Samsung’s profits fall as cheaper smartphones gain market share

Samsung-LogoLast Friday tech giant Samsung Electronics hit the market with its ultimate creature. The Galaxy S5 was released worldwide, in more than 100 countries. Samsung said there was high demand for its latest flagship smartphone in many countries across the globe such as France, India and Canada, reporting that there were long queues for the device, way before the shops’ opening. Moreover, the Korean giant is pretty confident that the peculiarities of the S5 – like being sand and water resistant – will guarantee success in areas like Middle East.

That’s pretty interesting, although there’s no real report of long queues in front of the shopping malls and it’s quite tough to verify the general demand. On top of that, the Galaxy S5 – which received positive review also gathering general consensus that it lacks real innovation at the same time – was priced lower at its commercial launch than the previous S4 model. And this is definitely not accidental.

Three days before launching the S5 the electronics company announced it was facing a second consecutive quarter of profit decline. The company estimated its first quarter operating profit at 8.4 trillion Korean WON (€ 5.76 billion) – a 4.3 percent fall – marking a second straight year-on-year decline. Sales are flat at 53 trillion Korean WON. No doubt that the S5’s price lowered is a sign, not yet a symbol, of the challenge that the company faces.

The smartphones sector is shifting to mass-market, this is the knot, as high-end growth eases off with sales slowing in mature markets. Smartphone sales growth is slowing down in North America, Europe, South Korea and Japan, while consumers in developing nations tend to buy cheaper devices. Huawei, Lenovo and Xiami are expanding in Southeast Asia and China, and consequently they are forcing down prices. Market research and analysis firm IDC estimated the average selling price of smartphones will fall to € 192 globally by 2017 from € 244 in 2013 and € 280 in 2012, generally speaking. The average price of a Samsung smartphone this year will likely be € 199, down 9 per cent from 2013, according to analysts at Nomura Financial Investment, as reported by the Times Colonist recently. Declining prices of smartphones also puts pressure on profit margins for micro components which are complementary to mobile devices, such as memory cards and display panels, which are all key products made by Samsung.

Samsung is attempting to cut costs in response to its business challenges, and this would have been unthinkable even 12 months ago. The Korean giant, the world’s largest smartphone maker, has cut back on marketing to save money. “This strategy gives them price competitiveness that can be leveraged to drive sales volume and defend overall profits,” IM Investment analyst Lee Min-Hee said, as reported by Reuters.

Many see wearable devices such as smartwatches or glasses as the next key of success in an incredibly saturated market. However, Samsung’s first internet-enabled smartwatch series, which was introduced last September, was greeted coldly by consumers. Analysts believe that, given its enormous economic potential, the tech giant will likely invest billions in this segment anyway.

No doubts that this is going to be a very challenging year for the Korean company, as also a patent trial was opened in the United States last week, with arch-rival Apple vowing to prove that Samsung copied their iPhone features and should pay more than $2 billion (€ 1.45 billion) in damages.

Most analysts expect Samsung’s earnings to improve in the current quarter anyway, and the Korean multinational company to get back on track very soon.

The Seoul-headquartered company is the world’s largest maker of smartphones, televisions and memory chips. Samsung made more than 30% of all smartphones sold in the world last year, nearly twice the share of Apple.

Follow @carlomotta_ on Twitter

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

the European Sting Milestones

Featured Stings

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

Teenage girl’s death sentence spotlights Sudan’s failure to tackle forced marriage, gender-based violence – UN rights office

Heard about deepfakes? Don’t panic. Prepare

Security Council urges ‘maximum restraint’ around Gulf region as Iran and United States trade diplomatic blows in New York

How music can help children with autism connect

Greece bailout programme: Full agreement after marathon negotiations on debt relief between IMF and Eurozone

Peru should help more young vulnerable people into work

Prevent future crises and empower youth – now!

What happens when you toss your water bottle in the trash?

