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  (Source: Android Scissor)
Samsung beats Apple in U.S. sales, grows global sales

In Q3 2013, smartphone maker Samsung Electronics Comp., Ltd. (KSC:005930) showed some signs of weakness, but also posted strong financials defying claims of a major slump in its high-end smartphone sales.

I. Samsung Remains King of Smartphone Sales

For the quarter, Samsung -- which does not release sales numbers -- moved an estimated 85 to 89 million smartphones globally, according to analysts surveyed by The Wall Street Journal.  That's up roughly 20 percent versus Q2, when Samsung sold an estimated 71 million smartphones.  Samsung now looks much better positioned to potentially meeting its ambitious goal of selling 300 million smartphones globally (an average of 75 million per quarter) that it set for itself late last year.

After moving a reported 22 million units of its flagship Galaxy S4 in Q2, Samsung CEO JK Shin told reporters [translated] on Wednesday that sales had cracked the 40 million unit mark by the end of the quarter, indicating sales of about 18 millions GS4s in Q3.  Mr. Shin is quoted elsewhere as saying, "S4 sales are solid. It's just that some analysts had higher expectations and then they lowered them."

Samsung Galaxy S4 wide
The Galaxy S IV

Assuming nothing was lost in translation and GS4 unit shipments declined by 4 million units on a quarter-to-quarter basis, that's a decline of nearly 20 percent, which appears troubling.  But that number is also somewhat deceptive as Samsung also picked up a burst of Galaxy Note III sales following the device's Sept. 25 launch.

Samsung Galaxy Note 3

In its earnings report [PDF] Samsung writes, "high-end model shipments stayed at similar" while "total shipments [were] up QoQ [quarter to quarter, e.g. Q2 2013 v. Q3 2013] led by increased sales of mass-market models."

It's unclear how the shift from high-end to "mass market" (i.e. mid-to-budget range) smartphones will effect Samsung's bottom line, particularly given that sales are also growing, further complicating matters.  Nokia Oyj. (HEX:NOK1V) -- a veteran phonemaker whose devices division is now a Microsoft Corp. (MSFTsubsidiary has long asserted that it makes more money off feature phones than smartphones.  But other firms like Samsung and its archrival Apple, Inc. (AAPL) have seemingly suggested high-end models are where the greatest profits lie.

This discrepancy is likely because Samsung and Apple have traditionally charged more for their premium models.  For example an iPhone 5S with 16 GB of storage retailed for $649 USD overseas -- the same price as the 16 GB Galaxy "Nexus" S4 at launch.  By contrast Nokia's 2012 flagship device -- the Lumia 920 -- retailed for as little as $450 USD off contract at launch (although that's changing -- the industry-leading camera smartphone, the Nokia Lumia 1020 launched at $699 USD off contract).

Overall Samsung's smartphone unit cashed in with an operating profit of 6.28 trillion won ($6.3B USD) on sales of 35.2 trillion won ($33.1B USD).  This represents a 7 percent rise in profit and 3 percent rise in total sales revenue over Q2, indicating that the growth of low-end sales has more than offset the stall in high-end sales growth.

II. U.S. Outlook -- Apple v. Samsung, Still a Two-Horse Race

The smartphone battle in the U.S. market is still very much a two company race with Samsung and Apple trading blows in Q3.  Samsung ranked second, behind only Apple in a recent JD Power and Associates study examining customer satisfaction with their smartphones (Nokia notably beat all other Android OEMs, coming in third place). 

JD Power
Data collected by Counterpoint Research showed that in September Apple seized a commanding 39 percent lead in new device sales in the lucrative U.S. market, with Samsung in second place at 29 percent.  

Smartphone sales

But not so fast -- the same study shows Samsung winning by double digits in July and August as Apple fans waited for the iPhone 5C/5S.

Consumer Intelligence Research Partners (CIRP) reports that after falling behind Apple in U.S. sales in Q2, Samsung's strong July-August performance managed to trump Apple's powerful September showing, allowing it to regain the top spot in sales.  
Q3 2013
CIRP estimates that Samsung smartphones accounted for 38 percent of U.S. sales, while Apple devices took 34 percent of the market.  Together the two firms accounted for nearly 3 out of every 4 smartphones sold in the U.S.

III. Overseas Samsung Tramples Apple

But when looking at global sales, the picture Samsung's slow growth and maintenance of high-end sales looks remarkably better than the outlook for Apple.  While Apple has not released its sales numbers, Argus Insights has combined a number of analyst estimates along with its own data to compile a series of estimates of how many iPhones were sold globally in Q3 2013 (Apple's fiscal Q4 2013).  Its estimate pegs iPhone sales at 27 to 31 million units.

