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Samsung Unable To Prevent Decline In Sales And Profit

October 6, 2015 - Written By Debarshi Nayak

Things are not going as smooth for Samsung as they want them to and have yet to find a solution to this deadlock. Even though they are still the largest mobile phone manufacturer in the world, the Korean giant has been losing sales every quarter, signaling distress among the investors and resulting in a drop in market share and margins. As predicted, the profits and mobile margins are expected to decrease in a periodic manner. Things got worse for Samsung last year when the company’s biggest wager, and flagship model Galaxy S5 failed to gain enough traction among consumers, resulting in a disheartening 60 percent drop in profit in Q3, 2014. The launch of Galaxy S6 didn’t help Samsung much either – sales kept falling, and this results in a whopping loss of USD 40 billion in market value.

Samsung has been trying various new things, to gain its former position in the market. It is targeting the lower end segments in India, and flooding the market with a variety of low-cost Android phones. Samsung has not stopped there, going on to develop and introduce curved screen, changing from plastic to metal body, and resorting to price cuts after launch in order to boost sales of its new flagship Galaxy S6 as the sales fell short of the target in the third quarter.

These measures, though partially successful in earning profits for Samsung, haven’t been any more beneficial. Samsung is desperately trying to regain back its share of the market from Apple, but that doesn’t seem to be happening anytime soon. This move is necessary for the investors to have faith that Samsung can turn itself around from the crisis.

It’s inherently tough for smartphone manufacturers to compete against each other, except the pricing. There are no innovations in smartphone technology that isn’t being copied by other manufacturers as well, and Samsung has been failing to create a growing interest in its devices among the customers, further leading to slower growth. Samsung intends to tackle this point, releasing Samsung Pay into the market at a time when the technology is still nascent. Brokerage reports estimate the mobile department’s operating margin is down from 10.6 percent in April-June to 7.7 percent recently. This has been affected by facts like the greater share of lower end devices and price cuts to its new flagship.

Samsung’s semiconductor unit continues to remain the top source of income for Samsung, as in addition to supplying for their phones, Samsung provides chips to Apple iPhones as well, boosting the market quite a bit. Lacking significant confidence, Samsung is trying to salvage the situation and try to convince frustrated shareholders.