Lack of innovation may lead to a drop in Samsung’s revenue for Q2
The giant electronics manufacturer Samsung Electronics Co. Ltd. is living through an unfortunate period, with profit growth for Q2 2018 expected to be the smallest in over a year. The Galaxy smartphones, which belong to the premium product line, have not seen much sales success recently, and even undermined the excellent streak that the chip sector of the company business has been seeing.
A further decrease in smartphone sales is expected in Q3, after the previous quarter saw a 2% decrease due to the growing popularity of other, more affordable models from up-and-coming Chinese competitors like Xiaomi.
iPhone X’s success in the international electronics market has led to questions about Samsung’s lead over Apple. Furthering Samsung’s drop in sales is the apparent lack of technological innovation in the new models of the Korean manufacturer. Experts agree that Samsung phones are losing popularity due to the price / value ratio being less than attractive. There are more and more options of getting far more interesting models for less.
The last Galaxy S9 flagship model by Samsung, which entered the market in early spring, does have notable software features, but is less than impressive in innovative technological solutions. Unfortunately, in its first year of sales it will sell less than the previous Galaxy model – the S8, which launched in 2017.
Apparently, this will have an effect on the Q2 profit growth figures that Samsung is slated to announce on Friday.
14.9 trillion won, or USD 13.3 is the Q2 expected estimate, which is an impressive 5.7% up from the same period last year, yet shows a drop from Q1 2018, which set a record of 15.6 trillion won.
It hasn’t been the best year for Samsung, whose shares dropped 9% since the beginning of the year. The company will issue guidance for Q2 2018 on July 6, projecting revenue and operating profit numbers. A more precise and detailed report will be ready in late July.
COMPETITORS FROM CHINA
According to experts, Samsung distributes its phones via traditional distribution routes, while its rivals have mean employing online sales as the primary route that allows them to offer reasonable prices on top-quality devices.
There’s some skepticism among the investors in regard to Samsung’s much awaited OLED-screen foldable phones. They will certainly be stylish enough, that much is clear, yet there’s doubt about the level of innovation. There’s just a month left until the unveiling – the new and improved Galaxy Note will be presented in NYC on August 9.
It’s Samsung’s turn to demonstrate something new, changing the pattern, an investor and industry expert shared. Otherwise, the Chinese competitors will gain an even greater lead on the Korean conglomerate.
The most immense smartphone market in the world is China, and Samsung’s market share is naturally low there due to the presence of local manufacturers, amounting to just 1.3% in Q1, according to Strategy Analytics. Meanwhile, Huawei’s share constitutes 22.5%.
Huawei, Oppo, Vivo and Xiaomi, China’s top manufacturers, are the natural leaders in China, ad Apple is the only non-Chinese firm in the top five positions.
Xiaomi’s replacing Samsung as the market leader in India as well in 2017, and continues to be in the first spot in 2018 on the second biggest market in the world.
This is not to say that Samsung’s position as the major smartphone manufacturer in the world has been challenged – it still sells about 80 million devices every quarter, and covers over 1/5 of the international market.
Samsung’s chip business is far more successful than the smartphone segment, bringing in approximately ¾ of the operating profit and 1/3 of the company’s revenue.
The operating profit in this lucrative segment is expected to grow further, about 50% to a record-setting trillion won in Q2 compared to the prior year, as there is an increasingly huge demand for chips on the part of gaming PCs, servers and cryptocurrency mining equipment.Source