Semiconductors Now The Most Profitable Samsung Unit

Samsung's difficulties have been widely publicized. As one of the largest players in the global smartphone market, Samsung had experienced strong growth that started to falter with the introduction of the Samsung Galaxy S4 in 2013 and the S5 in 2014. For 2015, Samsung entrenched and released something rather different - the Galaxy S6, which contained the best components Samsung could find at the time. This meant the business dropped the latest Qualcomm Snapdragon System-on-Chip, which Samsung had traditionally used in their flagship devices, in exchange for one of their own SoCs, the Exynos 7420. The Exynos 7420 uses similar technology to the Snapdragon 810 but is built on a smaller process, so produces less heat and uses less power.

Unfortunately, Samsung Electronics' net profit was down again by 8% in 2015 compared to 2014, despite the introduction of one of the best 'phones in the market. Indeed, this drop is being blamed on disappointing sales of the flagship S6 devices. Conversely, Samsung's semiconductor business accounted for almost half of the overall business profit (with Samsung Mobile at 40%). We have also documented Qualcomm's difficulties, which in part are caused by Samsung dropping them as a supplier for their flagship device. The money Qualcomm lost appears to have been recycled back into the Samsung semiconductor business unit. And the Exynos 7420 wasn't enough to increase device sales to where Samsung wanted them to be. There are few non-Samsung products on the market that contain an Exynos processor; Samsung have not taken the device market by storm by selling their System-on-Chips to third parties.

Perhaps part of the reason for this is because whilst the Samsung Galaxy S6 is a technically interesting device with many features, it is still very expensive. Samsung had an opportunity to revolutionize their device and to a point they took it - dropping the replaceable battery, MicroSD card, using the best quality internal components and keeping the eye watering price. The business is facing competition from all comers and it must be a difficult choice to significantly drop prices, but we are seeing Motorola, OnePlus and ZTE (as recent examples) introducing handsets that whilst might not be crafted so beautifully as the jewelry-like Galaxy S6, are around half the price. As for Qualcomm, it has been forced to cut 15% of its workforce and reduce investment to the tune of $1.4 billion going forwards. Let's not consider them out of the game just yet: there are an increasing number of devices emerging using the Snapdragon 810 and the next generation 820 SoC, due early next year, is looking especially promising.


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About the Author
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David Steele

Senior Staff Writer
I grew up with 8-bit computers and moved into PDAs in my professional life, using a number of devices from early Windows CE clamshells and later. Today, my main devices are a Nexus 5X, a Sony Xperia Z Tablet and a coffee cup.
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