Argus Smartphone sales

In other words, Samsung outsold Apple roughly 3 to 1 globally in device units.

Argus says this is due to the fact that while the iPhone 5S was moderately well received, customers were very critical of the iPhone 5C which appeared to parrot Nokia's colorful body designs.  Argus writes:

This was the softest launch for Apple in years.  The 5C was a a global bust.  We recently started bringing in some data from Chinese consumers and was surprised to find that the buzz around the 5S was over 35 times higher than the 5C.  Surprisingly we did not see the iPhone 5 demand jump the way the iPhone 4S did after the iPhone 5 launch.  Overall buzz for Apple is falling everywhere but China.  This does not bode well for the next year and opens Apple to disruption by other competitors

The iPhone 5C was poorly received by customers
Indeed the buzz around the iPhone 5C seemed to be tepid at best. Apple has a tendency to surprise pessimistic analyses, but most of that trend was set in the Steve Jobs era -- under Tim Cook's leadership Apple has seen a disappointing stall in smartphone sales growth.

IV. Samsung's Other Products Showed Mixed Results

While all of Samsung's major units remained profitable, revenue from the display unit sagged 12 percent continue a trend from Q2.  Samsung currently owns a dominant market share in the industry's cutting edge technology OLED displays.  The display division's strong sales to smartphone manufacturers has somewhat insulated it from the TV market's decline, but the overall weakness is bad enough that it's dragging Samsung down with the rest of them.

Writes Bloomberg:

TV makers are reeling from sluggish demand, especially from China, while tougher competition is accelerating price reductions. Global shipments for liquid-crystal display TVs may fall 0.7 percent to 205.1 million units for this year, market researcher TrendForce said Aug. 22. The final figure may be as low as 202 million units, it said.

This revelation also adversely impacted Samsung's Consumer Electronics division, which sells both appliances and complete LCD TV sets.  That division dropped 18 percent.

On the other hand, booming sales of PC, tablet, and smartphone DRAM coupled with a lucrative contract to manufacture the Apple A7 aboard the iPhone 5S, saw Samsung's semiconductor unit to snag 2.06 trillion won ($1.94B USD) on sales of 9.74 trillion won ($9.17B USD) -- a 12 percent rise in revenue and 17 percent rise in profit.  DRAM and NAND flash storage (collectively referred to as "memory" by Samsung) accounted for 6.37 trillion won ($5.99B USD), or roughly two-thirds of Samsung's semiconductor revenue.

Samsung NAND flash
Samsung is now producing NAND on the 10-19 nm node. [Image Source: Samsung]

Aside from semiconductors, Samsung's strongest growth was in tablets -- which together with smartphones and enterprise products comprise Samsung's IT & Mobile Communications (IM) unit.  Samsung reports:

Shipments sharply increased due to enhanced product line-ups with Tab 3 expansion.

Samsung Galaxy Tab 3 10.1 in "Gold Brown"
The Galaxy Tab 3 7.0"/8.0"/10.1" debuted in June priced at $199/$299/$399 USD respectively.  Android in Q2 passed Apple in tablet market share on a platform basis, but Samsung -- the top Android tablet maker -- still trailed Apple in unit sales.  It is unclear how much that changed in Q3.

tablet market share
[Image Source: IDC via DazeInfo]

Apple introduced a refresh of its iPad Mini/iPad this week.  The 7.9"/9.7" iPad variants retail for $399/$499 USD, respectively.

A final note on the device side -- the Galaxy Gear, despite rampant advertising -- was a virtual nonfactor in Q3 earnings.  Samsung -- who reportedly is planning a Google Glass Explorer challenger -- has a lot of work to do to grow wearables into a high volume market.

V. Outlook -- Smartphones, Tablets, Intellectual Property

Samsung's smartphone growth continues to slow, but not as badly as Apple.  Microsoft's Nokia Devices, South Korea's  LG Electronics Inc. (KSC:066570) and a variety of Chinese OEMs -- including The Lenovo Group, Ltd. (HKG:0992), ZTE Corp. (SHE:000063), and Huawei Technologies Comp. (SHE:002502) -- are all slowly robbing Samsung of market share.

On the tablet front Samsung has the most growth potential.  With Apple's decision to price its 7-nch tablet $200 USD higher than Samsung's most recent model, it's essentially giving Samsung the majority of sales at this form factor.  Given its aggressive price, the only major concern for Samsung's tablet sales remains intellectual property concerns.