EU fight against tax-evasion and money laundering blocked by Britain

No better year for the EU’s weak chain links

The EU Commission by serving the banks offers poor support to European mainstream political parties

Eurozone officials play with people’s deposits and minds

The US-Mexico trade deal a threat for others, Trump to single out China, Europe

The blackened white coat of the doctors

Facebook has built an AI-based tool that fixes the social network when it crashes

Congolese expelled from Angola returning to ‘desperate situation’: UN refugee agency

How Hawaii plans to be the first US state to run entirely on clean energy

European Parliament backs CO2 emissions cuts for trucks

UN political chief calls for dialogue to ease tensions in Venezuela; Security Council divided over path to end crisis

Haiti: ‘Laden with challenges’ but also hope, Mission chief tells Security Council

Macron defends the idea of European sovereignty

Ebola situation worsening in DR Congo, amidst growing ‘funding gap’ UN health agency warns

Migrants, asylum seekers detained in Hungary ‘deliberately deprived of food’: UN human rights office

How cities can lead the way in bridging the global housing gap

Berlin favours economic and social disintegration in certain Eurozone countries

The power of trust and values in the Fourth Industrial Revolution

Banking on sunshine: world added far more solar than fossil fuel power generating capacity in 2017

False promises to Small and Medium Enterprises

Free flow of non-personal data: Parliament approves EU’s fifth freedom

Reinforcing EU border security: Visa-exempt travelers will be pre-screened

Main results of Environment Council of 09 October 2018

Moves to create a Kosovo army have ‘deteriorated relations’ with Serbia: UN peacekeeping chief

JADE Spring Meeting 2017– day 1: Excellence awards, panel discussion, keynote speeches

COP21 Breaking News_04 December: Building a Sustainable Future – speech by UNEP Deputy Executive Director Ibrahim Thiaw at the LPAA Thematic Event on Buildings

When did globalization begin? The answer might surprise you

EU-US trade deal: Europe to Americanize its social model?

Streaming music isn’t as green as you might think. Here’s why

Europe united in not supporting a US attack on Syria

Why Obama asks approval from Congress to bomb Syria?

MWC 2016 LIVE: Mobile has power to tame transaction fees – PayPal CEO

In 1975 NASA envisioned future life in space would look like this

Bayer’s cross at night (Copyright: Bayer AG)

The EU clears Bayer-Monsanto merger amid wide competition and environmental concerns

How innovation from within is transforming International Organizations as well as lives

7 skills every leader needs in times of disruption

EU tells Britain stay in as long as you wish

Building climate resilience and peace, go hand in hand for Africa’s Sahel – UN forum

After globalization what? Europe’s long, straining shake-up post Davos wreckage

Yemen: ‘Living hell’ for all children, says UNICEF; Angelia Jolie calls for ‘lasting ceasefire’

EU gas market: new rules agreed will also cover gas pipelines entering the EU

Countries must up their game to reduce low birth weights, warns UN-backed report

Mexico City is banning single-use plastics

Iraq: Security Council told ‘despair’ has ‘given way to hope’ but road to stability ‘long and far from easy’

UN agriculture chief urges ‘transformative changes’ to how we eat

A new bioeconomy strategy for a sustainable Europe

Guterres expresses ‘grave concern’ following explosion at large political rally for reform-minded Ethiopian Prime Minister

One Day in Beijing

Road to Brexit: the UK seeks early agreement on Data Privacy with the EU

Two days left until General Data Protection Regulation (GDPR), lots of newsletter opt-outs but does the EU citizen really know?

MEPs want to fund crucial areas to stimulate European growth

EU budget: Commission proposes most ambitious Research and Innovation programme yet

More Stings?

Comments

  1. Well, we all love cool smartphones, for which we will shell out hundreds of bucks, specially considering the pries on Samsung Galaxy phones, but how can they compeet with 20$ smartphones haha ?
    http://techinabottle.wordpress.com/2014/05/08/cheapest-smartphone-in-2014-worth-20/

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s