A few years ago, Samsung "locked all its executives in a building" to hammer out a strategy to take on Apple, said ABI Research analyst Michael Morgan, who sees Samsung as a growing threat to Apple.
The new Galaxy S4, which goes on sale next month, embodies the company's ambitions to directly take on -- and overtake -- Apple. The device comes with a 5-inch screen, gesture recognition and eye-tracking software -- the kind of enhancements Apple should be doing, he said.
"Samsung has moved the bar," Morgan said. "Apple could have done this. Why didn't they?"
Samsung Semiconductor, meanwhile, is spending millions of dollars to build a new San Jose campus and is recruiting local engineers with the aim of expanding cutting-edge research.
"They realize they are fighting a battle of innovation," Morgan said.
As impressive as Samsung's rise has been, the company still is not in Apple's league: Its devices lack the seamless integration Apple is known for, said Carolina Milanesi, a consumer-device analyst for research firm Gartner. As expectations for the Galaxy rise, consumers will eye Samsung's products more critically, she said.
Samsung is also losing the battle of profits. Apple accounts for some 70 percent of all smartphone profits, Morgan said, while Samsung has most of the rest.
Also, Samsung users don't show the loyalty for the brand that Apple enjoys from its customers.
The Yankee Group, which regularly analyzes consumer attitudes, said its recent survey of about 16,000 Americans revealed that 5 percent of iPhone users said they plan to jump to one of Samsung's many models of smartphones for their next smartphone, whereas 14 percent of Samsung owners were planning to buy an iPhone as their next device.
"What you are seeing in all this is a single phone model -- iPhone -- creating more loyalty than entire competing ecosystems of (Android) phones, or the 37 different models of Samsung smartphones," said Carl Howe, a researcher at the Yankee Group.
"People in focus groups say things to us like, 'If it's from Apple, I will buy it,' " said Alan Nazarelli, CEO of Silicon Valley Research Group. "I don't sense that Samsung has that today."
Castro, the convert, underscores Samsung's precarious position: Though he chose a Galaxy S3 over an iPhone 5 in the fall, he has not been completely won over by Samsung. His Galaxy lacks the software and app ecosystem of Apple, its messaging capabilities are not as "fluid" as the iPhone's and the device lacks the support system Apple offers at its retail stores, he said.
"They are on Apple's heels," Castro said. "But I don't see them ever catching up."
His next device purchase? It will probably be the next iPhone.
Contact John Boudreau at 408-278-3496. Follow him at Twitter.com/svwriter.
Samsung: A brief history
Samsung Group, based in Seoul, is South Korea's largest business group. The multinational conglomerate contains numerous subsidiaries and affiliated businesses, most of them under the Samsung brand. Here are key dates in the company's history:
1938: Samsung is founded by Lee Byung-chull as a trading company. 1953: After the Korean War, Lee forms profitable Cheil Sugar, which is followed by textile, banking and insurance enterprises. 1960s: Despite a political coup, charges against Lee of illegal profiteering and a 1966 family scandal of smuggling, the company grows by diversifying into paper products, department stores and publishing. 1969: Lee, with the help of Sanyo, establishes Samsung Electronics. It produces inexpensive TVs, microwave ovens and other consumer products for Western companies such as Sears and General Electric. 1970s: Under a government policy of rapid industrialization, Samsung launches a number of enterprises in shipbuilding, petrochemicals and aircraft engines. 1980s: The company is exporting electronics under its own name. 1983: Samsung begins production of personal computers. 1987: Lee's son, Lee Kun-hee, assumes control of Samsung. 1988: Samsung Semiconductor and Telecommunications merges with Samsung Electronics. Its core business focus is home appliances, telecommunications and semiconductors. 1990: Samsung becomes a world leader in chip production. 1994: Samsung Motors is formed. 1996: Lee Kun-hee is involved in a corruption scandal and gets a suspended sentence for bribery. 1998: Samsung completes the development of flat-screen televisions and begins the first mass production of digital TVs. Samsung Motors delivers its first cars. 2005: Samsung develops the first speech-recognition phone. 2007: Samsung Group is accused of political bribery and influence-peddling throughout the South Korean government, judicial branch and the media. 2012: Samsung Electronics becomes world's largest mobile phone-maker by unit sales, overtaking Nokia, the market leader. U.S. jurors rule Samsung must pay Apple $1.05 billion in damages for violating six Apple patents on smartphone technology.
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