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Samsung may oust Apple as the world’s largest tech company

There is one fundamental difference between Samsung and Apple – Samsung designs and makes virtually all the components powering its devices and Apple is a designer that outsources all its manufacturing.

If its latest quarterly earnings guidance is accurate, Samsung is on a stellar upwards trajectory jumping 50% at year-end 2016 and a 70% year-on-year increase for Q2, 2017.

In part, its rebound is because of Apple and its confirmed use of Samsung Display Company (SDC) OLED screens on its upcoming iPhone 8 series, not to mention that Samsung Electronics is a major supplier of V-NAND, UFS/SSD, DRAM, processors, and other vital smartphone and computer components.

And, in part, it is because the Galaxy S8 and S8 Plus have retained the crown as the world’s best Android smartphones and its leadership in TV and home appliances – Samsung products are now in over 70% of Western homes.

Samsung also expects the soon to be released S Pen equipped Galaxy Note 8 to break all sales records as there is a pent-up demand given the two-year gap between the Note 5 and the new release.

Samsung’s earning guidance Q2, 2017 has predicted the highest level of profit in its history and it is because the stars are aligning – not because of any super profits made along the way.

Its Electronics Division alone predicts sales of 60 trillion Korean won and an operating profit of 14 trillion up from Q1, 2017 of 50.55 and 9.9 trillion won respectively. One trillion won is roughly equal to A$11 million.

If it meets the estimates, it would have eclipsed Apple’s operating profits – on an Apple for Apple basis.

Of course, Apple aficionados would rightly point out that one-quarter does not a year make and the iPhone 8 release in September has slowed iPhone sales as people wait for its “anniversary edition.” Those same well-heeled aficionados can only believe that the iPhone 8 will blitz every other phone as well.

But the Apple and Android camps have solidified in their allegiance and support – existing investment now in apps and music in either ecosystem makes it harder to switch meaning Apple gets most of its sales from its existing customers. If the free-fall in sales of iTunes and the rise of OPPO and Huawei in China are indicators, Apple’s market is contracting.

Sure, Samsung must compete against other Android makers but the day when its Galaxy S and Note series loses the crown is a still long way off.

It is yet to be seen if Samsung can sustain its growth trajectory but all indications are that its heavily American influenced design, the design of the silicon, the manufacture of components, and control of its own supply chain make it a more holistic and profitable company.

That it has turned around, almost against all odds with the odour of vice chairman Jay Y Lee, embroiled in embezzlement and bribery charges, and the Galaxy Note7 mess, is remarkable and shows there is some savvy leadership there.

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Ray Shaw

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Ray Shaw ray@im.com.au  has a passion for IT ever since building his first computer in 1980. He is a qualified journalist, hosted a consumer IT based radio program on ABC radio for 10 years, has developed world leading software for the events industry and is smart enough to no longer own a retail computer store!