Samsung faces stiff competition in mobile market

Samsung is struggling in the mobile space as it faces competition from Chinese makers of low-cost cellphones and—at the high end—from Apple, with the recent release of the iPhone 6 Plus removes Samsung’s uniqueness as a provider of large-screen smartphones.

The company is bracing for cost cuts and a potential management shakeup, according to the Wall Street Journal. The company said its third-quarter profit would probably fall as much as 62% from a year earlier.

In an email, Dr. Aleksi Aaltonen, an assistant professor of information systems at the Warwick Business School, said, “Samsung is being squeezed at the top of the smartphone market by Apple that is fully focused on providing high-end mobiles, while at the bottom Chinese manufacturers such as Huawei and Xiaomi are driving the margins down. A large part of the growth in smartphones comes in countries where these manufactures are strong. The change in the market dynamics has been coming for a few years. Why has Samsung not been able to adapt?”

He added that the smartphone market has matured rapidly—screen size has reached its usable limit, and consumers don’t really need more megapixels and gimmicky features. He suggested Samsung may be a victim of its own success across the spectrum of cellphone offerings—the company is “not as cool” as a manufacturer who focuses exclusively on the high end, and it doesn’t offer as much value at the low end because of what it spends on marketing. He added that Samsung may have to give up either the low end or high end.

Min-Jeong Lee in the Journal writes, “Samsung appeared to be shifting its emphasis to the semiconductor business when it unveiled an aggressive $14.7 billion investment plan Monday to build a new chip manufacturing plant in South Korea. Shares of rival chip makers slumped after the move because of concerns about a potential supply glut.”

She quotes C.W. Chung, an analyst with Nomura in Seoul, as saying, “Samsung’s memory chip business is now the only division that is doing well. Until the company’s mobile unit is able to recover, continued strength in the company’s chip business will be key.”

 

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