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Weak demand led to shortfall in orders from Samsung's semiconductor division which Apple relies upon

A rather gloomy weak earnings outlook has been issued by South Korea's Samsung Electronics Comp., Ltd. (KRX:005930) (KRX:005935).  But the news from Samsung hints at a potentially troubling calendar Q2 2014 for other premium smartphone makers -- such as Apple, Inc. (AAPL) -- as well.
 
I. Warning -- Slow Lane Ahead
 
In its cautionary earnings guidance, Samsung Electronics cited the strong value of South Korea's currency, the Won, as one key factor.  But it also pointed to a broader slowdown in Q2 in the global electronics market.
 
Samsung -- like Apple -- has been struggling to balance the equation of growth in tablet demand versus the less favorable upgrade cycle of the device.  Both Apple (#1 in tablets) and Samsung (#2) have discovered that consumers are buying tablets less frequently than smartphones.  Samsung's guidance said that tablet sales "declined more than the expected level" thanks to the sluggish pace of upgrades.
 
The OEM also saw some troubles on the smartphone front.  Samsung is currently the world's top smartphone manufacturer, well ahead of second place Apple.  Samsung's flagship Galaxy S5 smartphone has been one positive spot in a generally troubled earnings outlook; it has been selling relatively well.  However, sales on the budget side have been weak for a variety of reasons.

Samsung Galaxy S5
The Samsung Galaxy S5
 
One factor has been stronger-than-expected competition from Microsoft Corp.'s (MSFT) Nokia Devices (which recorded 10 million preorders for the Nokia X alone) and domestic OEMs in India/China.  Another factor has been weak demand in Europe, where Samsung commands a dominant 40 percent share of the smartphone market.  In China -- another top market -- others factors came into play as sales of 3G handsets dipped as citizens awaited the activation of new LTE networks in China in H2 2014.   Q2 is also traditionally seasonally weak in China.
 
Samsung says it committed to inventory reduction efforts to prevent a buildup of devices on low demand, but that these efforts hurt its profitability.  It writes:

Therefore, the second quarter earnings were negatively affected by substantial increase of marketing expenses from the previous quarter due to strong sell-out promotion to reduce channel inventories in addition to marketing promotions for new smartphone and tablet launch.

World Cup
Samsung is a major advertiser at the World Cup in Brazil. [Image Source: Jason Mick/DailyTech LLC]

Among its big marketing expenses in Q2 2014 was a major World Cup advertising campaign.
 
II. What's Bad for the Goose is Bad for the Gander: What Outlook Says About Apple
 
For those Apple fans that might grin at Samsung's misfortune, the outlook carries troubling signs for its competitor as well.  Samsung writes:

The weak demand for smartphones also affected the System LSI and the display businesses that provide key components, which led to decrease in shipments and lower than expected profitability.

Apple has long been Samsung's largest semiconductor business client.  While it has tried to move away from Samsung's DRAM and NAND amid the pair's legal spat, Apple continues to largely source its processors to Samsung.  Estimates from 2012 value the pair's mutual business at $8-12B USD.  Estimates of the payments for system-on-a-chip (SoC) processors vary greatly.  A research note by Hong Kong, China-based Sanford Bernstein analyst Mark Newman claimed $5B USD in total SoC business, while IC Insights suggested just under $3B USD in mutual SoC business.
Apple A7
The Apple A7 -- the brains of the iPhone 5S -- is produced by Samsung Electronics. [Image Source: iFixit]

More recent estimates indicate that roughly 80 percent of the SoCs Samsung manufacturers go to Apple, which pays between $10 and $15 USD per chip.  And SoC business is on the rise, according to some.  Despite Apple's hopes of sourcing production to rival foundry Taiwan Semiconductor Manufacturing Comp., Ltd. (TPE:2330) (TSMC), Samsung remains Apple's most cost-effective solution for SoC production.  IC Insights estimates that shipments grew from $2.962B USD in 2012 to $3.413B USD in 2013.
 
Profit-wise that relationship may actually be hurting Samsung; a report from Mar. 2014 suggested that Samsung's Austin, Texas plant -- dedicated heavily to producing SoCs for Apple devices -- was a money loser according to regulatory filings.  While Apple pays a lot for chips, it is reported that Samsung may be spending even more in capital investments (including research and development) to try to maintain those contracts, leading to a net loss.
 
