Fresh off Apple Inc’s record earnings announcement, Samsung Corp reported an operating profit of Won5.3 trillion, a massive 36% decline compared to the last quarter of 2013. The shocking decline is a wake-up call for Samsung to refresh and re-evaluate its product line-up, especially its mobile division.
Same old Galaxy
Samsung sent out an invite to its Unpacked event on 1 March, just one day before the start of Mobile World Congress 2015 (MWC 2015). It is widely acknowledged that Samsung will unveil its flagship Galaxy S6 smartphone. The new smartphone is under tremendous pressure in view of Samsung’s whopping decline in revenues and profits. Sales of its predecessors, the Galaxy S5 and a generation before, the Galaxy S4, failed to inspire and showcase Samsung as an innovator. Samsung’s flagship models had been just simple line extension of the Galaxy S model that was launched way back in 2010. Samsung had been content to just increase the screen size, screen resolution and adding gimmick features rather than pushing the boundary of technological limits. Euromonitor International warned Samsung against complacency way back in July 2013.
Apple launched two flagship models, the iPhone 6 and iPhone 6+ in September 2014. The earlier generation of iPhones had a measly screen size of 4” display, whereas flagship models of competitors were 5” and above. The new iPhone 6 and iPhone 6+ eliminated the screen advantage of its competitors and the new models were aimed squarely at Samsung’s flagship models, Galaxy S5 and Note 4. The new iPhones were massively popular with consumers and Apple’s record breaking financial results for the last quarter of 2014 was the best evidence of Apple’s success. Ominously for Samsung, Apple will be launching its Apple Watch (autonomous wearable electronics) in 2015, piling additional pressure on Samsung’s lacklustre Galaxy Gear sales. The autonomous wearable electronics category is projected to be worth US$3 billion in 2015, with threefold growth in 2016.
Sales of smartphones are projected to exceed 1.3 million units in 2015, with feature phone upgraders in emerging markets fuelling the growth. The smartphones category has evolved and the volume driver is no longer flagship models. At the high end of flagship smartphones, Apple is gaining new customers, who were previously Android owners, with its new range, whereas Samsung is also under attack from other manufacturers. Companies like XiaoMi, Lenovo and Micromax have proved to be more than capable in launching smartphones at extremely competitive price points. At the MWC 2015, Samsung not only has to entice jaded consumers with a revolutionary Galaxy S6 to compete with Apple but also an attractive product line-up that can woo feature phone upgraders.
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