apple when it announced earnings Tuesday afternoon. Not only were revenue and profits below expectations, but year-over-year iPhone unit sales were down for the first time.
And then came another hit. Yesterday, IDC released its smartphone numbers for the first quarter of 2016. Global sales were nearly flat, with the smallest year-over-year growth on record for the category as a whole. Both Apple and Samsung saw declines in smartphone shipments, while three Chinese companies saw big increases.
The existing market has become saturated, as it had to eventually, and even China's market has become more mature and moved past peak adoption. Even so, when Samsung announced its earnings today, revenue was up 5.7 percent year-over-year and operating income grew by 12 percent. The company cited the launch of the new Galaxy S7 models as one of the drivers.
So what happened? How did Samsung weather the storm and Apple come to be perceived as all wet? Diversity of product offering is one point, as I've mentioned before. Samsung not only had the new Galaxy models but also sales of memory, processor chips, and OLED panels.
But there's another difference. Samsung takes the innovation process and pleasing customers far more seriously than Apple does. That may sound crazy on the surface. Apple is "known" for delighting customers and innovation.
Nevertheless, there are some significant differences between how Apple and Samsung go about their business, at least on the consumer electronics side. Apple counts on brand cache, deeply loyal fans, and the reputation of delivering what the market will want, even if consumers don't yet know they want it.
There's a lot of hype and presumption in that approach. Yes, it is possible to come out with something that will surprise and wow people. But no one, including Apple, does that year after year after year. The numbers prove it. The iPhone was a runaway hit, but then Apple began alternating versions with major releases every two years, with secondary releases in between. That was fine when carriers would subsidize the up-front price for consumers, letting them upgrade for $199 while burying the rest of the cost in monthly charges.
But once the subsidy strategy started to come apart, people were less interested in always getting the newest version, especially when the current model seemed to work just fine. People could afford to wait and buy less frequently. That has turned into fewer sales for Apple.
Samsung, on the other hand, is more aggressive. The company comes out with multiple models over time, looks at consumer reaction, and finds the features that seem to drive the most interest. That allows Samsung to build a broadly attractive product. Management recognizes that customers may have tastes that differ from those of management. Apple tends to assume that it knows best. Look how long it took the company to provide an option offering the significantly larger screens that people had been buying and that Samsung, among others, had been selling.
The other part of Samsung's aggressive stance is the rapidity with which it releases new models. The S6 came out last year. This year sees the S7. That provides more frequent reasons for people to upgrade.
As a result, while Apple unit sales slipped 16.3 percent, Samsung was down only 0.6 percent. With the new Galaxy S7 release and other business units doing better, Samsung came out showing its competitive edge.