In some ways Apple has actually grown more reliant on Samsung.  Samsung now supplies an estimated 60 percent of 9.7 inch so-called "Retina Displays" (2048x1536 pixels), shipping 5.2 million units in Q1 2014 according to DisplaySearch (via ZDNet Korea [translated]).  As that display size is virtually exclusive to the iPad, this would indicate Samsung is Apple's top supplier for the display found in recent iPad models.
iPad Air
Roughly 3 out of every 5 large Retina Displays (9.7-inch) -- like the one in the iPad Air -- came from Samsung in Q1 2014.

Samsung's chief rival in this class is another South Korean firm -- LG Display Comp., Ltd. (KRX:034220).  But LG Display has recently been struggling to keep up with the bargain that Samsung Electronics is able to offer.  In Q1 Samsung earned an estimated $385M USD from selling Retina Displays to Apple.  Together, Apple's SoC and display orders -- along with smaller orders for NAND and DRAM -- could be worth an estimated $1.5-2.5B USD per quarter for Samsung.
 
In Q2 2013 the semiconductor unit accounted for 8.68T Won (~$8.6B USD) of Samsung Electronics' total revenue, while the display unit accounted for 8.18T Won (~$8.1B USD).  Excluding the 5.7T Won ($5.6B USD) in memory revenue, Apple orders may have accounted for up to a quarter of Samsung's total Display panel, SoC, and IC orders.
 
That strong link means that Samsung's warning of a "decrease in shipments" in the "System LSI and the display businesses" hints at iPad sales sliding further after dipping 16 percent on a year-to-year basis in calendar Q1 2014 (Apple's fiscal Q2 2014).  It could also hint that iPhone growth -- 17 percent from Q1 2013 to Q1 2014 -- could have stalled or even followed the iPad in its reversal.
 
Also bad news for the iPad is Samsung's note that the market shifted away from tablets, towards large smartphones (which Apple doesn't have -- yet).  Samsung wrote:

The demand for 5-to-6 inch smartphones also cannibalized the demand for 7-to-8 inch tablets.

Nothing is certain, but either way, the nature of Samsung's guidance warning seems to clearly indicate a warning to not have overly high expectations for Apple's earnings either.
 
III. Rebound Looming in Q3?
 
Samsung predicts it will see a profit of 7.2T Won ($7.1B USD) on sales of approximately 52.1T Won ($50B USD).  For comparison, in Q1 2013 Samsung earned 8.4T Won ($8.1B USD) on sales of 53T Won ($51B USD).  In Q2 2014, Samsung earned 9.5T Won ($9.3B USD) on sales of 57.5T Won ($54B USD).  Together the past earnings and the current guidance suggest that Samsung's revenue declines are stabilizing, but its decline in profitability is continuing to undo the two years of continuous profit growth Samsung had enjoyed up until the Q4 2013 downturn.
 
One piece of good news is that Samsung says it's "cautiously optimistic" that its situation will improve on a number of fronts in Q3 2014.  It writes:

The Company expects additional appreciation of won to be limited compare to the second quarter.  For the IM business, Samsung expects marginal marketing expenses related to inventory reduction in the upcoming quarter, while the Company cautiously expects a more positive outlook in the third quarter led by increased shipments of the coming release of its new smartphone lineup.

Samsung GS5 LTE-A
The Samsung Galaxy S5 LTE-A will be crucial to revitalizing sales in Q3. [Image Source: Samsung]

In Q3 2013 sales of the Galaxy S5 LTE-A -- a refreshed version of Samsung's flagship device -- will begin.  Sporting a Snapdragon 805 processor (with 3GB RAM) from Qualcomm Inc. (QCOM), 3 GB of DRAM, and a fancy new 2560x1440 pixel QHD (Quad HD) display, the refreshed GS5 variant has the hardware power to keep up with LG Electronics Inc.'s (KRX:066570)(KRX:066575) flagship device, the LG G3, and Apple's upcoming eighth generation iPhone 6.  A Google Inc. (GOOG) Play Edition GS5 (or GS5 LTE-A) is also rumored to be forthcoming.

