Beleaguered Samsung’s days in the sun are over in smartphone market

“For four years Samsung Electronics Co Ltd has basked in the success of its Galaxy smartphones, making billions of dollars competing with Apple Inc in the premium mobile market,” Se Young Lee reports for Reuters. “The coming years are set to be more sombre for the South Korean tech giant, as it is forced to slash prices and accept lower margins at its mobile division in order to see off competition from rivals including China’s Huawei Technologies Co Ltd and Xiaomi Inc in the mid-to-low end of the market.”

“Behind Samsung’s reality-check is the fact it is stuck with the same Android operating system used by its low-cost competitors, who are producing increasingly-capable phones of their own,” Lee reports. “It remains the world’s biggest smartphone maker but it is Apple that is reaping most of the rewards. While the U.S. giant’s smartphone sales in its last financial quarter fell short of market expectations, it is still estimated by some analysts to earn 90 percent or more of the industry’s profits.”

MacDailyNews Take: Apple sold 47.5 million iPhones in the third quarter, up 35 percent year-over-year. But some analysts had expected around 49 million. Some analysts also expected growth of more than the mere 35% that Apple posted (in the June quarter, no less) and wanted guidance of more than $51.13 billion – $51.13 BILLION! – in the 90-some-odd-day quarter over the dead of summer (sorry Aussies!) in which Apple’s all-time record for the September quarter, so far, stands at $42.1 billion, but Apple only gave guidance with a top end of $51 billion, not $51.13 billion for which some analysts had hoped. That’s what Lee means by “fell short of market expectations.”

Analysts say “Samsung will not be able to compete with Apple in the premium market based on hardware and will continue to trail the U.S. firm in the absence of a major technological breakthrough,” Lee reports. “‘Some still seem to think that a well-made product will sell well, but the Galaxy S6 showed that assumption is wrong,'” said IBK Securities analyst Lee Seung-woo, who predicts Samsung’s mobile division margins will fall to 9.3 percent this year – the lowest since before the first Galaxy S phone launched in 2010.”

“Acknowledging the headwinds, the South Korean firm said last week it will “flexibly adjust” prices of its flagship Galaxy S6 and S6 edge models to boost third quarter sales,” Lee reports. “Samsung cut the retail price of S6 edge smartphones in South Korea by around 100,000 won ($85.46) during July.”

Read more in the full article here.

MacDailyNews Take: Good. More misery for Samsung, please!

If the courts won’t mete out justice unto Samsung, it look like karma will.

An iPhone with a larger screen option will hurt Samsung immeasurably more than myriad, unending traipses through the legal morass.MacDailyNews Take, May 2, 2014

Thermonuclear
Thermonuclear.

23 Comments

  1. Apparently, the author believes that Hauwei and Xaiomi only compete with Samsung and not Apple. Perhaps Apple has no interest selling phones to less affluent consumers.

      1. It’s funny how only Apple customers can’t figure out what it means for Apple to make 90% of all market profits in the smartphone category!!!

        Most obviously, Apple consumers are illiterate when it comes to economics!

        When Apple states that it makes 90% of all market profits on smartphones, it means Apple consumers are getting 90% less for their money!

        That means less quality, less functionality, less, less, less!

        In other words, excessive profits benefit shareholders, not the consumer!!!

        Yet Apple consumers are perfectly happy and proud of being taken for a ride!???!!!!

        Go figure!

        🙂

        1. You would think that wouldn’t you.
          However most customers by Apple products because they work well. They do not want to waste time on their devices just to get them to function correctly.
          That’s why I buy Apple.
          As far as profits are concerned Apple dominate that because they have excellent product management. That includes good component pricing and supply, great manufacturing partners and superb product design. Perhaps the key feature is that they have a very focused product lineup. They sell a lot of a few products which really makes a big difference in their margins.
          Look at companies like Samsung. Their gut reaction is to race to the bottom and try and sell as many units as possible. They think that they do not have to worry about margins because profits will come from higher sales. The problem with this approach that has been proven time and time again is that there is always another competitor waiting to beat you at your own game. So now Samsung’s profits are disappearing because they cannot sell enough phones.

          1. Wow! Do you really believe what you’re saying???

            Well, if you can’t figure out what I mean by excessive profits, let me help you out.

            Apple currently has no more than 12-15% of global smartphone market share, yet it nets 90% of profits!!!!!

            While it might not mean anything to you, this certainly qualifies as excessive profits to me!!!

            Don’t get me wrong, if you’re happy that’s GREAT! Please keep buying their products!

            1. You’re the prime sort of blind cheapskate doofus who cares little about his own data and security and for which Android was made for. What do you care the rest of us care more about our devices, ecosystem and security? The sad thing is you THINK you’re so smart about this. Go knock yourself out Xiaomi Boy.

            2. You’re hilarious!

              What surprises me most is that 6 other people liked your comment? And I’m sure, there are more to come!

              Let me ask you this:

              “What is the main son why you couldn’t provide me with an intelligent response to my comment in the form of a well articulated counter argument?

              (a) because of your lack substantive knowledge when it comes to basic economics?, or

              (b) because you lack intelligence all together?, or

              (c) all of above?

