China Photos\/Getty images<\/p>\n
More bad news for Samsung: The South Korean electronics company is set to see its seventh quarterly year-on-year decline in profit and yet another decline in revenues, which are down 8.4%.<\/p>\n
Its semiconductor business is growing healthily; it is Samsungs beleaguered smartphone business that is the problem.<\/p>\n
Samsung was once the undisputed king of the smartphone industry. But in recent years it has run into repeated difficulties.<\/p>\n
A lack of meaningful differentiation from other devices on the market — a problem that plagues all Android manufacturers — has left Samsung vulnerable to low-cost upstarts, while the runaway success of Apples iPhone 6 has also battered the companys sales.<\/p>\n
In short, Samsung is being killed at both the high-price and the low-price sections of its phone business, and it is mismanaging the one area in which its phones are performing well: the Galaxy S6 Edge.<\/p>\n
Down, down, down<\/p>\n
Here are the details of the decline, via The Wall Street Journal:<\/p>\n
The South Korean technology giant said that it expects to earn just 6.9 trillion Korean won ($6.1 billion) in operating profit for the three months ended June 30, a 4% decline from the same period a year earlier. It said revenue likely dropped to 48 trillion won, down 8.4% from the same period last year.<\/p>\n
So whats going on? Part of it is a misstep surrounding demand for its flagship devices, the Samsung Galaxy S6 and Galaxy S6 Edge. The S6 is Samsungs big flagship phone; the Edge is its new curved-screen version of that model.<\/p>\n
According to one of The Journals sources, Samsung assumed demand for the devices would be around 4:1 in favour of the regular S6. But the Edge has turned out to be quite popular, and demand is closer to 1:1. The company was left scrambling, with excess inventory of S6 units and not nearly enough of the more expensive S6 Edges to satisfy demand.<\/p>\n
Blogger Ben Thompson writes in his Daily Update email this is a pretty clear screwup, with Samsung failing to recognise what its customers are actually after. He goes on:<\/p>\n
[It] suggests they dont understand just how starkly the smartphone market has bifurcated: the only people buying a high-end Android phone want the top-of-the-line, and that means the Edge. Anyone who is concerned about price isnt going to save $100 by buying a normal S6; theyre going to save $500 and get a perfectly serviceable phone that runs the exact same software.<\/p>\n
Samsung already forgot the lesson it learned 2 years ago<\/p>\n
Thomson ReutersThe Samsung Galaxy S6 Edge smartphone.<\/p>\n
To be fair to Samsung, the company suffers from a persistent bias in tech writing. If Apple launches a new device and cant supply demand, people hail it as evidence of Apples incredible popularity. When Samsung cant supply demand, they call it a mistake.<\/p>\n
But the Edge situation makes it look as if Samsung has failed to learn from its most recent history. Until 2014, Samsung ruled the phone world because it offered a high-end Android with a radically different, more useful shape than the iPhone (a big screen, basically).<\/p>\n
Now that advantage has gone, but the Edge fills a similar gap. Its corner-curved screen lets the phone display different types of info in different formats, something the iPhone does not do.<\/p>\n
Again, consumers have stepped up and said I want that. But Samsung apparently thought the traditional design would be more desired than the new one — which is the exact opposite lesson the company learned when its Galaxy S4 phone become a best-seller.<\/p>\n
Samsung struggles to differentiate itself<\/p>\n
Thompsons comments are indicative of a far greater problem inside Samsung — beyond a premium build quality, theres no longer much to differentiate Samsungs smartphones from those of its (often far cheaper) competitors. Its a problem that faces the entire Android ecosystem: The operating system offers users greater functionality than iOS does, but the shared use of this OS means individual hardware companies find it hard to stand out from the pack.<\/p>\n
Samsung used to have one killer draw: Its premium, big-screen devices. It offered a smartphone experience that even Apple — with its paltry-size iPhones, at least until 2014 — couldnt match. But then the iPhone 6 and 6 Plus came out, and those phone have consistently stolen share from Samsung. The Cupertino company enjoyed the most profitable quarter of any company ever, while Samsungs profits cratered.<\/p>\n
As Apple Insider put it in January 2015: Apple Inc.s thermonuclear assault on Samsung vaporizes Androids remaining profit pillar.<\/p>\n
It is being attacked at the high end, and the low<\/p>\n
Data from Gartner released in May shows how the global smartphone market is booming, jumping to 336 million phones in use from 281.6 million a year prior. But the smartphone maker is failing to benefit from this trend: The research company believes Samsungs device sales actually shrank year-on-year.<\/p>\n
Gartner<\/p>\n
At the high end, Apple is largely to blame. But the company is also coming under unprecedented threat at the low end. Take China: According to data from IDC, Samsungs smartphone sales market share in the country halved in 12 months. Apple enjoyed growth of 62% in the year — but the low-end Android manufacturers Xiaomi and Huawei also jumped 42.3% and 39.7% respectively.<\/p>\n
These companies are offering an Android experience very similar to Samsungs, at a far lower price point — and the South Korean companys sales are cratering as a result.<\/p>\n
IDC<\/p>\n
Its not over (yet)<\/p>\n
Of course, its important to keep this all in perspective: Samsung is still making a profit. And there clearly is demand for the S6, even Samsung has failed to properly prepare for it. In contrast, HTC, another high-end smartphone maker, expects an operating loss of $166 million for the second quarter of 2015, TechCrunch reports.<\/p>\n
But the Galaxy S6 was supposed to help turn things around. News of another quarterly slowdown proves that just hasnt happened.<\/p>\n