Galaxy W
The Galaxy W launched in June in Asia. [Image Source: Samsung]

A fourth generation Galaxy Note with a 5.7-inch QHD display is expected in September.  The massive 7-inch Galaxy W (not to be confused with the GSII "Galaxy Wonder" variant) launched last month in Asia, and may come to the U.S. sometime in H2 2014.  Despite its massive size, its hardware spec is relatively underwhelming with a 720p display, 1.2 GHz quad-core processor, and 1.5 GB of DRAM.

Samsung also just launched new 8.4" and 10.5" Galaxy Tab S tablets, which should revitalize its slumping tablet sales.

The 10.5-inch Galaxy Tab S

In terms of its ongoing legal dispute, Samsung appears in relatively good shape. The company fought Apple to what basically amounts to a draw, with a jury in May finding mutual guilt and ordering both OEMs to pay each other damages over various "stolen" technologies.  The verdict was still narrowly in Apple's favor with Samsung's infringement being deemed "willful" and Apple's infringement "accidental" (hence the difference in damages, in part).  However, Apple is now under much greater pressure to settle with its rival to save face and avoid the appearance that it's "stealing" technology.

Sources: Samsung [1], [2], [on NewsWire.kr]



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troubling signs ahead
By kmmatney on 7/8/2014 10:53:49 PM , Rating: 3
"Apple see troubling signs ahead..."

They just need to release a phone with a larger screen - then enjoy the ridiculous profits.




RE: troubling signs ahead
By StormyKnight on 7/9/2014 12:43:59 AM , Rating: 2
After years of waiting, Apple fans will get their big-screen big-boy phones this Fall.


RE: troubling signs ahead
By StevoLincolnite on 7/9/2014 1:30:47 AM , Rating: 2
Makes me wonder how a larger screen would go, every Apple user I know, actually tells me they prefer a smaller screen as it fits better in one hand. (That is after I point out how glorious a 4.5"+ higher-than-retina DPI display really is.)


RE: troubling signs ahead
By MadMan007 on 7/9/2014 6:44:19 AM , Rating: 5
They just tell you that because they don't want to admit their glorious phone has a shortcoming. As soon as Apple has it, their tune will change.


RE: troubling signs ahead
By StevoLincolnite on 7/9/2014 7:23:30 AM , Rating: 2
I honestly hope they do, then I can call them out on it, hopefully in front of allot of people. :P


RE: troubling signs ahead
By retrospooty on 7/9/2014 8:23:01 AM , Rating: 4
It wont be any different than any other Apple come lately feature. They didn't need 3G until Apple supported it, they didn't need a 4 inch screen, 4G, copy/paste, multitasking, smaller tablets, or any # of other features until Apple supported it, then suddenly it was important. Zealots will be zealots as they aren't about the tech, they are about the company and that wont change.


RE: troubling signs ahead
By Reclaimer77 on 7/9/2014 8:48:07 AM , Rating: 2
Don't forget widgets. For years these guys scorned us for daring to suggest such a "gimmick" could add any value or even be something "cool".

Now that Apple is blatantly copying that too, where are all these guys?


RE: troubling signs ahead
By retrospooty on 7/9/2014 11:45:26 AM , Rating: 2
Yes, I enjoy the "gimmick" of being able to read the subject and first few lines of emails from the home screen without launching the app. The "gimmick" allows me to quickly determine if it's important and needs an immediate response or not. Not useful at all. Neither is my quick contact widget. I mean, who needs to look up contacts quickly? /s


RE: troubling signs ahead
By w8gaming on 7/9/2014 8:38:17 AM , Rating: 4
Denial to the end, until Tim Cook said now he is selling a large screen phone and suddenly every Apple fan will be praising how great a large screen phone is and all other large screen phone are never "done right" until Apple does it. And everyone else is "copying" Apple all over again.


RE: troubling signs ahead
By BRB29 on 7/9/2014 10:22:09 AM , Rating: 2
quote:
every Apple user I know, actually tells me they prefer a smaller screen


I live in DC, land of iPhones, and I can tell you just about everybody wants a bigger screen. Nobody is saying 5" big, but 4.5 -4.7".


RE: troubling signs ahead
By Cheesew1z69 on 7/9/2014 6:01:38 PM , Rating: 1
quote:
and I can tell you just about everybody wants a bigger screen.
No, you certainly can not, you have no clue what others want outside of your little circle jerk.


RE: troubling signs ahead
By protomech on 7/9/2014 8:32:53 PM , Rating: 2
I have owned an iPhone 3GS and iPhone 4 on AT&T, trialed a VZW LTE Galaxy Nexus, then switched to TMO for a HSPA Galaxy Nexus, Nexus 4, and Nexus 5.