Apple has given Samsung the 7-inch market with its pricing decisions.
Recent patent decisions in the U.S. indicate a high likelihood that the majority of Samsung's product line is in violation of Apple's patent portfolio on multi-touch and other technologies.  Questionable nature of these patents aside, Samsung has hope yet of staving off Apple, though, in that it can release so-called workarounds that delay bans.

Apple patentSwipingApple Patent
Apple claims to "own" exclusive writes to "scroll", "swipe", and type with reliable accuracy on multi-touch displays.

Thus thanks to a combination of the inherently slow U.S. court system (two Apple v. Samsung lawsuits remain pending in federal court -- the GS4 one won't be tried until late 2014, at the earliest) and its workaround strategy, Samsung remains relatively safe in the U.S. -- for now.

VI. Outlook -- Semiconductor, R&D, and Report Card

Expect Q4 to be a key test as Samsung faces a refreshed Apple lineup and new models from HTC, Nokia, LG, and other players.  The Galaxy Round is Samsung first effort tipped to try to ward off those rising stars in Q4 2013.  It features a slightly rounded OLED screen, which gimmicks aside supposedly "hugs" the outline of your leg better when in your pocket.

But while smartphone and tablet market performance remains a key test in Q4, Samsung seems sure to post more record profits thanks to its semiconductor sales.

Basically Samsung is selling as much DRAM as it can manufacturer, but demand is still outpacing growth.  Thus in Q4 expect yet higher profits.  Of Samsung's 6 trillion won ($5.64B USD) in Q3 capital spending, roughly half ($2.5B USD) went to the semiconductor unit, with the chief goal of pumping up DRAM production.
Samsung DRAM
Samsung is cashing in, in the wake of a DRAM supply shortage [Source: regmedia]
From whence does this demand come?  The demand surge comes thanks to supply shortages at SK Hynix Inc. (KRX:000660), a top DRAM supplier.  A fire broke out last month at SK Hynix's DRAM line in Wuxi, China, a facility that accounts for 10 percent of the world's DRAM supply.  While production is expected to fully resume this month, the shutdown is expected to cut SK Hynix's output by 14 percent, and leave the overall market with a 7 percent deficit in components.  To Samsung, that news is the sweet sound of money.

So expect revenue, profit, and overall financials to rise to new records in Q4 -- even if Samsung was basically handed this golden opportunity via SK Hynix's misfortune.

Samsung's earnings report card for Q3 2013 is:
  • Revenue                                     B+
  • Profit                                          A-
  • Budget Phones:                           A-
  • Mid-to-Premium Smartphones:     B
  • Consumer Electronics                  C
  • Semiconduct/Display                   A
In other words, the world's largest electronics company is still the world's largest electronics company, but it didn't escape the quarter without showing signs of weakness.

Sources: Samsung [PDF], iNews [Google Translated], WSJ, Bloomberg

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RE: Faster than expected
By Tony Swash on 10/26/2013 9:24:49 AM , Rating: -1
But they don't CARE about market share! At least according to some here, and because Apple TOLD them they don't! LOL

But come on, get real, they DO care about market share, ALL companies do.

I do hope you never get to run your own business.

Company's are concerned about profitability, the balance sheet, sales and cashflow. It's quite possible to have massive market share and to make less profit, and to have a deteriorating balance sheet and cashflow. It's also obviously possible to have a small market share and have excellent profitability, balance sheet and cashflow. Company's want to increase sales but not if it leads to a significant deterioration in profitability, balance sheet and cashflow.

The problem with the market share comfort meme is that it conflates two issues. One is the health of Apple as a business and the other is the health of iOS as a platform.

Market share is often used as a proxy to measure both of those things.


Even a cursory glance at the mobile device and broader tech sectors shows that Apple out performs it's competitors as business easily, it makes more money and has a healthier balance sheet. Obviously that could deteriorate but so far I can find no metric or data from Apple's financial reports that show anything going wrong or moving firmly in a negative direction. As a business Apple seems astonishingly healthy and in a much better shape than the vast majority of large tech companies. Which CEO of which large tech company would refuse to swap their results for Apple's?

As for platform health, and based on an almost wholly imaginary memory of what happened during the PC era, there seems to be a belief amongst some that iOS must eventually suffer as a result of being a minority platform, that this must then translate into some form of impoverished or sub-standadrd experience for Apple's customers, and that this will then lead to a problem for Apple as a business. There is not a shred of evidence that any of that is happening, in fact that iOS is doing better than any other mobile platform as a platform, and Apple's device customers are happier than other company's customers.

