Samsung’s slumping gross sales recommend China is the subsequent cellular battlefield
Samsung had a tough day yesterday. Its earnings report indicated the corporate skilled the primary posted drop in revenue in two years (a mere $7.eight billion, in comparison with $eight.27 billion in the identical quarter final yr), because of a robust Korean gained, a particular one-off bonus cost to staff and heavy vacation advertising prices. Given its elevated yr-over-yr income and gross sales this will likely not appear so dangerous, however there’s a rising concern that the corporate has a troublesome yr forward, particularly for smartphone gross sales.
The corporate expects slowing gross sales within the first quarter of 2014 for its smartphones and tablets, because of “seasonality.” This implies fewer individuals are shopping for cellular units — as a brand new Galaxy flagship approaches, many individuals postpone their telephone buy till it comes out. However the firm additionally indicated that the cellular battlefield is simply going to get fiercer over the subsequent yr, as developed markets are reaching saturation. Now, the warfare is shifting to creating markets the place extra individuals are turning into smartphone and pill house owners for the primary time.
With developed markets turning into saturated and experiencing sluggish gross sales, areas like China are ripe for the choosing.
In its earnings report, Samsung said: “In 2014, Samsung will concentrate on increasing its smartphone portfolio each by area and worth vary, and actively responding to rising LTE demand in Europe and China. Anticipate … intensified worth competitors, amid developed and rising markets to proceed speedy progress.” With developed markets turning into saturated and experiencing slowed gross sales, areas like China are ripe for the choosing.
This is not to say that Samsung does not have already got a big presence in areas like China and India — it is at present the market share champion in each nations — however its dominance is shortly slipping because it faces intense competitors from each native and international corporations alike. Native powerhouses Micromax and Karbonn are shortly catching up to Samsung in India, and in China, Apple has skilled exponential progress in current quarters; studies point out that the iPhone 5s and 5c helped Apple greater than double its market share to take third place. The telephones launched on China Cellular (the nation’s largest service with 750 million clients) this month, so we anticipate Apple’s foothold to solely get stronger there within the coming months. However that is not the one giant firm making strides in China: Lenovo, which is in second place, can also be rising considerably.
If the rumors about Apple releasing iPhones in bigger type elements are true, Samsung should instantly compete towards a serious pressure that did not exist final yr.
Not solely is there extra competitors in these nations typically, there’s additionally a way more pointed give attention to particular type elements and worth factors. As we identified in an earlier piece, the beneath-$one hundred pricing tier is turning into very aggressive, particularly in rising markets. Moreover, the massive-display smartphone, a type issue as soon as dominated by the Galaxy Notice, is now coated by almost each main firm. If the rumors about Apple releasing iPhones in bigger type elements are true, Samsung should immediately compete towards a serious drive that did not exist final yr.
Because the battle continues to accentuate in nations like China, the place demand is rising at an incredible tempo, Samsung’s revenue margins will get squeezed as telephone costs plunge. Thus, we anticipate to see the corporate hit tablets and wearables even more durable in 2014 — in response to Samsung, the previous will expertise a 20 % improve in demand, and it has extra of the latter on the best way as nicely. We do not know if it is going to be sufficient for the corporate to take pleasure in a report yr, however Samsung is underneath extra strain to bedazzle its clients than at any time in current reminiscence. It is simply going to need to be extra artistic to remain on prime.
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