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Surprise of the Year: Samsung's Decline


News by admin on Friday January 02, 2015.

samsung news · industry news · admin

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One could argue that Samsung's utter dominance in the smartphone world was an anomaly and that the company was riding too high on an unsustainable model. The Korean giant was and indeed still is the biggest smartphone maker in the world, but this time last year its market share was through the roof, profits were high, and only Apple provided any real threat.

In the Android market Samsung ruled supreme, but 2014 brought the company back down to earth, and while there has been no crash, Sammy is reeling. Oddly, it is not really old foe Apple that has caused a large decline in market share and a huge drop in profits. Sure, the iPhone continues to be a thorn in Samsung's side, but it is Xiaomi that now provides a threat to the continued success of the company.

The Chinese manufacturer has arrived with a business model that shocked Samsung and gave the Korean giant a bloody nose. Samsung remains the one to beat, but 2015 has become a pivotal year, one that could ultimately make or break the company as a dominant force or just another vendor. All eyes will be on the Galaxy S6 when it launches in April.

Some of the things we reported on Samsung in 2014:

When looking at the Galaxy S5 through the lens of the many Galaxy devices that came before it, this isn't an amazing phone. There's no sense of marvel in the hardware like someone feels with an HTC One M8, and there's no perceivable change to make someone say this is a dramatic departure from the Galaxy S 4. That's only the case if you look at the external of the device.

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Perhaps the Galaxy S5 is an evolutionary step too far, and I don't mean that in a positive way. Instead of an incremental (which the GS5 is) update the range needed an overhaul, but Samsung failed to spot the danger and perhaps got complacent at the top of the Android pile. The result has been a phone that failed to live up to expectations in terms of sales and quality, so much so that Samsung is going right back to square one for the Galaxy S6.

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The Wall Street Journal is reporting today that sales for the Galaxy S5 have slipped 40% behind expectations, while year on year against the GS4, sales are down 25%. To put that in clear black and white, the Galaxy S5 has sold a quarter fewer units than the Galaxy S4 managed through the same amount of time.

The S5 managed to sell 12 million units through three months on sale, while the Galaxy S4 managed to move 16 million units through that same time frame. The number also proves that any sales comparisons made by Samsung to the iPhone are totally false, Apple's device managed that number in one week. However, throughout 2014 it has become increasingly clear that Samsung is no longer fighting it out with Apple, but is instead looking over its shoulder to Xiaomi and even compatriot LG.

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Samsung head of investor relations Robert Yi confirmed during a presentation in New York that the electronics giant would cut production costs and also release fewer smartphones in 2015. It will be interesting to see if both of those go hand in hand or whether production costs will be slashed across the board. Samsung is not known for making premium feeling devices, so I hope declining costs of production does not worsen that. However, it is more likely that production costs will fall because of the decrease in output.

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Samsung has been taking numerous steps to solve its current crisis, including a $2 billion share buyback this week, the biggest in the company's history. Business Insider says that there is uncertainty among Samsung's workforce of late, with even those at an executive level in line to lose their positions.

Insiders say staff at Samsung Electronics have never been so anxious ahead of the annual reshuffle, as a weak smartphone performance and its worst earnings in three years are expected to cost many jobs [...]

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Samsung has had a torrid year and you will read why later. However, the company is fighting back from a position of first; that's right, the company is still the biggest smartphone manufacturer in terms of unit sales and market share... and it's on a global level too, as in every nation. This is not HTC, a company that has slid in the market and is trying to claw its way back.

Samsung is dominant, it's just that the company has lost a lot of those sales and a chunk of its market share. Make no mistake, every other company with perhaps the exception of Apple (Cupertino makes more profit) would want to be in Samsung's shoes right now. The third quarter was worrisome and paints a bleak picture for the future if things are not changed, but it was not a disaster as some would have you believe. Samsung still managed to shift 73 million smartphones through the three month period, more than just about every other company will sell through the whole of 2014.

There is plenty of doom mongering around, with some saying Samsung will collapse like Blackberry, which is utter nonsense of course. Blackberry (or RIM as it was then) missed the smartphone boat and misunderstood it too, whereas Samsung is a driving force in the market and is still an innovating company. Scoff at that last point all you want, but take a look at the Note Edge, love it or hate it, the device is an innovative one.

 
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