Samsung looks to cheap phones to stem steep profit decline in face of Apple iPhone 6/Plus

“Samsung Electronics Co Ltd. on Thursday said it would revamp its smartphone line-up to take on competitors in the rapidly growing mid-to-low range segment, after third-quarter earnings set it on course for its worst year since 2011,” Se Young Lee reports for Reuters.

Samsung’s “market share declined in annual terms for the third straight quarter in July-September, lagging Apple Inc in the premium market and overtaken by rivals like Lenovo Group Ltd and Xiaomi Inc at the bottom end, research firm Strategy Analytics said,” Lee reports. “Executives said the South Korean giant would overhaul its lower-tier line-up to boost price competitiveness and use higher-quality components to set its devices apart, after it announced its worst third-quarter profit in more than three years. ‘The mid-to-low end market is growing rapidly, and we plan to respond actively in order to capitalise on that growth,’ Samsung Senior Vice President Kim Hyun-joon said during a conference call with analysts.”

MacDailyNews Take: Translation: Unlike Apple, we will make junk.

“Samsung said its third-quarter operating profit fell by an annual 60.1 percent… Profit for the mobile division fell 73.9 percent,” Lee reports. “Analysts say Samsung will likely have to sacrifice margins to protect its market share. Cheaper phones are expected to drive global smartphone market growth in coming years, meaning a general trend of lower average selling prices.”

Read more in the full article here.

MacDailyNews Take: Go, karma, go, go go!

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    1. Samsung never analyzed consumer buying deeply in the industrialized world as far as I can see.

      Cellphones were a tool and most didn’t last very long in the past (exception being the Moto bricks in the 90s.)

      Any buyer with a need or half a brain understands that first price is not what you want to look at when buying a “tool.” Everyone also understands that the real price paid for communication with a ‘smart phone’ is the carrier fees.

      So the initial phone price is not the deciding factor. Quality, features and integration with the rest of our lives is what drives the sale of a ‘tool.’

    1. All it means is that they’re willing to reduce profit margins to sell phones. This strategy is a good one if you’re trying to sell phones. It means that lower-end Samsung phones will be higher quality for the same price.

      Although this means there are fewer reasons to buy the flagship phone, in the end, the average consumer wins. Truth be told, even as an AAPL shareholder, I wish Apple would relax its requirements to get so much profit from every device. I wish the iPad mini (3-year old A5-chip tech) was dropped, the iPad mini 2 was $249 and the iPad mini 3 was $349.

      I wish they added GPS into all their wifi devices and had a 32GB entry point.

      Apple doesn’t do this to preserve margins, not to provide the user with the best experience. At 16GB, there is frequently not enough space to properly use the capabilities of the device. Frankly, it’s very un-apple… the original iPod had 5GB of storage… because you needed that to have 1000 songs in your pocket. Other MP3 players had the capacity for a few playlists.

      Quality and usability in Apple were important.

      Now, it’s closer to brand, cachet and luxury.

    2. It means shifting the focus of their $12B advertising budget to the lower end consumer. That much money can move a lot of junk: It’s how they propped up their high end product “sales” for so long.

  1. Meanwhile Jony Ive focuses intently on iPhone 7, a phone that will make the cutting edge iPhone 6 look like a thing of the past. Samsung makes derivative garbage while Apple only cares about obsoleting its own great products with newer, better ideas. The contrast between these two companies couldn’t be starker.

    “People think focus means saying yes to the thing you’ve got to focus on. But that’s not what it means at all. It means saying no to the hundred other good ideas that there are. You have to pick carefully.”

    — Steve Jobs

    1. Samsung did that by inventing the phablet and incorporating the stylus pen, despite criticism by Apple (and analysts in love with Apple) who mocked them, called it desperate gimmicky junk that would fail.

      And Android did that by incorporating a bunch of features into Jellybean and KitKat that Apple and the pro-Apple analysts that dominated the tech media also dismissed as cumbersome, clunky, unorganized, unnecessary failed attempts to differentiate only to have Apple put those same features in iOS 8.

      And Samsung and Android did by introducing wearables 2 years before Apple’s first attempt: a watch whose only real difference from several Android Wear watches already on the market is an NFC chip, a different UI philosophy and a click wheel. And if Apple adds a 3G radio to allow it to make its own calls, it will only emulate 3 Android watches already on the market with more such animals to come next year (through granted they are not Android Wear watches).

      So … done, done and done!