The N5's screen is great, but the phone is too large for me in width and height. Thickness doesn't matter after a certain point.

I will strongly consider switching back to an iPhone as an everyday-carry if Apple releases a flagship sub-5" device, now that they are supported on TMO. Not sure why Samsung/LG/HTC cripple their smaller phones.

Not addressed at parent post: lots of fanboy cheerleading in this thread, but typical for any Apple or Android post. There's significantly more diversity in opinion in the real world than internet black/white worldview.


RE: troubling signs ahead
By Reclaimer77 on 7/10/2014 8:27:16 AM , Rating: 2
quote:
Not sure why Samsung/LG/HTC cripple their smaller phones.


If you want a smaller phone with great specs, what's wrong with the Nexus?


RE: troubling signs ahead
By Reclaimer77 on 7/9/2014 8:09:44 AM , Rating: 2
I don't think their large screen phones are going to sell all that well. I figure that most of those wanting a large screen had the intelligence by now to have already switched and get the phone they want.

But then again....we are talking about Apple owners, so hmmmm.


RE: troubling signs ahead
By retrospooty on 7/9/2014 8:20:24 AM , Rating: 2
They will sell. While a lot of people that wanted larger screens, left already over the past few years, a lot stayed and just stuck with smaller phones. There will also be some amount of people that move back to it once larger ones exist.


RE: troubling signs ahead
By TEAMSWITCHER on 7/9/14, Rating: 0
RE: troubling signs ahead
By atechfan on 7/9/2014 9:59:09 AM , Rating: 2
Apple is not even the first phone to use sapphire. Unlike Gorilla Glass, synthetic sapphire does not have only one producer, so I fail to see how Apple could "shut out" competitors.


RE: troubling signs ahead
By BRB29 on 7/9/2014 10:08:14 AM , Rating: 2
Apple has been using sapphire on its phone for a while. It's in the fingerprint reader and camera.


RE: troubling signs ahead
By atechfan on 7/9/2014 10:32:45 AM , Rating: 2
Watchmakers have been using sapphire for a long time. Some luxury phone makers, like Vertu, use titanium bodies and sapphire screens on their phone. Hate to disappoint, but this is hardly an Apple invention.


RE: troubling signs ahead
By stoogenadoot on 7/9/2014 12:09:13 PM , Rating: 2
Not an Apple invention, but putting it on a smartphone is still a good idea. We know it is more scratch proof, but if its more shatter resistant, broken screens could be a thing of the past. At least for casual drops. Not for "hit by a truck" damage, but from person to pavement screen damage may be over. Add in waterproofing and it cant be a bad thing.


RE: troubling signs ahead
By atechfan on 7/9/2014 10:16:34 PM , Rating: 2
Yes, sapphire screens on a phone is a good idea. One that Vertu, at least, and probably others, had before Apple. Granted, a Vertu phone makes an iPhone look like a bargain, but that isn't my point. Apple is not being revolutionary with this screen. It has already been done.


RE: troubling signs ahead
By TEAMSWITCHER on 7/9/14, Rating: -1
RE: troubling signs ahead
By retrospooty on 7/9/2014 11:25:19 AM , Rating: 2
" Like a great magician - Apple will pull off another amazing trick."

Oh good... Another hopelessly deluded fanboy.

Dood, wake up. Apple is just a company. You like the products? Buy the products, but dont put them on a pedestal. They have downsides as well. - Like a great magician. LOL.


RE: troubling signs ahead
By Reclaimer77 on 7/9/2014 12:31:54 PM , Rating: 2
lol the "magic" of a slightly better screen surface.

Yeah, that's gonna get us all flocking to them...


RE: troubling signs ahead
By W00dmann on 7/9/2014 3:45:39 PM , Rating: 2
Teamswitcher: I see your comment was junked. It's not that anything you stated was egregiously wrong re: sapphire screens and all, but honestly, "Technology Elite"? Come on. That was douche-y. It's that kind of arrogant (not to mention misplaced) comment that the non-Apple crowd hate with a passion. I tell you this as someone who has owned several Apple products and enjoys them. No need to be douche-y.


