After years of record profit growth, tech giant Samsung Electronics Co looks to be at a commercial crossroads as it searches for a new growth driver to counter slowing sales of its phenomenally successful smartphones.
Alarm bells have been sounding for a while over Samsung’s reliance on smartphone sales in increasingly mature markets such as Europe and the US, and increasingly competitive emerging markets like China.
The world’s largest smartphone maker has a diverse product line ranging from memory chips to home appliances, but more than half its profits are generated by mobile devices.
Last week, Samsung said it was on track for a second consecutive quarter of year-on-year profit decline, and its stock price fell nearly 10 percent last year — the first annual drop in five years.
Friday saw the global roll-out of the latest version of the flagship Galaxy series smartphone, the S5, whose performance will be closely watched.
While reviews have rated the S5 a top-class product, they note that it offers little in the way of real innovation that would set it apart from previous versions and models offered by competitors such as Apple Inc.
“I think the market really needs a new growth driver at this point,” said Lee Min-hee, an analyst at IM Investment and Securities, noting that the high-end smartphone market “is already saturated.”
“So it’s inevitable to shift to mid-and low-end markets where margins are tighter and competition is even more fierce,” he said. “Samsung did well this year on cutting costs — including marketing spending, but these are only defensive measures to make up for slowing sales and to maintain profits, not a proactive move to innovate.”
Lee said that Samsung and South Korea’s other export powerhouses are also feeling some strain from the strength of the won currency, which last week hit its highest point against the US dollar since August 2008.
Samsung said sharp currency swings cost it 700 billion won (US$676 million) of lost revenue in the fourth quarter of last year, when its operating profit came to 8.3 trillion won — a 6 percent decline on the previous year. And there appears to be a general consensus that smartphone evolution has hit a barrier that will only allow incremental improvements on existing design and technology, rather than market-changing re-invention.
Many see wearable devices as the “next big thing.” IT research and advisory specialists Gartner Inc predicts wearable technology will emerge as a US$10 billion dollar industry by as early as 2016.
Samsung’s first Internet-enabled smartwatch, introduced in September last year, was given a lukewarm reception by consumers who disliked its chunky design. A second edition, the Gear 2, was launched in February.
“I believe the next big thing will be Internet of Things [IOT] in which all household appliances, electronic devices and even cars are connected through the network,” Lee said. “And the first step towards the era of the IOT is wearable devices.”
Samsung certainly has the financial clout to invest heavily in new technologies with a net cash balance of more than US$50 billion.
However, the company is already making margin concessions with the S5, launching it at a slightly lower price than its predecessor the S4 and throwing in a premium software bundle estimated at more than US$500.
Nevertheless, Greg Roh at HMC Investment and Securities said they had had cut their forecast for Galaxy S5 shipments for the year to 44 million, from the previous estimate of 46 million.
“We also slashed our forecast for Samsung’s second-quarter sales and operating profits by 1.5 percent and 2.7 percent, respectively,” Roh said.
“It’s true that Samsung is good at producing profits despite slowing smartphone growth, but for now it looks inevitable that the operating profit falls this year,” he added.
Adding to Samsung’s headaches is a continuing series of patent-focused legal battles with arch-rival Apple.
A fresh trial opened in the US earlier this month, with Apple vowing to prove that Samsung flagrantly copied iPhone features and should pay more than US$2 billion in damages.
Stephen Garrett, a 27-year-old graduate student, always thought he would study in China, but first the country’s restrictive COVID-19 policies made it nearly impossible and now he has other concerns. The cost is one deterrent, but Garrett is more worried about restrictions on academic freedom and the personal risk of being stranded in China. He is not alone. Only about 700 American students are studying at Chinese universities, down from a peak of nearly 25,000 a decade ago, while there are nearly 300,000 Chinese students at US schools. Some young Americans are discouraged from investing their time in China by what they see
MAJOR DROP: CEO Tim Cook, who is visiting Hanoi, pledged the firm was committed to Vietnam after its smartphone shipments declined 9.6% annually in the first quarter Apple Inc yesterday said it would increase spending on suppliers in Vietnam, a key production hub, as CEO Tim Cook arrived in the country for a two-day visit. The iPhone maker announced the news in a statement on its Web site, but gave no details of how much it would spend or where the money would go. Cook is expected to meet programmers, content creators and students during his visit, online newspaper VnExpress reported. The visit comes as US President Joe Biden’s administration seeks to ramp up Vietnam’s role in the global tech supply chain to reduce the US’ dependence on China. Images on
Taiwan Transport and Storage Corp (TTS, 台灣通運倉儲) yesterday unveiled its first electric tractor unit — manufactured by Volvo Trucks — in a ceremony in Taipei, and said the unit would soon be used to transport cement produced by Taiwan Cement Corp (TCC, 台灣水泥). Both TTS and TCC belong to TCC International Holdings Ltd (台泥國際集團). With the electric tractor unit, the Taipei-based cement firm would become the first in Taiwan to use electric vehicles to transport construction materials. TTS chairman Koo Kung-yi (辜公怡), Volvo Trucks vice president of sales and marketing Johan Selven, TCC president Roman Cheng (程耀輝) and Taikoo Motors Group
New apartments in Taiwan’s major cities are getting smaller, while old apartments are increasingly occupied by older people, many of whom live alone, government data showed. The phenomenon has to do with sharpening unaffordable property prices and an aging population, property brokers said. Apartments with one bedroom that are two years old or older have gained a noticeable presence in the nation’s six special municipalities as well as Hsinchu county and city in the past five years, Evertrust Rehouse Co (永慶房產集團) found, citing data from the government’s real-price transaction platform. In Taipei, apartments with one bedroom accounted for 19 percent of deals last