After Alphabet Inc’s (NASDAQ:GOOG, NASDAQ:GOOGL) big event earlier this week, the natural assumption was that Google is gunning for Apple Inc. (NASDAQ:AAPL).
The new Pixel smartphone is certainly a worthy competitor to the iPhone 7, and by controlling the hardware design and the software, Google is definitely emulating Apple’s approach. But it’s actually Samsung (OTCMKTS:SSNLF) that should be worried.
It’s Tough to Get Consumers to Switch Platforms
The fight for mobile domination has been a long one and a tough one. Android won the battle for top spot long ago, but Apple’s iOS is comfortably in second place. And while iPhone sales have been slipping, that’s more indicative of a maturing of the market than declining popularity.
Despite prominent switching campaigns and undercutting the iPhone in price, Android manufacturers haven’t had much success in knocking Apple’s market share down significantly.
The new Google Pixel smartphones are going to run into the same challenges. They may win over new buyers who pick between the iPhone 7 and the Pixel as their first smartphone. But the same obstacles remain when it comes to convincing longtime iPhone loyalists to make the switch: they’re comfortable with iOS and the iPhone, and they have an investment in iOS apps.
Despite the new Apple-like approach of controlling every aspect of the Pixel phone — from hardware design to software integration — Google isn’t yet a threat to Apple’s iPhone empire.
Pixel Is Bad News for Samsung and Other Android OEMs
Where the Google Pixel stands to be a serious threat to steal market share is competing against its fellow Android smartphones, especially those from Samsung.
Samsung is at the top of the Android smartphone food chain, best known for its premium Galaxy smartphones. They are perennially the best-selling Android flagship devices and practically the only smartphones that make any profit of note — outside of AAPL’s devices.
The premium design and price of the Google Pixel signal that it is aimed squarely at Samsung’s Galaxy S7. Google is taking on Samsung in both hardware design and features, with the goal of being the best Android smartphone on the market.
But it’s not a level playing field.
Key to the Pixel experience is Android Nougat and tight integration with Google Assistant, the supercharged AI-powered successor to Google Now. Google Assistant is a Pixel exclusive and Google is also offering Pixel buyers unlimited online photo and video storage. Like Samsung, Google is also now selling a new VR headset accessory — the Daydream View — the Pixel can be plugged into.
Google has pledged to ensure its Pixel smartphones will receive future Android updates, something that’s a serious weak point for the platform. Even though the latest version of Android has been available for nearly two months, it’s on less than 1% of devices. The most widely installed version of Android is currently Lollipop, at over 35% of devices. And Lollipop is two years old …
Compare that to the AAPL equivalent, iOS 10. Released several weeks after Android Nougat, it was on over 48% of all Apple mobile devices within two weeks.
GOOGL vs SSNLF
Smartphone shoppers looking at a premium Android smartphone now have a big choice to make.
They can stick with Samsung and its Galaxy S7, put up with Samsung’s TouchWiz UI, wait for Android Nougat to eventually to be released for their device and hope that the powerful Google Assistant someday makes its way into a general Android release … which they will then have to wait for.
Or, they can choose the attractively built Google Pixel, with Android Nougat and no OEM interface cluttering it, tightly integrated Google Assistant, free unlimited photo storage and assurance that Google’s smartphones will continue to receive timely Android updates.
The price is the same.
Not good news for Samsung. And making the situation even worse is the timing. The Google Pixel is launching just as Samsung is being roasted in the media over exploding batteries in its Galaxy Note 7.
Eventually, by adopting the iPhone model of designing the Pixel in-house and developing Android around it for seamless integration between hardware and software, Google could well be a threat to AAPL. However, at the moment and for the foreseeable future, Samsung is the smartphone make that should be very worried about this whole Pixel thing.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.
