Saheli Roy Choudhury for CNBC:
Samsung Electronics said on Friday that profits for the three months that ended June more than halved from a year earlier following continued weakness in price and demand of memory chips.
The world’s largest smartphone maker and supplier of memory chips said operating profit was at 6.5 trillion Korean won ($5.5 billion), which was slightly better than an industry estimate of 6 trillion won, but was down about 56% from a year earlier.
Memory components, which are used in mobile handsets and enterprise servers, comprise Samsung’s main profit-making business.
The results include 800 billion won (around $684m) paid to the company by Apple because the iPhone maker missed an agreed display panel sales target — though Samsung’s smartphone sales seem to have collapsed.
MacDailyNews Take: You got to take the rough with the smooth when you are a ‘fast follower’, eh, Samsung?
The greed led to over saturation. The chicken came home to roost. Pray the news for Apple is not the same!
It could be just as bad for Apple as they barely sell any iPhones in emerging nations such as India and Africa. Chinese smartphones killed the smartphone market using cut-throat pricing or maybe I should say very affordable pricing. Apple is going to have to look further than selling iPhones to keep the company afloat in profit. Consumers have so many smartphone brands to choose from so Apple’s iPhone will be well down on their buy list.
My take is that Apple needs to push into the enterprise market if they’re going to try to move expensive products. Consumers no longer seem to be interested in paying high prices if they don’t need to.
Subsidy? That’s about spun as much as it could possibly be. Apple failed to meet contracted purchase numbers, and had to pay an agreed amount towards that shortfall. This is a standard agreement. It’s no subsidy.
When this happens, it hurts me, and I’m not thrilled, as someone who is a longtime investor with a fair amount of stock. But to characterize this as a subsidy is ridiculous.
It’s not that straightforward. If Apple had fulfilled the full quota requirement, ending up with a stockpile of components or worse, a stockpile of high end phones with next years new phone imminent, the write-down costs may well dwarf the $684 payment affecting share value to a greater extent.
Long time investor here too and see this as sensible given a generally contracting market. The next quarterly figures will likely reflect that fact.
My 2cents
As a non-investor I love it. The pressure to reduce prices while offering the same, or more, or better suits me. This, in general, not just Samsung. I have no loyalty to companies.
That’s sensible thinking. Consumers shouldn’t be stupid when it comes to stretching a paycheck. Apple is foolish to think they can set some high product price and most consumers will happily pay for it. Apple surely needs to find alternate ways to make revenue without bleeding loyal Apple consumers to death. Apple should have acquired a cloud computing service which Wall Street considers an unlimited growth market. The smartphone market has hit a wall and that’s the end of that for Apple.