Samsung wobbles but stays its ground
Samsung Electronics employees display the new Galaxy S4 smartphones during an event at their head office in Seoul on April 25, 2013. The rapid shift of Kenyans to smartphones has driven data uptake to a new high with major telcos angling to grab a bigger chunk of users. PHOTO | FILE |
What you need to know:
- The South Korean behemoth, which is also facing a once-in-a-generation leadership change, reported a near 50-per cent plunge in third-quarter net profit on Thursday, following a 20 per cent drop in the previous quarter.
- Mainland China is the world’s largest smartphone market, and Xiaomi’s cheap, feature-packed handsets had already ousted Samsung as the top seller there in the second quarter.
SEOUL
Buffeted by sliding profits and emboldened rivals, mighty Samsung is looking unusually vulnerable these days, but analysts say its financial muscle and product diversity make “crisis” talk more than a little premature.
The South Korean behemoth, which is also facing a once-in-a-generation leadership change, reported a near 50-per cent plunge in third-quarter net profit on Thursday, following a 20 per cent drop in the previous quarter.
The nosedive came after several years of stellar growth and a seemingly endless succession of record quarterly profits for the world’s largest smartphone maker.
Just as it had driven the rapid profit expansion, it was the performance of the company’s mobile unit that accounted for the sudden reversal in fortunes.
While its flagship Galaxy S smartphone suffers in the high-end market from the popularity of arch-rival Apple’s iPhone 6, its dominance of the middle- and low-end handset segment is challenged by Chinese handset makers — Huawei, Xiaomi and Lenovo.
“Suddenly, Samsung finds itself sandwiched between Apple and the Chinese makers,” said Lee Min-Hee, an analyst at IM Investment and Securities.
SALES VOLUME
For the moment, Samsung is still the comfortable leader by sales volume, but its share of the global smartphone market has fallen from 35 per cent a year ago to just under 25 per cent, according to Strategy Analytics.
The star performer in the third quarter was Xiaomi, which took the number three spot behind Apple with a near six per cent market share.
Mainland China is the world’s largest smartphone market, and Xiaomi’s cheap, feature-packed handsets had already ousted Samsung as the top seller there in the second quarter.
On Thursday, Samsung executives promised to “fundamentally reform” the handset arm for every tier.
Lee Seung-Wo, an analyst at Seoul-based IBK Investment and Securities, said Samsung was more than capable of making the necessary adjustments.
“Samsung is a giant that makes a million smartphones a day, so naturally it takes quite a bit of time to steer the ship in a different direction and make it sail smoothly again,” said Lee .
A more fundamental restructuring is assumed to be in the pipeline, with control of the family-run conglomerate’s main business expected to pass from ailing patriarch Lee Kun-Hee to only son Lee Jae-Yong.