      1. Well you got one thing right “Samsung is done, done, and done.”

        They copied Apple huge 3.5 inch glass capacitance touch screen mode of gorilla Glass brought out in the first iPhone. It’s huge and no physical keyboard – never work huh? Oh, the first complete dedicated OS in a phone – yup, first iPhone. Oh, the stylus, yup … Newton. They use Apple relationship in the mobile processing business … Oh, yea… The Arm processor. That right to bring out the Newton, oh dear – used in Samsung devices. CNC to produces metal body… Nut Apple again, started with the Apple laptops and then to the iPhone. Well, Samsung is still working on that … Well they do have that innovative metal band that Note or Aplha. Oh, that innovation of watches they pushed out to be first and used an apology for the watches … They are like green tomatoes and will get better as more models come out. But buy our green tomatos. Yes, Samsung is first out with copies. How about that finger print reader on their phone … May gawd! State of the innovative art 10 years ago. But who need 360 degree re ability and that silly enclave to secure the data … Just pluck it off that cheap plastic Samsung computer with a fake Apple keyboard and MacBook Air design. Oh, that payment system that ties into that secure enclave … Oh, that not out yet. Never mind, the next innovation from Samsung. What about those Keynote Samsung attempted to innovate … Wait, never mind Steve did that a decade before.

        Talking about these Samsung innovations leave in the middle of the Mojave Desert with nothing but sand and that need for a cold bottle of water.

        Damn, think I will buy a big cold bottle of water with a private and secure Apple Pay – Samsung and Android lemmings.

        Boom, another blow to the Samsung plastic and metal war dingy.

      2. You are so wrong wrong wrong and so very unknowledgeable about things related to this industry. Go back to the 1990’s and revisit Apple’s innovative and ground breaking Newton products… Which by the way are still used today. They were phablet sized, accessed the Internet, came equipped with a stylus, has extremely reliable hand writing recognition, converted handwriting, text and cursive to editable text which could then be spoken aloud, had two slots for additional memory or applications if desired, and literally set the stage for what most uninitiated today consider new tech… In 22 years all that’s changed is the ability to offer these ground breaking Apple firsts in a smaller package. I still use my recently upgraded Newton 2100 every day, right alongside my iPhone 6 plus!

  2. If you think that a fantastic phone like the Moto X is junk, your opinion is simply not credible.

    Fellas, an Android One phone that costs $120 provides comparable performance to an iPhone 4s. This is not an opinion … go check out the benchmarks. Huawei just released a phablet with a 5.5′ 720p HD display, 2 GB RAM, a Snapdragon 64 bit processor that Qualcomm only made available a few months ago, and the hardware controls are optimized for Android Lollipop (though it will run KitKat 4.4.4 until Google releases Lollipop).

    Price? $220. If you call it junk just because it doesn’t cost $700 when (after it is upgraded to Lollipop and gets the performance improvements from switching from ART to Dalvik) it will be able to run any app that an iPhone 5c is capable of running, you are just not being honest.

    You guys can keep fooling yourselves if you want to, but Android buyers know that there are quality alternatives to iPhones out there.

    1. Nobody is saying you can’t buy/use Android, it’s a personal choice after all. The protagonist here is Samsung, it ain’t too hard to know if you read the article carefully.

    2. I will pass an the malware and tracking services with the included NSA optimization. The lack of software updates, poor code, and lack luster phone up scaled Apps.

      I will stick with the smaller market that caters to more refined products and secure services, thank you… pay for detail and all that free customer service the other cheap low end burners do not offer.

      Yup, buy Apple. Top tier phones.

    3. If you’re so happy with your Android….. Why are you wasting your time here? On a page dedicated to APPLE products and adherents? Just who are you trying to convince…. Yourself? You certainly won’t convince many here. Enjoy your life.

    4. The issue is making a profit, without which Samsung cannot continue to be in business. This is why MDN keeps harping on the ‘Karma’ resulting from the company’s shameless copying tactics.

  3. I recently had a chance to hold a Samsung smartphone in my hands. I have no idea how well it works, but it felt like a piece of cheap plastic junk. Shockingly bad, actually.

  4. Big mistake and most companies make that choice when they face competition.
    The result diminishing margins and profit whilst trying to maintain revenue. Eventually they will be selling millions of units for zero profit.
    Examples: Compaq, Dell, Motorola, Nokia, soon to be HP and Samscum.
    Apple are the ONLY company that innovates in the face of competition. The iPod was at the height of its success but really had nowhere to go. So they released the iPhone and then iPad and revolutionized 2 major industries.
    Other companies are too lazy or too short-sighted to think themselves out of their problem.

  5. I believe it’s completely impossible for Samsung to return to smartphone profitability selling mid- to low-end smartphones. They can’t sell enough smartphones to make a difference and won’t be able to undercut the hungrier low-end companies without taking losses.

    If it were possible, I’m sure Nokia wouldn’t have gone down the tubes the way they did. They had high and low-end major market share and once their high-end products stopped selling, the low-end models weren’t able to bring in enough revenue to balance the books. Nokia had it all for a good number of years and still couldn’t come back to profitability.

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