Smartphone margins fade
Smartphone sales grew slightly, but marketing costs and lower prices for its best models have eroded profit margins. Nevertheless, smartphones still represent two thirds of the company’s profit.
The fourth consecutive drop is not a surprise: market research firm IDC had previously announced that Samsung’s market share was slipping. From the bottom part of the market, it is under attack from cheaper Chinese manufacturers like Xiaomi and Huawei, while it is a fight with Apple’s iPhone 6 in the higher echelons of the market.
Samsung is particularly struggling in China: the country is transitioning from 3G to 4G at lightning pace, while Samsung still has a huge stock of 3G smartphones.
“The most important thing for Samsung now is to protect its fast-falling market share, especially in China“, analysts have said. That will take some adjusting for Samsung as the company have always been on the attack up until now. It remains to be seen how well they are at defense.
