Samsung's continued domination of the smartphone niche is facing a major scare from other quarters in the industry. For a long time, the technology company has dominated the smartphone niche, but that edge seems to be losing its leverage over the rest of the players in the market. Indeed, the latest statistics show that Samsung (SSNLF) has lost traction against rivals such as Apple (NASDAQ:AAPL), whose iPhone devices are selling steadily and HTC (HTCXF), whose owners are looking to acquire a respectable market segment.
In the second quarter of this year, Samsung reported that its net profit fell by 8% from the values recorded last year. In the three months that ended late June, Samsung rerecorded 5.75 billion dollars in profits. This is a significant drop from the previous year's numbers ($6.25 billion) and a marked deviation from what the market had forecast.
Samsung's mobile division was one of the hardest hit areas, recording a whopping 37.6% drop from figures recorded in the same quarter a year ago. To the keen observer, this is not a surprise because the value of Samsung smartphones has been dwindling over the years, albeit slowly. While these changes do not hurt the company's current standing that much, it still reflects a worrisome trend.
For some time, Samsung has been locked in a war for the control of the smartphone industry with Apple, whose iPhone products keep pulling in consumers despite their hefty prices. This competition has seen the production of smartphones target various demographics in the market with a focus on price.
The S6 debacle
In April, Samsung rolled out its Galaxy S6 and Galaxy S6 edge models. This was a great response to competing forces in the market, but things did not work out as planned. There were rave reviews from across the industry but these reviews did not translate into sales, at least not as envisioned. The Edge model was an instant hit, attracting customers across the spectrum. As a result, there was more demand than Samsung could furnish, and this led to the loss of revenues as the company ran out of stock. Replenishing supplies for the Galaxy S6 Edge is never really easy because intricate processes and permissions go into its manufacture. This scenario was seen as a lack of sight by critics, who believed that the South Korean company should have foreseen that kind of surge a long time ago.
As for the Galaxy S6, the response from the market was painfully underwhelming. Instead of going out for these devices, consumers stuck to trusted models and refused to budge.
A war for control with Apple
Samsung has consistently tried to topple Apple by producing smartphones tailored for middle-class users as well as budget types that are friendly to the pocket of the average consumer. Despite this sustained push, market figures show that the technology giant is still playing catch up. The average selling prices of Samsung's products have gone down by slightly more than 10% since a year ago. This is an indicator of the company's attempts to beat Apple in sales. Surprisingly, despite its steep prices, Apple has noted a significant increase in the prices of its iPhones. The increase for the American outfit is at the $100 average over the same span.
However, the sparring between Samsung and iPhone is not limited to prices alone; it cuts across all aspects of production, marketing and distribution. For example, the iPhone 6 Series is seen as a response to the latest releases by Samsung. This series features screen sizes that are strikingly similar in dimension to those of Samsung, a factor that kill's the latter's only leverage in the market.
Things getting tougher as India and China wade in
Samsung has always prided itself in the ability to produce quality devices at budget prices. Admittedly, their smartphones at both the middle and low-end smartphone area are a steal by any means, but even that is changing. China and India are now selling smartphones at less than 70% the price of Samsung's product. While Samsung retains a steady following across the board, consumers are increasingly lapping up the words of Chinese firms and buying decent smartphones at very low prices.
Samsung is not about to lose its lofty position in the market, not by a long stretch. However, the industry is opening up for possibilities beyond the well-known. Apple is upping its strategies, China is tooling up for a grueling smartphone duel and India is looking to fashion out a piece of the smartphone pie for itself.
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Source: Samsung's Smartphones Falter as Rivals Circle
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