This is an interesting article on the state of the tablet market (I disabled these as a links because of DT's stupid spam filter, just past them into your browser)

Do you think that when Tim Cook looks at this chart he get's worried :) s-OS-share.gif

RE: Faster than expected
By hrrmph on 10/26/2013 1:08:53 PM , Rating: 1
It's painfully obvious that Apple's marketing smoke and mirrors work primarily in the USA where the true cost of phones is hidden by the telecoms' own set of even harder to see through smoke and mirrors.

The rest of the world gets to see a clearer picture. Premium flagship smartphones cost between $750 and $1100 on 'Day 1.' You are paying for the miniaturization of the PC, so that you can carry it in your pocket.

So if you are going to pony up the full real cost of a phone like I do (even if I have to import it), and most of the rest of the world does already, then which do you really want?

The one that has medium high specs, is very high priced, has only 16GB of storage, and the battery cannot be replaced by the user?

Or the one that has the best-of-the-best specs, including flagship models with Dual-SIM slots, a Micro-SDXC slot that lets you bump the storage to 80GB, 96GB, or more on 'Day 1,' a tool-less removable back cover, and a user replaceable battery?

Even the Blackberry Z10 is an 80GB device with a user removable battery for $300 for an international unlocked version. Samsung has several devices in this market at $300 to $400 for an international unlocked version.

And Sammy's top-end S4 and Note 3 'DUOS' Dual-SIM versions absolutely kill the competition.

Even the relatively enlightened LG and Sony are struggling to offer something close to what Sammy does. Those two still refuse to offer the user replaceable battery, but they have some models with Micro-SDXC.

Nokia is finally rumored to be making a return to Micro-SD land, albeit sans a user removable battery.

I won't argue that Apple isn't a successful marketer and profiteer of smartphones. But, their smartphone business model reminds me of AOL circa 1990s: all hat, no cattle, and no shepherd.

Sammy needs a real competitor to keep them on their toes, just the same way that Intel needs ARM and needed AMD to keep them moving forward.

Apple's refusal to embrace expandable local storage and user removable batteries means they are limiting themselves to phones that you give to your children so that they won't hurt themselves.

I just can't see how that doesn't put Apple's smartphone business in the category of 'marketing supported house of cards.'

RE: Faster than expected
By Tony Swash on 10/26/13, Rating: -1
RE: Faster than expected
By retrospooty on 10/26/2013 2:04:11 PM , Rating: 3
I have to agree with you. Apple's success is largely marketing, but house of cards? No, its solid and stable. "marketing supported house of steel" would fit better.

Apple are doomed? No, Apple is boring as hell and their products are behind the competition, but they are not in any trouble at all.

RE: Faster than expected
By Monkey's Uncle on 10/26/2013 6:27:22 PM , Rating: 4
iPhones are for those that are less technically inclined that want a basic smartphone that simply works with no fussing around and don't really care about flexibility. You know the type - the ones that always get their computers loaded with malware while surfing thru porn, scratch their heads as to why their system is slowing down & go paying the nearest computer geek to fix it for them.

Apple is very, very good at finding and marketing to these folks.

My view on that? Great! Apple can have them! I am one of those that demand an endlessly flexible smartphone rather than a *little* black box.

RE: Faster than expected
By Tony Swash on 10/26/13, Rating: -1
RE: Faster than expected
By Monkey's Uncle on 10/26/2013 7:44:03 PM , Rating: 2
Really Tony? What high end pro apps are those?

As for "enterprise, medical, creative and educational sectors"... Again, you got something that documents this? Well, let's call this a given in the absence of evidence otherwise.

These sectors pretty much underscore the demographic that would be much more comfortable with less flexible, proprietary black box products. Apple's favorite marks - ones that don't look too closely at their technology or need much more than you package up for them. They are far less demanding of their technology than those in the various tech sectors -- the ones Apple has a tough time marketing their products to. Techies are inquisitive and like to push the envelope on their devices just because they can. Apple's devices does not cater to this crowd but Android's phone implementers welcome it.

Apple users train themselves to using their products the way Apple wants to do things and are really not interested in trying to change it. Android users on the other hand are the opposite - they would much rather make the device work the way they want it to work rather than conform.

While both kinds of people don't really understand the motivation of the folks on the other side of the tracks, there's plenty of room in the world for both and there are companies out there that are perfectly happy to cater those folks on their side of that fence.

RE: Faster than expected
By retrospooty on 10/26/13, Rating: -1
RE: Faster than expected
By Tony Swash on 10/27/13, Rating: -1
RE: Faster than expected
By retrospooty on 10/27/2013 9:19:27 AM , Rating: 2
You should be made to think with some objectivity, instead of your current company based thought process. There is a whole world going on outside of Apple.