              You see Apple has figured out that it is far more profitable to sell to people the likes of you than to the other 85% of the population.

              🙂

            3. @GerryBowsinger

              Your argument doesn’t make any sense.

              Quick question for you. How does Apple make 90% of all the profit? Do you equate that to their phones costing 90% more than all the others on the market? Please do tell.

              Last time I looked Samdungs phones cost basically the same as Apple’s iPhones at the stores. If that is the case and if Samdung “SHIPS” gazillions of phones world wide, where is all their profits? Could it be because they have a terrible business model or spend gazillions, advertising, bribing stars, Judges, or hordes of online reviewers to lie about their products?

              Come on I seriously want to know…I want to know where their profits are going. Do their products cost so much more to make than Apple phone? Is plastic more than aluminum? Is it shipping, marketing, or gazillions in..cough..cough..R&D?

              Please explain because from a consumer point of view I see very little price difference at the store.

            4. Hilariosity is more the main effect of your own clueless adolescent posturing and posting. I guess you can’t see the forest for the trees which is no surprise as I cited security, ecosystem, device quality, resale, etc. If you notice Android is devoid of much of a complete ecosystem solution and the hapless devices themselves are a kludge of inconsistent UI nonsense. Go for it as it seems your choice making ability and the craptastic fragmented, malware infested, security infringed (check your recent headlines) and data mining Android platform are perfectly matched. Doofus is as doofus does and you are a classic case.

            5. So how would you remedy this problem of “excessive profits”? Would you lower their margins to break even, there by garnering a larger market share for no profit? Is that a better idea? What if they lowered their margins to 10% and then cornered the market with 100% market share, there by earning 100% of the profits since everyone else is out of business? Would you consider that “excessive profits”? Apple sells their products at a price that basically leaves them very little inventory. If anything, they have a problem keeping up with demand, so lowering the price wouldn’t get them more sales. Raising the price might hurt sales, thus lowering their profit share, but raising their gross margins. What I gather from this discussion is that all companies should strive for 100% profit share in whatever industry, thus optimizing their product price and market share. Looks like Apple is doing that pretty close to perfectly…

        2. LOL, dude, I hope that was sarcasm, because if it’s not, then the only person showing who is economically illiterate is you.

          Apple didn’t state it made more than 90% of all the profit in the phone market, analysts did. If they hadn’t told you, you’d never have guessed it.

          Just because Apple profits doesn’t mean that consumers don’t get a good value. Apple profits because they sell solely at the high-end of the market, in volume. Because of that they get the best economies of scale. End result, they make the largest profit. Samsung would also get a lot of those benefits if they didn’t have to spend 10x as much on marketing as Apple to generate sales. Now that they don’t generate as many sales at the high-end, their profit margin eroded quickly.

          1. My question to you is the following, based on the modern theory of economics:

            Who is likely to benefit from lower manufacturing costs due to “economies of scale”?

            (a) the one who has 15% market share?, or

            (b) the one who has 85% market share?, or

            (c) none of the above.

            Remember, the question is worth 30% of your final exam!

            Please respond carefully!

            Cheating is allowed!

            1. @GerryBowsinger

              Honestly you need to stop. You are just making yourself look really dumb.

              BTW, how much did Samdung pay for R&D last year? How many market changing inventions did they invent over the last 10 years?
              You have heard the term “race to the bottom” right? Meaning the first to make the cheapest possible product available with little or no profit, right? How’d that work out for Dell, IBM, etc?
              Pretty sure when you do that you also ship all the manufacturing to slave labor markets and damn the environment.
              So, you are saying screw making money and doing things right so it is better for the workers, employees and environment. So those 85% are doing a better job than Apple in these areas and that’s where all their profit is going?

              I’m waiting for your response………..

          2. While you’re at it, you might also want to lookup the definition of a value-proposition.

            Once you understand what it means, you will quickly realize that Apple offers the LOWEST value-proposition of the entire smartphone industry!

            🙂

    1. YES Fred. You got it right. Apple has zero interest in selling hobbled junkware to the ‘less affluent’. Apple ain’t gonna make no crap for the masses. That’ ain’t gonna change none at all.

      Thank you Apple. No cheap hobbled versions required.

  2. Samsung will give up making phones at the end of 2017 – not worth it when they’re losing this much money. How much longer Google will continue with this expensive disaster, who knows? They don’t derive the advertising revenue that was the original basis for Android, only from iPhones, which with iOS 9 will lock them out further. It makes about as much sense as driverless cars. The time will come when Google will not have the money to spend on frivolous, loss making projects – Google+. Search is changing and Google is not leading it – 5 years, at best.

  3. So sad that Samsung went that way to copy the “unique selling points” from Apple like neither having a SDCard nor a replacable batterie. I hope they will pickup with the S7 to keep moving foreward their way as they used to do while growing.

  4. Oh dear, we’re into reverse DOOM mongering now, are we? Samsung is gonna die.

    Hopefully, what this means is that ScamStung will learn how to actually INNOVATE for a change and COMPETE will Apple for a change. THAT would be the best outcome of ScramScum being soooo delightfully screwed.

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