With Samsung reporting a 60 per cent fall in profits for Q3 to £2.4 billion – its lowest for more than three years – James Pearce assesses what has gone wrong and what it must do to maintain its dominant position
Samsung has faced a roller-coaster year. Despite maintaining its throne as the global leader in smartphone sales, with 25 per cent of the global smartphone market at the end of Q2 (IDC figures), profits have declined rapidly.
Despite this strong position, the South Korean manufacturer has come under increasing scrutiny as its financial results have taken a turn for the worse. In January, Samsung posted a fall in profits for the first time in two years.
Reporting its Q3 financial results on October 30, Samsung revealed profits had fallen by 60 per cent to Won4.1 trillion (£2.4 billion), its lowest in more than three years. This was in line with guidance provided earlier in October.
In the wake of these results, it comes as no surprise to hear that Samsung is considering releasing its next flagship device, which will most likely be called the Samsung Galaxy S6, earlier than expected.
Sources have revealed to Mobile News that the South Korean giant plans to launch its next Galaxy S phone between the beginning of January and the end of March next year. Both the Samsung Galaxy S4 and S5 have had an April release date in 2013 and 2014 respectively.
With the iPhone 6 and 6 Plus showing strong early sales and rivals such as LG showing positive gains in the smartphone sector, there are worrying signs that Samsung’s dominance is waning. A new strategy could be key to turning these results around.
In some ways, Samsung can only blame itself for what may be an inevitable decline. The manufacturer was the first to really go toe-to-toe with Apple in the smartphone race with its Galaxy range of handsets competing directly with the iPhone.
The problem is that Samsung seemed to overreach. It feels like not a week goes by without the manufacturer releasing another device. Since June, Samsung has released the Galaxy Core, the Galaxy S5 Mini, the Galaxy Alpha and the Galaxy Note 4.
The manufacturer has also announced the Galaxy Ace 4, the Galaxy Note Edge and the Galaxy K-Zoom. And that’s just the Galaxy phones listed – there are also tablets, smartwatches and other devices, too.
Samsung had a strong brand with the Galaxy range but this flood of devices has diluted the brand and now that is being reflected in its falling profits. How can Samsung sell its Galaxy S range as premium devices when the Galaxy range is so varied in quality?
It will also be harmed by the release of the iPhone 6 Plus in September. Samsung was one of the earliest adopters of the “phablet” craze and has partly driven the move to larger devices. Apple fans who always wanted a larger screen can now turn to an i-device, instead of alternatives such as the Note range.
A change in strategy could benefit Samsung and releasing a new flagship phone before the competition does could help it capture market interest before its rivals. If the device is released prior to April, it will fall around Mobile World Congress (MWC), which will be held at the beginning of March.
MWC sees a large number of handsets launched each year, but Samsung could have the device ready or even released by the time its rivals are unveiling their latest products in Barcelona. That advantage could be vital to Samsung boosting its profits.
Being first to the market also carries with it an element of risk. Samsung has always packed the Galaxy S range with top-of-the-range specs but releasing the devices early could give rivals the chance to market their products in a way that builds upon their knowledge of Samsung’s devices.
If Samsung does decide to bump up the release date of its next flagship device, it could be a step in the manufacturer reasserting its position at the top of the smartphone market. It might also be viewed as a sign of panic as profits continue to fall.
What is clear is that Samsung needs to do something to turn round its fortunes, sooner rather than later, or the gap at the top will close very quickly.