The US is one of the world's most lucrative smartphone markets. Apple has had a tight grip on it and Samsung is the only company that has been able to compete there. The most recent stats suggest that Apple holds over 57% of the US market while Samsung comes in second place with an almost 28% share.
Calling this a two-way fight would be an exaggeration since Apple has over twice the market share of Samsung. Nevertheless, it's impressive that Samsung has still been able to carve out a niche for itself.
Apple would like for nothing more than to totally dominate its home market. That would require it to sell a lot more iPhones. There's no denying the fact that iPhones are expensive. Since Apple is the only company that makes them, it's not like customers can just buy an iOS-powered device from another manufacturer.
The price might well be a factor that forces some people to buy an Android phone. As growth in the premium segment stagnates, the company needs to come up with new ways to get people to buy its phones. It appears that Apple has found a way to make that happen.
Bloomberg recently reported that Apple may start selling iPhones and even iPads through a hardware subscription service. The report mentions that this will “make device ownership similar to paying a monthly app fee.”
Over the years, Apple has made the conscious decision to shift towards subscription services and they're bringing in a lot of money for the company. Last year, the company's various subscription services like Apple Music, Apple TV+, iCloud, Apple Care, etc brought in combined revenue of more than $72.2 billion. It boasts 785 million paid subscriptions across all of its services. To say that's impressive is a massive understatement.
Building an ecosystem that people don't want to leave is something Apple has done better than any other smartphone manufacturer. No one can even match that, certainly not Samsung. Apple is now going to leverage this to lower the barrier of entry for customers who want an iPhone.
The report mentions that this new hardware subscription will be different from the existing iPhone Upgrade Program that was launched in 2015. The program lets customers pay for an iPhone and AppleCare over a 24 month period while giving them the option to upgrade to a new iPhone after 12 months of payments.
This subscription will be tied to customers' Apple ID accounts and they may also be able to bundle AppleCare of AppleOne, a combined subscription that bundles services like Apple Music, TV Plus, News Plus, etc, to provide the best possible value for money.
This new monthly subscription won't just be the price of the iPhone divided by 12 or 24 months. Customers will pay a monthly cost that's not been decided yet instead with the option to upgrade to a new iPhone when it's launched. This will remove one major limitation of the iPhone Upgrade Program. Customers will ostensibly no longer need to wait for 12 months to pass before they can upgrade to the latest model.
There's a lot that's still unknown about this service. Would this work like every other subscription service, meaning that customers could just get an iPhone for one month and then send it back the next? That seems unlikely.
Will the payments stop when customers have paid up the full device value even if they don't choose to upgrade? Will they be required to send the devices back? It's hard to believe that this would be the case.
The details are slim right now but it's clear that Apple wants to further expand its subscription business. If this helps make it easier for a lot more people to buy an iPhone, suddenly people who were forced to buy an Android will no longer be made fun of for their green iMessage bubbles.
So why is this going to be a problem for our favorite Korean company? Samsung doesn't have an answer to this. It just doesn't have the subscription ecosystem that can lock in customers and keep them hooked enough to not leave. Samsung does try to facilitate annual upgrades by offering lucrative trade-in values and deals but that's not the answer to this latest challenge from Apple. It needs to do more to try and stop Apple from running away with the ball.
There's also the fact that Apple's customers are a lot more used to the idea of subscriptions. Apple has gradually built up its subscription business over the better part of the decade. It doesn't have to convince its customers to sign up for a new subscription, not much anyway. They're more than happy to do it on their own.
The ship has sailed on Samsung building up a viable subscription business. While it has experimented with music streaming and cloud storage, none of that worked, and Samsung had to wrap up those services and call it a day.
Sure, Samsung could come up with a hardware subscription of its own, but it doesn't have the ecosystem of other services to draw people in. Apple could offer customers a great deal by providing them with an iPhone and many of its media services for one single monthly payment. There are plenty of people who want to see Apple TV content and stream their favorite tunes from Apple Music. Why wouldn't they want a new iPhone to be a part of the bargain?
Even the best Samsung phones may not be able to match the appeal of such a deal. This certainly gives Samsung to worry about. It may need to come up with an answer otherwise, Apple could make a serious dent in its US market share.
There's every possibility that Apple could then roll out this hardware subscription to other key markets, further making it difficult for Samsung to compete. It's unclear exactly when this subscription service will launch but the scribe mentions that it may happen either in late 2022 or early 2023. It will certainly be interesting to see how this all plays out.
