Samsung struggles with smartphone sales, profits slump

by Mark Tyson on 7 October 2014, 13:05

Tags: Samsung (005935.KS), PC

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Samsung has published its July-September earnings, revealing its profits are the lowest in over three years. The company flagged a near 60 per cent year-on-year profits plunge, according to Sky News.

Caught in the crossfire

The profits struggle is said to be related to the continuous challenges Samsung's key smartphone sector is facing with increased competition. Thus the world's smartphone leader has seen its global market share decline for the past two quarters. In the premium smartphone area, Samsung has been out-classed, notably by Apple's iPhone releases, whilst at the same time it is undercut by Chinese rivals such as Lenovo and Xiaomi at the value end.

"Operating margin declined due to increased marketing expenditures and a lowered average selling price, driven by reduced proportional shipments of high-end models coupled with price decreases for older smartphone models," the South Korean electronics giant said in an explanatory note.

Operational profit for the July-September period is estimated at 4.1 trillion won ($3.8, £2.4 billion), a 59.7 per cent fall from analysts' expectations of around 5.6 trillion won. The result will be the company's weakest quarterly profit since the second quarter of 2011, and it warns that the "uncertainty" in the mobile sector would persist into the fourth quarter. This is despite promises of a new line-up of top-end smartphones featuring "new materials and innovative designs", new mid- to low-end devices which will appear by the end of October, and strong seasonal demand for TV products.

Glory days left behind

Many analysts believe that although devices like the Galaxy Note 4 will help nudge profits higher, the best days are behind for Samsung's mobile division with the mobile market becoming increasingly saturated. Competition has intensified from Chinese makers creating more devices on the cheaper end of the spectrum, and Samsung's smartphone selling prices are likely to fall in response. But others suggests that the company should be able to make up for lower margins with stronger volumes once its product lineup has been revamped to reflect current market trends.



HEXUS Forums :: 25 Comments

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A bit like PC's smartphones now have become a commodity and with increased contract prices and longer contracts less upgrading is needed
3dcandy
A bit like PC's smartphones now have become a commodity and with increased contract prices and longer contracts less upgrading is needed
Not to mention phones like the Moto G are more than enough for most users.

The biggest problems in my opinion for with Samsung are they need a high end premium product, the s5 is not while the alpha falls short on performance. Not everyone wants a phablet. They also don't have a decent low end phone like a Moto G….then there's touchwiz (which looks like it will get even worse on Android L), all other manufacturers are staying pretty close to stock android these days except for Samsung.

Throw in some good android competition from Moto, Sony and HTC, not to mention the cheap Chinese brands, and you can understand why Samsung are losing out.
In the premium smartphone area, Samsung has been out-classed, notably by Apple's iPhone releases, whilst at the same time it is undercut by Chinese rivals such as Lenovo and Xiaomi at the value end.
Hmm, but I've been reading that this year's iPhone release has also been less successful than a lot of the “experts” thought it would be.

So in the absence of the iPhone juggernaut at the top end then who else can be held responsible? To me, the second part of that quote above is key - Leonovo (nee Motorola) seem to get a lot of love for the Moto X and G - so Samsung's traditional “pile ‘em high and get everyone to sell ’em” market is going elsewhere. The other point is that other high end competition have definitely upped their game.
EDIT: while I was typing this LSG501 posted the same thing, so I can't be too far off base. ;)

Taking myself as an example, I was looking for a replacement for my much-liked Galaxy S3 and I ended up with a short list of HTC M8, Sony Xperia Z2/Z3, LG G3 and Galaxy S5, with the S5 being the weakest option. In the end I plumped for the G3 (because I liked “minimalist” UI), but if asked to rechoose I'd be quite happy I think with any of the competition. The S5 struck me as pretty plain looking and loaded to the gun'als with “value add” software of Samsung's that conversely made it less appealing. As it stands today, the only mobile device of Samsung's that appeals to me is the new Note.

So if I'm typical, then perhaps that's the rest of the reason why previously can-do-no-wrong Samsung are now losing a bit of their sheen? And I'm not sure that - given the way that the market is moving* - that Samsung will be able to rule the roost in the same way that they have done previously.

(* new entrants like the One+1, Microsoft putting more focus on mobile, etc.)
Touchwiz, well I kinda like it - but each to their own.
Problem is that people do like to try something different too - and as well as Samsung there is now a multitude of broadly similiar options
Maybe they should put some effort towards high end smartphones rather than high end phablets.
http://forums.hexus.net/android/329829-poll-bigger-smartphones-phablets-appealing-you-4.html#post3388637
Even their mid range is going all phablet size and the prices are just way too high. They have so many different models of phones but other than the S5 and Note, what answer do they have to the Moto G? Only their flagship devices can outperform the Moto G, yet almost all of their smartphones offerings are more expensive. They should just slap a Snapdragon 410 onto the S5 mini, price it accordingly and remove any unstable software that slows down the experience.

Finally, Samsung are just awful at making software. Their Kies desktop stuff just doesn't work (at least with older phones). Their latest updates have made the S4 mini randomly reboot constantly. Their Android skin has handicapped their flagship smartphone S5 so much that it can barely beat the Moto G in terms of responsiveness.