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Samsung Mobile In Management Crisis As Smartphone Sales Plunge

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With its Vice Chairman and de-facto leader Lee Jae-yong still in jail, Samsung seems to be having a management crisis. According to the Korean publication The Elec, the company is conducting a management review of its mobile business for a prolonged period of time.

The review reportedly began in the second quarter this year and was supposed to end in July. However, keeping in view the performance of the mobile business unit in recent years, the company has extended the management review by another month. It could go on to conduct an audit of the business depending on how the review goes, the report suggests.

Samsung is conducting a special management review of its smartphone business

Management reviews aren’t anything new for big companies like Samsung. The Korean giant reportedly conducts such reviews every four to five years. Not just the mobile business, it reviews its other business units as well to evaluate their performance and see if it need to make any strategic changes to increase their efficiency.

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However, the most recent management review of the mobile business isn’t a regular one from the company. It is a “special review” which, according to the report, is done without any prior notice when the leadership team identifies a major problem with a particular business unit.

Samsung’s mobile business hasn’t enjoyed much success recently. Smartphone sales have fallen drastically. The Galaxy S21 series have reportedly sold only 13.5 million units in the first half of the year. That’s less than half of what the Galaxy S series sold in the past. Even the Galaxy S20 and Galaxy S10 series sold far better than the new models. Samsung is now highly unlikely to achieve the sales target for its latest flagships.

The situation is as bad in the 5G market. Samsung was one of the first OEMs to launch a commercially available 5G smartphone when it introduced the Galaxy S10 5G in early 2019. However, over the past couple of years, the Korean behemoth has fallen behind its rivals in the market. Research firm Strategy Analytics recently reported Samsung to be only the fourth-biggest vendor of 5G smartphones globally. Apple tops the chart with a market share of 29.8 percent, followed by Oppo (15.8 percent), Vivo (14.3 percent), and then Samsung (12.5 percent).

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Samsung is also losing market share in some of its historically strong markets like India. The Korean firm has failed to match the value offerings of its Chinese rivals. It has significantly improved its software game recently but that doesn’t help when the devices themselves don’t offer the desired value upfront.

Supply chain issues have coupled Samsung’s troubles

Samsung’s troubles aren’t just limited to poor sales of its smartphones. The company is having to deal with multiple supply chain issues as well. Firstly, the Korean firm has failed big time in keeping its new products under the wraps until launch. Almost every single device it has announced in recent years was leaked extensively months ahead of the official unveiling. The same has happened with its upcoming batch of devices — the new foldables and Galaxy watches it plans to unveil during the Galaxy Unpacked next week.

Moreover, some of its component suppliers have reportedly refused orders from the company recently. MediaTek, in particular, has said it cannot fulfill Samsung’s chip orders. And it’s not because of the ongoing chip shortage problem, but because the Taiwanese firm believes Samsung is losing its position as a top vendor in the smartphone market. The Korean company uses MediaTek chips in its mid-tier products.

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According to the report, the jailed Samsung leader could implement measures based on the findings of this review once he’s out of jail. There have been calls for a presidential pardon or parole for Lee for the past few months. Reports suggest he could walk out of jail later this month. He could also review the company’s other core business units while in jail. This would allow him to act accordingly as soon as he comes out.

Samsung wants to build an ecosystem to rival Apple. But it seems the company first needs to sort out a lot of things first. Time will tell how it plans to get its smartphone business back on track.