In the mobile world, there are really only two companies that make every other smartphone maker envious — Apple Inc. (NASDAQ:AAPL) and Samsung Electronics Co., Ltd. (KRX:005930). Samsung Electronics Co., Ltd. (KRX:005930) is the world’s largest tech company by revenue, and holds 41% of the Android market share. And, according to researcher Juniper Analytics, the company shipped twice as many smartphones as Apple Inc. (NASDAQ:AAPL), and grew nine times faster in Q1 2013.
While Apple Inc. (NASDAQ:AAPL)’s success story has been chronicled in many news articles, books, and a forthcoming biopic, Samsung Electronics Co., Ltd. (KRX:005930)’s advancement is a little more elusive and probably less dramatic — but the impact on the smartphone market has been just as important.
Good artists copy, great artists steal
Pablo Picaso’s oft-quoted phrase was one Steve Jobs used himself. Jobs once added to the phrase in an interview saying, “We have always been shameless about stealing great ideas.” In an ironic twist, that’s the same approach Samsung Electronics Co., Ltd. (KRX:005930) took shortly after the iPhone launched.
Apple’s smartphone popularity had already been solidified at that time, and Samsung Electronics Co., Ltd. (KRX:005930) did its best to capitalize on it. In a 2010 Samsung document — which surfaced during a trial last year between the company and Apple — Samsung Electronics Co., Ltd. (KRX:005930) appeared to copy iPhone designs and functionality. Last year, AllThingsD wrote about the document saying: “In each case, it comes up with a recommendation on what Samsung should do going forward, and in most cases, its answer is simple: Make it work more like the iPhone.”
You can contrast Samsung’s response to the iPhone with other tech companies at the time. Microsoft Corporation (NASDAQ:MSFT) CEO Steve Ballmer said in 2007: “There’s no chance that the iPhone is going to get any significant market share. No chance.” The company failed to recognize what consumers wanted, and Microsoft Corporation (NASDAQ:MSFT) has been paying for it ever since. Windows Phone made up just 3.2% of all global smartphone shipments in Q1 2013.
Reports that leaked years after the iPhone initially launched showed that RES.IN MOT.DBA BLACKBERRY (FRA:RI1) — formerly Research In Motion — was in disbelief over the iPhone. RIM’s CEO at the time, Jim Balsillie, said this just after the iPhone launched: “It’s kind of one more entrant into an already very busy space with lots of choice for consumers … But in terms of a sort of a sea-change for RES.IN MOT.DBA BLACKBERRY (FRA:RI1), I would think that’s overstating it.”
These two companies are the easiest examples to pull from, because they not only didn’t notice what consumers wanted — or stubbornly chose to ignore it — but they also went in a decidedly non-Android direction.
Meanwhile, Samsung sought to directly compete with Apple using Android. Part of copying Apple’s design and usability lead to years of lawsuits and back-and-forth accusations between Apple and Samsung that most of us are all too familiar with. But, despite rulings on either side, Samsung’s similarities with the iPhone at the beginning have paid off for the company.
But Samsung’s initial follow-the-leader approach is only one small part of its meteoric rise. You have to dig inside the company’s deep pockets — and its devices — to really get at the heart of its success.
Components and commercials collide
Samsung manufactures its processors, handset displays, and internal flash memory — giving it control over major areas of its smartphone production. This gives the company a significant advantage over its competitors by not having to pay other companies to build main components for its devices, or wait for them to catch up to Samsung’s production needs. Which is great for the company, considering it cranked out 215 million smartphones last year.
Samsung’s component advantage has helped the company flood the market with variations of its devices. While other companies may find it difficult to create multiple versions of smartphones and phablets at different sizes, Samsung can utilize its production to bring a slew of devices to market at many different price points.
The other side to Samsung’s manufacturing success is making components for other companies — including Apple. Over the past few years, Samsung has made applications processors, flash memory, DRM memory, and displays for the company. For obvious reasons, Apple has attempted to move away from Samsung for some of its components, but even now, the difficult relationship remains between the two.
Aside from component manufacturing, Samsung also has marketing prowess that’s helped propel the company to the top of the mobile market. The company spent $402 million marketing its smartphones in the U.S. last year — beating Apple’s $333 million for iPhone marketing. Consequently, it was hard getting through 2012 without seeing at least a handful of Samsung commercials.
The company’s advertising has helped solidify its brand into the minds of mobile consumers, and has helped push the company into the top smartphone spot. In the first quarter of 2013, Samsung captured 32.7% of the global smartphone market share, with Apple following with 17.3%. One of Samsung’s ads — famously mocking a line of Apple fanboys — was the most-viewed tech ad in 2012, and has been viewed more than 17 million times on YouTube.
No simple answer
Samsung’s smartphone success comes from much more than its marketing budget — though that’s a big part of it. The company has the capability to create lots of products, adapt Android’s operating system to its liking, throw gobs of money marketing its devices, and make money creating components for its competitors at the same time.
Add to all that the foresight Samsung had to mimic Apple’s products at the opportune time, and you have the beginnings of Samsung’s success. For now, it seems the company will continue to enjoy its status in the mobile world — at least until someone else comes along and parrots what Samsung’s doing.
The article Is Samsung’s Success All Marketing, or Something Else? originally appeared on Fool.com and is written by Chris Neiger.
Fool contributor Chris Neiger has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple and Microsoft.
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