Rob Cihra at Evercore says Apple's iPhone business may be growing faster than Samsung's smartphone business.
In a note where Cihra ups his Apple price target, Cihra raises his Q2 iPhone estimate to 35 million units. If Apple hits that number, then sales would be up 12% on a year-over-year basis. That growth rate is slower than the overall smartphone market, but it's better than Samsung. Cihra is estimating Samsung sells 81 million phones in Q2, which would only be a 6% bump on a year-over-year basis. (Of course, Apple's growth is greater because it's coming off a smaller base — Samsung is still adding more total phone sales than Apple is, based on these numbers.)
Samsung's growth is being stung by weakening mid- and low-end phone sales, says Cihra. The Galaxy S5 will still hit sales targets, but in emerging markets Samsung is still trying to sell out its first quarter inventory.
This is a giant flip for Samsung and Apple compared to a year ago. Last year, Samsung was on fire, taking over the world. Apple was perceived to be slumping because its sales were significantly slower.
So, what changed? Chinese smartphone companies got better.
We wrote about this at the start of the year after we went to Mobile World Congress (MWC), the giant mobile industry trade show in Barcelona. The show was dominated by no-name Chinese phone makers selling handsets running on Android for $35-$100.
At MWC, we chatted with analyst Benedict Evans. He said something to the effect that all of these Chinese phone makers looked at Samsung in 2013, and took notes on how it did marketing and branding. They went back to China, improved their own design, marketing, and branding, and came back in 2014 with better products.
For Samsung this is a major challenge. Because it relies on Android, it doesn't have anything other than its brand to differentiate itself. In emerging markets, people aren't going to pay a big premium for the Samsung brand when they can get the exact same experience for less money.
(Samsung doesn't even really want to compete in that low and mid-tier since there's no money to be made. It's not a platform war for Samsung. It doesn't really benefit from selling loads of cheap no-margin phones.)
Apple doesn't face the same sort of problem. Apple is the only company that makes the iPhone running on iOS. It will never sell in the same volume as Samsung, or an Android phone maker, but it will still sell well.
At MWC, just about everyone at the booths for Chinese Android phone makers told us that people (in China at least) were willing to save their salaries for a month just to buy an iPhone. In this scenario, t here is no true rival to Apple, which will allow it to continue to grow.