When the Suwon, South Korea based Samsung released only a bare-bones forecast in advance of a full quarterly earnings report later in the month, it provided no reasons for the expected decline. But analysts said softness in smartphones, which account for more than half of Samsung’s earnings, was probably a big reason.
Samsung, the world’s largest producer of smartphone is making efforts at CES 2014 to capture new market share in the tablets, which were part of the pre-event press presentations.
Samsung still has a roughly one-third share of global smartphone sales, but it faces new challenges to its dominance. At the low end, a number of Chinese companies are offering phones with similar features at a lower price. More worrying for investors are new signs of vulnerability in premium-price phones, which account for the vast majority of the profit in the business.
Samsung’s competitive rival, Apple is now making new gains. In November, it sold 65 percent of the smartphones priced at $400 or more worldwide, up from 35 percent a year earlier, according to Counterpoint Technology Market Research. And that was before Apple added China Mobile, the world’s largest network operator, as an iPhone partner, with sales set to begin this month.
In the same period, Samsung’s share of the premium market fell to 21 percent from 40 percent, according to Counterpoint. Tom Kang, an analyst at Counterpoint, reports that Samsung is being squeezed out of the premium price smartphone market.
A year ago, Samsung had two strong entrants in this category, the Galaxy S3 smartphone and the Note 2, a so-called phablet, or cross between a phone and a tablet computer. But the current, the Galaxy S4, has been a relative disappointment, leaving a new phablet, the Note 3, to carry the load. Samsung cut prices of the smartphones down to $290 from $320 a year earlier for an average, according to according to analysts at Sanford C. Bernstein.
Samsung is expected to introduce a new flagship phone to succeed the Galaxy S4 this winter. It is experimenting with new kinds of handsets, including ones with curved screens, and doing research on devices with flexible displays.
This upcoming entry along with new products shown at the CES 2014 show in Las Vegas Jan 7-10 includes the Ultra HD TV with curve screen at 77 in to 105 in. and new sizes in tablets, yet to be priced.
Byun Han-joon, an analyst at KB Investment and Securities says the company must have new products to bring back earnings.
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