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Samsung's smartphone decline: why sales slump could be long-term

Samsung's smartphone decline: why sales slump could be long-term

Samsung had already offered an inkling of what we could expect from its quarterly results, issuing a warning that its operating profit would slide by 62%, with sales across all of its divisions dropping 22%.

While the official figures show a 20% sales fall and 60% profit drop, it’s the smartphone figures that are most telling.

Profits from its mobile division fell by a colossal 74% in the three months from July to September compared to the same period last year.

If the extent of Samsung’s problems wasn’t clear before, it certainly is now.

During a press conference, the company’s Senior Vice President Kim Hyun-joon made the usual noises execs make in these situations.

“The mid-to-low end market is growing rapidly, and we plan to respond actively in order to capitalise on that growth,” he muttered.

samsung galaxy note 4 top detail

That’s all very well, but Xiaomi is killing Samsung in China and Google’s Android One partners in India are ready to eat into its market share there too.

Fixing this is going to take more than platitudes.

In a press release, Samsung was at least a touch more realistic.

“Although the company anticipates a demand growth for the recently launched Galaxy Note 4 and new middle-end smartphone models, uncertainty remains for the [mobile] division, due to the year-end surge in competitor smartphone launches, which may require a potential increase in marketing expenses associated with year-end promotions.”

That’s a barely concealed nod to the fact that despite slating Apple in a series of ads for releasing phones with larger screens, the Cupertino company’s massive iPhone sales show no sign of abating.

samsung galaxy note 4 camera

Samsung thought it had Apple beat last year, when in fact it showed shocking complacency by releasing expensive phones that looked cheap compared to rival models, and not just devices from Apple.

HTC, LG and Sony have all released better looking, more capable flagship phones this year.

It all smacks of the same issues that faced HTC after it fell from grace.

Initially a leading Android player, the Taiwanese company struggled to match early sales and hype and is only just returning to profit after two years in the doldrums.

Samsung has said it’s going to focus on using higher-end materials and components in its top of the range models, but admits it doesn’t know when its downturn will end.

Meanwhile, Apple is helping itself to record profits and expects iPhone sales north of 60 million in the current quarter.

Samsung vs Apple collision

Having woken up to the fact that consumers want larger phones, Tim Cook and co are taking Samsung down in the upper sector of the market with the iPhone 6 Plus.

Meanwhile, local manufacturers are producing better phones than Samsung in emerging territories.

The days of cheap phones laden with bloatware are over and Samsung needs to adapt.

But in the current climate, getting back to where you were is tough.

Samsung’s brand is strong, but as HTC has shown, regaining ground takes years and may never happen at all.

That means that 2015 could be all or nothing for Korea’s biggest tech player.

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