Last fall, college sophomore John Castro did what was considered the unthinkable among his friends: The devoted Apple (AAPL) fan bought a Samsung Galaxy S3, the closest thing to an iPhone killer.
The San Jose State engineering student's conversion reflects the growing muscle of South Korea's Samsung Electronics, whose array of fast-selling smartphones, from inexpensive low-end models popular in the developing world to its showcase Galaxy devices, have propelled it to the global leader, with a 29 percent share of the worldwide smartphone market in the fourth quarter of 2012 -- up from 8 percent in 2010. Apple trails in second place with 21.8 percent.
Samsung's gains, fueled by innovative engineering and an aggressive marketing campaign aimed at young people, present Apple with its greatest competitive threat in the mobile era. But Samsung's drive to put itself in the same class as Apple -- the world's undisputed leader in consumer electronics innovation -- could be short-lived if it can't keep pace with the company that has repeatedly upended the industry with disruptive devices, from the iPod to iPad mini.
Samsung's success so far has impressed analysts and raised alarm bells in Cupertino. On the eve of Samsung's recent unveiling of its Galaxy 4S, Apple marketing chief Phil
Schiller gave rare media interviews, during which he criticized Android's "fragmented" software and Samsung's devices.
The battle between the two tech giants is likely to grow even fiercer, analysts say, because the high-end smartphone market is nearly saturated, meaning new growth for companies will come from stealing customers away from one another.
Apple and Samsung are slugging it out on multiple fronts. In the fourth quarter of 2012, the two tech giants were nearly tied for global market share for smartphone, tablet, desktop and laptop sales worldwide -- a category research firm IDC calls "smart connected devices." Samsung held a slim lead, with 21.2 percent of the market compared with Apple's 20.3 percent, up from 15.1 percent in market share from the third quarter -- a surge fueled by the fall release of the iPhone 5 and iPad mini.
"Samsung is very dangerous for Apple," said Clyde Prestowitz, author of "Three Billion New Capitalists: The Great Shift of Wealth and Power to the East" and a former counselor to the commerce secretary in the Reagan administration. "Samsung has a lot of money. It has the willingness to invest aggressively."
Samsung Electronics, a longtime components supplier to Apple, doesn't fit the Silicon Valley model of a giant slayer. Unlike Apple, started by risk-taking entrepreneurs Steve Jobs and Steve Wozniak, Samsung Electronics is part of the conglomerate Samsung Group, the largest of South Korea's massive family-run Chaebols that were the foundation of the country's emergence as a powerhouse Asian economy. The group sells everything from insurance to refrigerators -- and even semiconductor chips that power iPhones.
"They are pretty nimble for a huge company," said Daniel Sneider, a researcher at Stanford University's Shorenstein Asia-Pacific Research Center. "Samsung Electronics is the star of the Samsung Group."
Now Samsung is daring
to try what many companies have failed to do: match the innovative magic of Apple.
While Korean companies don't have the culture of unconventional thinking found in Silicon Valley, Samsung has many of the credentials needed to challenge Apple, said Tim Bajarin, president of Creative Strategies. It has the technological sophistication to make the critical components of mobile devices -- such as chips and screens -- as well as manufacturing capabilities, which Apple farms out to companies like Taiwan-based Foxconn, he said.
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