According to new research Apple only made $3.2bn profit from iPhone sales in the second quarter of the year, according to the research firm Strategy Analytics, a marked drop from $4.6bn a year ago and less than Samsung's estimated $5.2bn haul from both its basic models and smartphones in the same period.
Smsung who are keen to keep ahead of Apple has also announced that they will tip approximately $4.5 billion to construct five new R&D centres in the coming three years.
All five of these R&D centres will be located in South Korea an additional $1 billion Samsung research centre is tipped to open in late 2015. It is said that that building alone will be able to hold 10,000 employees who will work solely on new designs for Samsung products.
Research shows that consumers who once flocked to Apple stores are no longer bent on owning the latest Apple iPhone, they are also turning away from iPad's with Samsung Australia reporting 360% growth in tablet sales during the past year.
Also coming down are Apple's margins with major retailers now able to negotiate better margins. Both Big W and JB Hi Fi are believed to have benefited from recent margin negotiations.
Apple's latest financial results showed that the average selling price of an iPhone has fallen to $581, down from $613 in the first quarter.
The same trend has squeezed Samsung's handset profits, which are down from an estimated $5.6bn in the second quarter of 2012, but the strong performance of its flagship Galaxy S4 has, put an end to Apple's four-year reign as the world's most profitable phone-maker.
"With strong volumes, high wholesale prices and tight cost controls, Samsung has finally succeeded in becoming the handset industry's largest and most profitable vendor," Neil Mawston of Strategy Analytics told the Guardian.
"Apple is now under intense pressure to launch more iPhone models at cheaper price-points or with larger screens to fend off the surging competition and recapture lost profits in the second half of 2013."
Apple is tipped to roll out several new products in coming months including a new larger iPhone, a cheaper iPhone and new iMacs.
In the past, Apple has relied on sales of its older models to reach more cost-conscious shoppers instead of launching new model new generation iPhones.
Apple CEO Tim Cook, is said to be considering a brand-new budget iPhone as part of a revamp of the company's product range planned for this spring.