RE: Faster than expected
By Cheesew1z69 on 10/27/2013 10:08:08 AM , Rating: 1
You should be made to think with some objectivity
Oh you, you are a funny one! I honestly think he is being paid by them to do this.

RE: Faster than expected
By retrospooty on 10/27/2013 10:19:17 AM , Rating: 2
Ya, but, Apple Apple Apple Apple.

RE: Faster than expected
By Kiffberet on 10/28/2013 8:50:44 AM , Rating: 2
You're partly correct.

Half the world's population are women. And in general, women couldn't give a flying f@ck about 'flexibility' (whatever that means on a smartphone)or technology.

Cater for them, and you've won the battle already.

As for men, try and capture a few percent of them and you're made.

RE: Faster than expected
By Any14Tee on 10/28/2013 8:00:26 PM , Rating: 3
Most women I know (ok a few, yes I'm f**k ugly) use the iphone, you know the type, I just need to whip out from my bussom my little shiny Applevibrator.

Oh chavs with money love iphone because they're too f**k stupid to possess a brain.
My gay friends I know from work have iphones, kept in their little dainty shiny bling cases, 'there so cutesy darling. But real men, I mean, grrrh real men, beer drinking buddies only use Andriods - iphones are for pu**ies.

I have an andriod because I am sensitive and require some understanding. I realise I have contributed absolutely nothing to this forum but thanks for listening.

RE: Faster than expected
By retrospooty on 10/28/2013 8:06:50 PM , Rating: 2
"Most women I know (ok a few, yes I'm f**k ugly) use the iphone, you know the type, I just need to whip out from my bussom my little shiny Applevibrator. Oh chavs with money love iphone because they're too f**k stupid to possess a brain. My gay friends I know from work have iphones, kept in their little dainty shiny bling cases, 'there so cutesy darling. But real men, I mean, grrrh real men, beer drinking buddies only use Andriods - iphones are for pu**ies."

<------------> distancing himself from this remark.

RE: Faster than expected
By Any14Tee on 10/28/2013 8:28:51 PM , Rating: 2

Uk time buddy must get some sleep. Thanks for keeping me entertained.

RE: Faster than expected
By retrospooty on 10/29/2013 12:16:13 PM , Rating: 2
hehehe... Right back at'cha.

RE: Faster than expected
By Roffles on 10/26/2013 3:30:47 PM , Rating: 2
Couldn't agree more. The "I charge my phone at night before I go to bed" and "I don't need expandable storage" arguments aren't really arguments. They are personal excuses and mean absolutely nothing. What you're really saying to me is, "I HAVE TO charge my phone at night before I go to bed" and "I HAVE TO live with the storage the device came with".

ARM processors are going to need at least one more generation of efficiency improvements before we stop worrying about the battery drain. And battery recharge and storage tech needs to evolve further as well. The fixed storage argument is always going to be a losing argument because the phone manufacturers such as Apple jump at this opportunity to overcharge you. $100 extra for another 16GB? $200 extra for another 48GB? Really??? Just because you can afford it doesn't mean you aren't getting ripped off. 64GB microSDXC cards are available for ~$50 today. I'm just glad Samsung gets it.

RE: Faster than expected
By testbug00 on 10/26/2013 5:22:19 PM , Rating: 2
Personally I don't mind the storage my 1020 came with, or the sub-par battery life.

Although, that is because I bought it for the camera first and foremost. Most people who buy an iPhone buy it first and foremost for iOS/the Apple ecosystem.

Would I like better battery life/more storage? CERTAINLY!

Do I feel the need for it? Not at all (mostly because it comes with 32GB base, if it came with 16GB base, I would be in desperate need of more)

RE: Faster than expected
By Monkey's Uncle on 10/26/2013 6:28:31 PM , Rating: 2
Yeah, 32GB is the sweet spot these days for smart phones.

RE: Faster than expected
By testbug00 on 10/26/2013 5:28:11 PM , Rating: 2
FWIW, Nokia supports Micro-SD cards on a lot of current phones (and they also have ones with Micro-SD card + dual SIM for quite a while) just not in the high end.

Nokia lumia 52x, 62x, 72x and 82x variants all have removable batteries and Micro SD cards.

The 625 has dual Sim variant as well.

RE: Faster than expected
By Cheesew1z69 on 10/26/2013 5:47:32 PM , Rating: 1
Blah Blah, that's all most people see when you type. I just wonder how much Apple pays you to troll all day, must be a pretty good living since you seem to devote so much time to it.

"So, I think the same thing of the music industry. They can't say that they're losing money, you know what I'm saying. They just probably don't have the same surplus that they had." -- Wu-Tang Clan founder RZA

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