We keep hearing that Samsung had a good run…that their best days are behind them…how their market presence is dwindling and so on…all doom and gloom. Samsung would like to think like Mark Twain when he said, “The reports of my death have been greatly exaggerated.” Samsung is still the number one smartphone maker in the world, but are poised to report a decrease in profits for two years in a row – a fact that greatly disturbs the South Korean philosophy of business and performance, where only excellence and success are tolerated.
In 2015, analysts from FnGuide Inc., estimate that Samsung will report a combined 2015 income of 20.8 trillion won ($1.91 billion) in net profit this year, which is down 6-percent from the 22.1 trillion won for 2014, which would be down 27.3-percent from their banner year in 2013. If these figures pan out, then 2014 would represent the company’s first annual drop in nine years. Things always look bleak when you compare sales figures to a banner year, but the question remains if Samsung can plug this hole of dwindling market share in its smartphone business.
Analysts believe that in 2013, Samsung had very little competition in the worldwide Android market, but those times have changed and Samsung did not change with them. Perhaps they were too arrogant to think that a small Chinese startup could ever overpower them in the emerging markets, but Xiaomi is doing exactly that. In China, where there is real sales potential, Xiaomi has already become the number one seller of smartphones, bumping Samsung into second place. Same thing is happening in India, between their homegrown brands and Xiaomi, Samsung is being beaten at their own game.
As far as the outlook for Samsung – analysts believe that an increase in their memory chip business will help offset some of the real losses brought on by the decline in the higher margined smartphone industry. Samsung refused to listen to customers and critics last year when their new flagship, the Galaxy S5, had much lower sales than Samsung anticipated – 40 percent less sales than the previous Galaxy S4. CEO JK Shin was so sure of the Galaxy S5’s success that he ordered 20-percent more be produced. This lack of sales brought about some reshuffling and removing of several higher-ranking executives, not to mention a warehouse full of unsold devices.
It is easy to see why Samsung has their sights set high for their new Galaxy S6 coming out this spring. If their recent devices, such as the Galaxy Alpha and Galaxy Note 4 and Note Edge are any indication of what the Galaxy S6 has in store for us, it may well be a winner, but certainly not enough to erase the past decreases in yearly earnings. Competition has become extremely strong in the US with LG and HTC and Samsung’s old nemesis, Apple and their new iPhone 6 and 6 Plus. No longer is Samsung the only company with a big display – the playing field has been leveled and it will be interesting to see just how well Samsung swings at the ball in 2015 and beyond.
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