Good Enough
By inperfectdarkness on 7/9/2014 2:45:21 AM , Rating: 2
This is the state of consumer-level technology in the 21st century. The majority of consumers only care if they can see high quality video of LOL-cats being streamed, and ideally without having to buffer.

Realistically, the only realm in which devices could offer improvement dramatic enough to warrant consumer interest--is battery life. Screens have hit "good enough" resolutions. Storage capacity has hit "good enough". Processor speed & RAM size has hit "good enough". Frankly, if the consumers that this segment is marketed towards--were more discriminating--they'd be buying laptops instead.

Wii sales slowed down eventually--and everyone said it was due to market saturation. Well the same exact thing has happened to Tablets and--in many ways--smartphones.




RE: Good Enough
By atechfan on 7/9/2014 6:05:25 AM , Rating: 2
That's why I bought my laptop. I'm more discriminating, and I have REALLY big pockets.


RE: Good Enough
By w8gaming on 7/9/2014 10:16:11 AM , Rating: 2
Well I don't think storage capacity has hit "good enough" on mobile devices. It is time for all vendors to make 64GB as standard feature, at least on those premium devices. It should add so little cost in terms of total cost anyway. Constantly limiting the default storage is preventing certain apps which benefit from bigger size storage from emerging.


RE: Good Enough
By stoogenadoot on 7/9/2014 12:12:12 PM , Rating: 2
All good points. But for "most" battery life is good enough too. More would be better, but most high end phones today can get 2 days of normal use off a charge, or 1 day of really heavy use. Most people sleep indoors and can charge it every night.


RE: Good Enough
By W00dmann on 7/9/2014 3:50:54 PM , Rating: 2
quote:
Realistically, the only realm in which devices could offer improvement dramatic enough to warrant consumer interest--is battery life. Screens have hit "good enough" resolutions. Storage capacity has hit "good enough". Processor speed & RAM size has hit "good enough". Frankly, if the consumers that this segment is marketed towards--were more discriminating--they'd be buying laptops instead.

Wii sales slowed down eventually--and everyone said it was due to market saturation. Well the same exact thing has happened to Tablets and--in many ways--smartphones.


Totally agree. I think this is the real problem here - after years of furious innovation in new product categories (smartphones, tablets) people are beginning to see no reason to upgrade any further. Phones are fast, slick, light, hi-res, and useful. There would need to be another "killer app / feature" to increase demand again to anywhere near what we've seen in the past.


RE: Good Enough
By DiscoWade on 7/9/2014 4:21:23 PM , Rating: 2
I remember reading how some analysts were saying the PC is dead because tablets are taking over. The logic was like this: PC sales declined and tablet sales took off, therefore this trend will always continue. The problem with this thinking is (1) past performance is no guarantee of future performance and (2) it assumes tablets and computers have the same purpose. Microsoft made mistake #2 with Windows 8. A hammer is nails and a screwdriver is for screws; a tablet is for consumption and a laptop/desktop is for production.


RE: Good Enough
By tonyswash on 7/9/2014 7:13:16 PM , Rating: 1
Leaving aside the tribal stuff what’s interesting about Samsung’s drop in both revenues and profits is what it reveals about the mechanics of the mobile device market and in particular what it reveals about the Android ecosystem. The problem that Android OEMs face is how to differentiate their products on anything other than price. Without controlling their own OS and service stack (both of which Google controls) it’s hard to secure a market segment that can reliably and securely deliver good revenue and profit results over time.

If anything Google is trying to ensure even greater homogeneity across the Android ecosystem, baking in UI, design and service stacks and so the job of carving a niche in the market will get harder. Samsung tried very hard to carve out a brand profile, partly though a massive advertising and market campaign, but it’s hard to stop their position from being eroded by, ironically, other Android OEMs making more or less identical phones just sold cheaper. Apple’s control of the entire stack, a stack that now goes from the silicon to the shopfront across everything in between, means that although they can’t come close to matching Android for units sold they do actually have a much easier time offering a distinctive product experience and can as a result retain much greater value in their ecosystem.

The only way out for Android OEMs would be to fork Android but that’s very hard to do because the they will lose the Google service stack which is very hard to replace, look how tough it has been for Apple to pry Google’s much less extensive tentacles out of it’s system whilst retaining customer satisfaction.


