I think Samsung smartphones have peaked. Here's why.

The fact that the Samsung Galaxy S4 is not meeting sales expectations has already been discussed several times in recent months.  What I don't think has been fully considered is how the Android smartphone landscape has changed in the last year, and I believe these changes will make it virtually impossible for Samsung to maintain its recent dominant position. 

First, let's consider a brief history of the market.  The release of the iPhone created a new category of smartphone:  a keyboardless, touch screen, almost PC-level computing device.  The iPhone was the first and enjoyed almost no competition in this new space until the release of the first Android phone nearly a year later.  

Android phones spent a few years lagging behind the iPhone in capabilities, both hardware and software, and it was only last year (2012) that most people started agreeing that Android phones had finally caught up in terms of software and hardware.  Throughout the rise of Android, no single model, no single manufacturer came even close to the iPhone in terms of sales, reputation, mass appeal and brand recognition.  And that's probably still true today.  During this time of Android catch-up, there were very few good reasons to buy an Android phone instead of an iPhone.  I will sum them up like this:

1) iPhone not available on my carrier

2) Android phones are cheaper

3) Some Android phone has a specific feature I value so much, that I won't buy the iPhone because it doesn't have that feature (examples:  physical keyboard, 4G). 

4) I don't like Apple / iOS, or I love Android because I think it's more "open" , customizable, I just like it better, etc. 

The first genuinely successful Android phone (the Motorola Droid)  was a hit entirely due to point 1 above.  Verizon didn't have the iPhone and marketed the heck out of the Droid with a massive campaign that actually sold a lot of phones.  I would say that some of the early HTC phones were also successful only on this basis.  Because they were the only option for Verizon, Sprint and T-Mobile customers (as well as most international carriers as well), they were heavily marketed and sold to the customers of those carriers since the iPhone literally wasn't even an option. 

Over the past couple years, Apple has almost entirely eliminated this reason to choose Android over iPhone, as it is available on all major US carriers, and has broad distribution with international carriers as well.  With the recent release on NTT DoCoMo in Japan, and the possible availability on China Mobile later this year, this reason will be pretty much eliminated for the majority of the smartphone market.  

So 1) iPhone not available on my carrier can pretty much be crossed of that list now.

The second reason to buy Android over iPhone is because many many Android phones are cheaper.  This is still true and will continue to be true.  However, outside of Samsung, no Android phone manufacturer is profitable.  And outside of Samsung and HTC, none of them ever really have been.  The primary reason for this, is because Samsung (and previously HTC) were the only Android manufacturers actually selling high-end phones that competed with the iPhone in the same price range in any volume.  Most Android makers don't successfully sell expensive Android phones because a) they don't make them, they only make cheap Android phones, or b) they make them, but if people want to spend that much on a phone they are buying the iPhone, not an Android phone (because the whole reason that we are discussing herefor buying an Android phone is because they are cheaper, right?).   

So reason 2) still exists, but it's a market that doesn't make anyone any profit.  So Apple isn't going after that market, and frankly, although Samsung does go after that market, it's not where they are making their huge profits and not where they really want to be either.  We can safely assume that reason 2) isn't a valid approach for any vendor (Apple or Android manufacturer) that wants to make money and be profitable.   So we can eliminate it as a viable way to differentiate Android from iPhone.

Reason 3) is some specific feature that an Android phone has that the iPhone doesn't.  I believe this point can be broken down into two further categories: a) specific features that only a few people care about and b) specific features that a LOT of people care about.  Category a) includes physical keyboards, NFC (that's right, I'm saying VERY few people actually think no NFC is a deal breaker because how useful is it really?) , and things like louder speakers, a stylus, etc.  There will always be niche products like these, and they serve such a minor part of the market, that they can be eliminated as a successful way to differentiate from iPhone, because the market they do serve is too small.

Category b, i.e. features that a LOT of people care about, IS a successful way to differentiate and sell phones profitably.  This category used to include 4G.  For over a year, no iPhone would work on 4G data networks, so Android phones were the only way to get those speeds.  That was a legitimate and successful differentiator and I believe it was the reason for the success of phones like the HTC EVO 4G, etc.  However, Apple removed this differentiator when they brought 4G data to their iPhones, and they have done a great job providing broad international compatibility for 4G since then.

