After Apple, will Samsung be the next one to crumble?

Moneycontrol Bureau

The hegemony of the world's top phone manufacturer is under threat: in a single day, it emerged that the Korean firm's status as the number-one phone maker in top markets China and India has been toppled over by their homegrown rivals Xiaomi and Micromax, respectively.

China and India accounted for about 2 billion of the world's 6.5 billion mobile phone subscribers across the globe at the end of the second quarter 2013.

The news follows a familiar theme we have witnessed run out several times in the past few years. The dominance of Nokia and Blackberry (in the smartphone) in the 2000s was upended by Apple, which was then overtaken by Samsung.

At its peak, Apple, which witnessed hypergrowth with its iPhone series, commanded a market capitalization of USD billion – and was forecast to be the world's first trillion-dollar company .

But as Android took over Apple's iOS as users' most preferred operating system, Samsung and a handful of other companies latched on to Google's most successful product of the past decade to leave the company short of breath.

It now appears that lesser-known rivals from emerging markets are poised to do to Samsung what it did to Apple.

For instance, China's four-year-old Xiaomi combines a robust phone line-up packed with breathtaking features at a cost significantly lesser than rivals, and plays the volumes game.

It resorts to innovative practices – "CEO Lei is known for emulating Steve Jobs's presentation style and dress code, even concluding a recent public launch with the famous Apple slide saying, 'one more thing'," Forbes staff writer Parmy Olson pointed out recently .

The company primarily sells its phones and tablet computers through so-called flash sales on its site, stimulating demand by touting that thousands of devices like its Mi3 smartphone have sold out within seconds of being offered to the public, she added.

Locally, Micromax has successfully followed a similar strategy of providing high-spec products at a far-lower cost compared to Tier-I brands such as Samsung and HTC, while plowing back its profits into brand-building and deepening its distribution network.

Also read: Micromax pips Samsung as India's leading mobile phone brand

This signals a perfect commodization of the mobile phone market where brand loyalty is increasingly receding -- and as the market waits for its next wave of once-in-a-decade innovative revolution since touchscreens changed the mobile interface – assembling components at the lowest possible cost seems to be the strategy.

With its back up to the wall, Samsung has resorted to trying to add bells and whistles to its Galaxy line-up of smartphones. But with rather-superfluous innovations such as Air Gesture, its newer phones end up becoming basically reiteration of its old phones but with more powerful specifications.

"Let me be clear: specifications are not the be-all and end-all. But Samsung used to stoke the fire and push the industry forward," wrote tech writer Taylor Martin at Pocket Now.

"The significance of this context change, however, cannot go unsaid. It can mean one of two things. Either the mobile industry itself is slowing down, at least in terms of progress and advancement of individual technologies – the inevitable plateau we knew we'd hit someday when specification improvements are so marginal, they become negligible," he added. "Or Samsung is getting complacent."