For the first time in a global flagship model, Samsung is switching to its own Exynos app processor. This offers the promise of delivering better overall margins for Samsung and, in time, differentiated performance from rivals.
Samsung Pay is the new effort to build a Samsung ecosystem. Apple Pay will prove a market and educate partners in 2015, but it leaves room for someone to become the dominant payments provider for the rest of the Android-powered market.
With a clearly differentiated form factor for this year's flagship, the Galaxy S6 and S6 Edge, Samsung will hope to see a similar leap to the iPhone shipment's 46% year-on-year quarterly jump when Apple offered larger screen models. But, whether Samsung can realise this sales improvement depends on its ability to manufacture the Edge model at scale and avoid teething problems with the Exynos chipset it is using in a global flagship for the first time.
Few OEMs have the capabilities to differentiate in hardware. Samsung is able to leverage its display division capabilities to create the twin curved screen, which makes the S6 Edge unlike any other smartphone. Importantly, this differentiator is visible to consumers from the front on a store shelf.
The degree of intense market competition will limit the upside potential of the S6 on Samsung's overall smartphone shipment volumes because of Samsung's exposure to the low and mid-end part of the smartphone market.
IHS forecasts the gap between market leader Samsung's position and the number three player will narrow: In 2014, the 308 million smartphones Samsung shipped represented 422% of the third-placed smartphone player's shipment totals. But, in 2015, Samsung will ship just 282% of the total shipments of the third-placed OEM as we see competition increase in this sector.
To succeed, Samsung must be able to ship sufficient volumes, so it is able to offer a fair price with a modest premium. If Samsung believes its manufacturing is not sufficiently capable, then Samsung will price the Edge version at a premium so as to limit demand.
High gain, higher risk strategy with global S6 Exynos
For the first time in a global flagship model, Samsung is switching to its own Exynos app processor. This offers the promise of delivering better overall margins for Samsung and, in time, differentiated performance from rivals, as Apple has achieved with their A series app processor designs. But it's a high risk, high reward strategy.
Samsung pay builds ecosystem
Samsung Pay is a swift follower strategy built on Loop Pay and new S6 hardware. Samsung is far from giving up on services: Samsung Pay is the new effort to build a Samsung ecosystem. Apple Pay will prove a market and educate partners in 2015, but it leaves room for someone to become the dominant payments provider for the rest of the Android-powered market.
Samsung Pay leverages the new fingerprint sensor in the S6 which no longer needs to be swiped, the move to tokenised credit cards, and the Loop Pay business. Unlike rivals, Samsung aspires to provide wide compatibility through enabling barcode, MST and NFC support.
If Samsung continues to limit Samsung Pay to only its smartphone hardware, it will fail to dominate all of the opportunity left untouched by Apple. Plus, Samsung will launch in summer of 2015 and initially only in USA and Korea, leaving room for operators, payment providers, and other ecosystem players a window to establish a mobile payments lead in the complete Android smartphone market.
