Samsung S7: Seriously Eroding iPhone Prices

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Although the new Samsung Galaxy S7 outdistances the iPhone 6S family on virtually every performance metric, the real threat is the S7 undermining iPhone sales pricing.

The new Samsung (SSNLF:NASDAQ) S7 beats Apple Inc. (AAPL:NASDAQ) iPhone 6S in screen pixels, double the RAM and almost twice the battery; yet it is similar in size and has a much better hand feel. Samsung has also brought back an SD Card slot and water proof case that were dropped from the Samsung 6S series.

Customers who order the Samsung Galaxy S7 that is selling during the pre-order period from February 23rd to March 18th will also get the $150 value Samsung Gear VR and six virtual reality games absolutely free.

It is often said that people who want iPhones are not price sensitive, because they get quality, rich ecosystem, and top support. A few years ago, Apple’s iOS operating system was clearly superior to all smartphones powered by Android. The iPhone also had clear lead in premium hardware design, retina display and camera performance.

For “selfie” oriented millennials, the Galaxy S7 has a clearly superior 5.5 quad HD amoled display and fantastically better camera, since iPhone 6 did not upgrade from the now ancient iPhone 5S. The camera in the $750 iPhone 6S is so far behind other elite smartphone offerings that it has about the same performance as the $300 Nexus 5X.

As far as design, both Samsung S7 edge and iPhone 6s Plus have the exact has same 5.5-inch screen size, but iPhone 6s has a huge amount of wasted space bezel edges.

The Android ecosystem now matches iOS ecosystem with all apps launching simultaneously on both platforms. As the owner of an iPhone 6 Plus, I can vouch that iOS still has a slight technical lead over Android due to the A9 CPU processor being optimized to iOS. But the performance differences have shriveled in the last three years to the point that very few impartial customers can recognize any Apple advantage.

Price pressure on Apple iPhones is becoming intense this year with premium Android devices being discounted to below $400 and $500. Breitbart News expects that Samsung will soon be discounting the Galaxy S7 and S7 Edge to $450 and $550.

This probably explains why the Apple 4-inch screen iPhone SE due in March is expected to be priced between $400-$500 range, according to the insightful 9to5Mac blog. The SE will be very similar to the iPhone 5S in appearance, but with slightly curved edges. It features the A9 processor chip and 12-megapixel camera in the 6S.

The launch of the iPhone SE will crush the price of the year-old iPhone 6 that currently start at $549. The two year-old iPhone 5s, which currently sells for about $450, will probably plunge to around $250. As a result, the resale value of iPhones will tank.

The 9to5 blog speculates that this price cannibalization of iPhone owners in it ecosphere is part of a strategy to get value priced iPhones into the booming emerging markets, where carrying an iPhone has high status. A ‘brand new’ iPhone at $450 and older models broaching the $200 off-contract price point would push a lot of new customers to the iOS ecosphere.

Breitbart News warned last July in ‘Wall Street’s Love Affair with Apple May Be Over’ that Apple, despite the stock trading at a record $132 a share, had exhausted the ability to continue to convince “existing Apple smartphone owners in its ecosphere will dutifully follow all iOS upgrades. The low internal conversion rate may mean that Apple consumers do not see enough innovation to justify upgrading, or the $700 average price point has become a competitive limitation. That suggests that Apple will soon need to defend its customer base by cutting prices and accepting lower profit margins.”

This was considered blasphemy at the time by Wall Street Analysts, who were universally positive the stock was headed to the moon. But with Apple stock price down 27 percent to $96, shareholders have lost $199 billion in market value.

Apple’s iPhone 7 will not be out for 7 months, but MacRumors blog expects that it will double-down on encryption, use A10 CPU, be made of use composite materials to be more water resistant, eliminate rear protruding camera and antenna bands across the back of the device and have a similar look to 6S.  The only big buzz is that the iPhone 7 will eliminate the ear phone jack to add a second stereo speak, like the $300 Nexus 5.


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