RE: Good Enough
By retrospooty on 7/9/2014 8:27:27 PM , Rating: 2
I don't actually disagree with your logic here... It's got to be rough for an OEM to make a lot of money with Android, but in the end, does anyone really care how much money their phone makes the OEM? No-one cares what HTC, vs. Samsung vs. Apple, Moto, LG or anyone makes. People care that they get the best smartphone they can get for their needs. THAT is what Android gets me. You can keep your favorite company's profit.


RE: Good Enough
By tonyswash on 7/10/2014 5:07:36 AM , Rating: 2
I think we are talking about two different things. I am interested in, and was discussing, how the mobile tech sector is developing, how one can best understand what is happening in the global mobile device industry as a whole. You are talking about how to select which phone you buy personally. Those are two different, and mostly unrelated, topics.

Given that the DT article we are both responding to is about a fall in profits at the largest Android OEM and what significance that might have for the future evolution of the mobile device sector I think my comment is a bit more on topic than yours.

You say you disagree with my logic but then make no attempt to actually counter it and instead talk about something different.

If you really don't care about how much profit phone OEMs are making why did you even bother to read this DT article and why are bothering to post any comments?


RE: Good Enough
By tonyswash on 7/10/2014 5:14:20 AM , Rating: 2
Sorry, just scratch the third paragraph of my previous comment, but the rest stands.

I tried to type my reply whilst I was listening to something on the radio and as a result misread your comment.

I fear my days of proficient multitasking may be over :)


RE: Good Enough
By Reclaimer77 on 7/10/2014 8:22:46 AM , Rating: 2
Tony you've been giving us the same "analysis" on Google and Android for years now, and none of it has come to pass.

So can I just ask you, when exactly is the entire Android ecosystem going to collapse and rain down on our heads?


RE: Good Enough
By retrospooty on 7/10/2014 10:06:05 AM , Rating: 2
LOL. No worries. It's kind of like when you are driving and someone does something really bone-headed and then when you get up next to them, you see it's just a really old guy so you let it slide. ;) j/k

My point was just that while profit matters to the OEM's it really makes no difference when selecting a phone. Yes, it was a different subject, put in a a counter to your usual "So, Apple makes more money" thread, which the above is a variant of.

Anyhow, on topic, Yes Samsung profits are lower, but they aren't in any trouble. They weren't going to keep growing like they were for a while. The market is saturated and competition on their own side of the fence (Android) is fierce. Reclaimer will probably freak out on my for saying this, but out of both the 2013 and 2014 flagships, Samsung is outclassed by LG, HTC, Sony, Google, and many smaller Chinese vendors as well. It's not at all surprising that sales aren't what they expected. They expected too much. I mean, they really though they would sell 100 million GS4's last year? Come on Samsung. Too much good competition for that. Anyhow, some are doing well and improving profit lines, like LG. Ones that are losing $ like HTC has massive cost issues that are not related to their product lineup, but internal inefficiencies.


RE: Good Enough
By Reclaimer77 on 7/10/2014 11:26:35 AM , Rating: 2
quote:
Reclaimer will probably freak out on my for saying this, but out of both the 2013 and 2014 flagships, Samsung is outclassed by LG, HTC, Sony, Google, and many smaller Chinese vendors as well.


I don't know why you guys think I "freak out" over Samsung lol.

You may be right, but that's a matter of opinion. I'll just add that Samsung outsells all of those brands combined, as well as Apple.

People blame this on marketing, but come on, they have to be doing SOMETHING right to be such a dominant player and the leading Android OEM.


RE: Good Enough
By retrospooty on 7/10/2014 1:09:59 PM , Rating: 2
"I don't know why you guys think I "freak out" over Samsung lol. "

Yeah, I dont know where I could have gotten that impression ;)

"You may be right, but that's a matter of opinion. I'll just add that Samsung outsells all of those brands combined, as well as Apple."

It is opinion, but anyone yourself included knows that Samsungs competition in the Android arena in 2011 and 2012 was horribly weak compared to 2013 and 2014. The other guys really stepped up their games the past 2 rounds.

"People blame this on marketing, but come on, they have to be doing SOMETHING right to be such a dominant player and the leading Android OEM."

Absolutely. They did it right earlier than the others. The GS2 was hands down the best Android phone of 2011, Probably the GS in 2010 as well. And the S3 the first 2-3 quarters of 2012 as well until finally the others started catching up at the end of 2012. That early lead got them where they are. Props for that... That and they do still make great phones. Root it and remove the bloat and they are fast as hell and reliable.