So here's where we get to Samsung.  Samsung started succeeding modestly with 4G Android phones before the iPhone had 4G, but the real feature that surprised many people (including Apple, I think) as a key differentiator was simply screen size.  Samsung started building phone with larger screens (like the Galaxy S2 and S3 and then the Note and Note II) and discovered a LARGE market of people who like larger screens on their phones.  This was not only something that the iPhone did NOT have, it was for almost 2 years something that other Android manufacturers did not have either, or least not to the same extent as Samsung.  

But, unfortunately for Samsung, essentially every Android device released by any manufacturer anywhere in the world for the last 6 months features a large (4.7 inch or above) screen now.  Not only this, but Samsung has run out of bigger screen sizes to make, because after the Galaxy Mega at 6.3 inches, you are basically running into tablet territory.   

So now, other Android makers match Samsung phones on display size at every level.  This means that while Samsung can still differentiate from the iPhone (for now), it can no longer differentiate from other Android phones that have equal or higher resolution, equal or faster processors, equal or better cameras, and equal and usually better build quality and design.

All of which means, at best, Samsung will now have to split the high-end Android market with more and more other players who will start eating into Samsung's profit share and market share.  At worst, Samsung will have to start competing on price for their flagship phones, and if all the Android manufacturers start a price war on flagship phones, they will be back in the world of no one making a profit selling Android phones again.

And if / when Apple does release iPhones in larger-sized flavors, it will take away the one last major differentiating feature that Android phones have to combat the widespread brand awareness, desirability, and overall quality of the iPhone.  

Unless Samsung can come up with a feature that again is something that a LOT of people want and isn't available on the iPhone, then Samsung is left only with competing on price (a losing strategy) or competing on equal footing with other Android manufacturers and no longer dominating the high-end smartphone market. 

Because ultimately, the difficulty of being an Android phone maker is that the point of differentiation: point 4) I don't like Apple / iOS, or I love Android because I think it's more "open" , customizable, I just like it better, etc.   There is certainly a decent sized market of such consumers.  However, they can get Android anywhere, and from anyone to satisfy this factor.  In fact, many of them don't appreciate the skins and modifications Samsung adds to stock Android on their phones at all.  So ultimately, while this last point will differentiate a Android phone from the iPhone and appeal to some consumers, it doesn't differentiate one Android phone from another.  

Samsung has tried adding gimmicky software features, invested in their stylus approach, built the Galaxy Gear watch that only connects to Samsung phones, etc. but I haven't heard of a single person who bought a Samsung phone specifically for any one of those minor features.  To date, it's been all about the screen size and the general awareness Samsung has built through massive marketing efforts.  

As Android phones once again become essentially non-differentiated equivalents of one another, we will see what happened to the PC / laptop / netbook market happening in smartphones.  The only competition will be on hardware specs and price, which drives manufacturers, including Samsung, to put in more expensive components and charge less for them, squeezing their profits, and eventually even crippling the margins Samsung needs to fund their massive advertising campaigns.  And once again, it will be a bunch of manufacturers (including Samsung) clawing at each other for the low end of the market, while Apple walks away with the majority of profits and the high end. 

The only other options I see for Samsung are:

1) Continued dominance through advertising.  But advertising is hit and miss, and I have yet to see it work consistently enough and price effectively enough to sustain Samsung's dominance on its own. 

2) Superior design and build quality.  But Samsung has simply never excelled at this. 

3) Discovery and implementation of some new feature only Samsung phones have that is extremely desirable to a large number of people.  They seem to be trying the curved screen phone as the next great hope, but I suspect that isn't going to pan out. 

So unless Samsung pulls a huge surprise out of their hat, I'm calling their peak right now, this quarter.  From here on out, we will see Samsung profits and share of the high-end market start to decline, and continue to a point where even if they lead other Android phone makers in profit, revenue, and / or market share, it won't be by the large margin they do today.   And they will certainly not be significantly competitive with Apple on profits or high-end marketshare.