Samsung Losing Smartphone Sales Leads In Major Markets

Will the S5 be Samsung's last non-premium
flagship phone?
We knew from Samsung's recent quarterly reporting that the company was undergoing a bit of downward re-alignment of its smartphone sales numbers (i.e. sales are tanking) but news in recent days shows the news is probably worse than first feared but also better than it could be.

First news broke that Xaomi had outsold Samsung in China to take number one sales spot, then that Miramax had done the same in India. That's important because these two markets are outgrowing the rest of the world by some measure. Anyone focusing on pure volume to sustain a business model can't afford to be losing out here. With close to two-fifths of the world population centred here and limited smartphone penetration compared to the rest of the world, sales growth is the name of the game.

On the flip side of the coin these two markets are going to be seeing growth mostly at the entry level of the smartphone field - low cost phones equal lower profit margins. For Samsung these markets mean lots of phones sold for next to nothing with tiny profit margins. In the developed world Samsung sells a far greater proportion of its mid-range and higher end phones. The result is a mucher higher average selling price and greater retained income.

Samsung has an opportunity to look at the long game here. In the same way that it stole the thunder of Apple and Nokia to become the largest seller of phones worldwide, so it is seeing its volumes carved up by smaller hungrier players able to better target local markets. Does Samsung need to sell tens of millions of phones for barely any return or is it better served moving out of the volume market and trying to position itself as the premium Android brand?

Leaks of the premium Galaxy S5 version suggest that there is a recognition that moving in the latter direction is the more sensible thing to do.

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