A tale of two bears
By tonyswash on 7/9/2014 9:22:57 AM , Rating: 1
It’s interesting to see the Samsung bear scenario unfolding. The bear case for Apple is trumpeted strongly on these forums and of course the underlying assumption is that we are witnessing a repeat of the (misremembered and imaginary) story of how Windows beat Apple in PCs, but the much stronger bear case for Samsung is discussed less often. The evidence has been mounting that the company with the vulnerable business model is Samsung and not Apple.

Its seems obvious but which company is best placed to resist the erosion of margins by rising bottom end low margin competitors, Samsung who have no software or service based differentiation (or worse whose fragmented attempts to build such differentiation actually make their devices less functional) or Apple who do have total control of their software and service stack?

Ben Thomson at Stratechery has over the last year written a series of articles about the bear case for Samsung versus the bear case for Apple, it’s worth reading them chronologically, his analysis is spot on.

http://stratechery.com/2013/two-bears/

http://stratechery.com/2014/two-bears-revisited/

http://stratechery.com/2014/smartphone-truths-sams...




RE: A tale of two bears
By TEAMSWITCHER on 7/9/2014 9:35:18 AM , Rating: 1
From one of your links:

"In fact, it turns out that smartphones really are just like PCs: it’s the hardware maker with its own operating system that is dominating profits, while everyone else eats themselves alive to the benefit of their software master."

I really liked this one. Thanks!


RE: A tale of two bears
By captainBOB on 7/10/2014 6:26:59 PM , Rating: 2
This would explain Samsung's Tizen experiments and Samsung equivalents of Google Play services.

Samsung knows that their size cannot be sustained as an Android OEM in the long term. Only by having their own platform and services to complement their hardware can they differentiate themselves from the thousands of cheaper Android handsets that are eroding them from the bottom up.

Comparatively speaking its easy to make a phone and slap a commodity OS on it and rely on the services provided by the OS provider than it is to build your own platform and services. Building services for your platform is hard, just ask Apple all about it. They're learning the hard way that they can't half-ass their server-side services. The most recent WWDC indicates that they're taking it more seriously but its going to be quite awhile before they are able to shake off their reputation for making really crappy server-side implementations.

If I were Samsung I would be deeply concerned about the OnePlus One. Not because its going to eat their lunch (it won't. Ever.), but because its existence is proof that you can have a phone with better build quality than even a Galaxy S for way cheaper. It is a indicator of things to come in the Android space, and it does not bode well for their premium Galaxy line.


RE: A tale of two bears
By Reclaimer77 on 7/11/2014 10:01:47 AM , Rating: 2
quote:
If I were Samsung I would be deeply concerned about the OnePlus One. Not because its going to eat their lunch (it won't. Ever.), but because its existence is proof that you can have a phone with better build quality than even a Galaxy S for way cheaper.


LMAO!!!!

I've been waiting for an "invite" to purchase the OnePlus One for months now. It's starting to look like vaporware at this point.

And build quality? I'll determine that when, or should I say if, I can even get my hands on one.

Maybe Samsung doesn't make the best phones, but they can at least get phones into the hands of the customer, in huge numbers.


Market Saturation
By coburn_c on 7/9/2014 9:50:25 AM , Rating: 2
Don't worry chaps, we'll shift tons of cheap trinkets priced in the triple figures that we'll deftly claim are 'wearables'. The public are idiots who suck up 10 different models of anything with a battery in it, right?... right?




Wall Street
By Shig on 7/9/2014 5:36:26 PM , Rating: 2
You have to hand it to them, 'signs of trouble' = under 25% growth every year.

Apple and Samsung were showing exponential growth rates, obviously those cannot be sustained.




Not Accurate
By Wazza1234 on 7/10/2014 2:29:21 AM , Rating: 2
There is absolutely nothing in any of the data behind this story which suggests Apple are expecting the same issues.

Why can't the reporting on here just be honest - for once.

The reality:

1 - Samsung is selling fewer phones because they are all ugly, all plastic, all the same design as the previous generation and customers aren't buying any more.

The story on Daily Tech:

1 - Samsung is selling fewer phone because of excuse a, b, c
2 - Apple is going to sell fewer too because of no logical reason whatsoever.
3 - Samsung will rebound.

Seriously?




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