back to article SamSUNK! Korean giant's electronics biz takes punch to the smartphone profits

Samsung's mobile phone businesses took a nasty tumble in 2014's fourth quarter, with profits at the company's electronics division falling by 27 per cent to 5.35 trillion won ($4.9bn). Samsung Electronics makes all manner of gadgetry, much used by other electronics companies in their own products. But attention has focussed on …

  1. Ossi

    A few pointers Samsung:

    1. People do care about how their phones look. Make an effort.

    2. Stop putting duplicates of Google services on the phones. It fills them with them crud and, let's face it,the Galaxy app store etc. are just never going to happen. Give in.

    3. At least give an impression that you support your old models, and get your updates out in a timely manner.

    4. You've got falling market share, and yet somehow you've convinced yourselves that you've got the market power to push people into Samsung-only ecosystems. You really haven't.

    Phones are pretty much commodity items these days, so you just have to do the basics really well.

    Have I missed anything?

  2. Truffle

    Yes :

    Apple profit margin per phone : 40%

    Samsung profit margin per phone : 7.5%

    There's the problem.

  3. Anonymous Coward
    Anonymous Coward

    Apple sell phones people want while Samsung sell expensive but now generic phones. Samsung have to spend huge sums on marketing to get people to buy their phones and buy market share but when you are down to 7.5% margin and facing ever increasing competition it's looking like it's unsustainable.

  4. Truffle

    Apple don't sell phones I want.

    Also, Apple US Marketing spend on iPhone in 2013: $351m

    Samsung US Marketing spend on ALL Samsung phone models in 2013 : $363m

    (Wall Street Journal).

  5. auburnman

    5. Pull out of the anorexia wars and stop trying to make the latest model thinner than Apple's. Make it light enough to hold but hefty enough you don't accidentally fling it when moving. Make up the weight with a BIGGER BATTERY.

  6. Captain Queeg

    @Truffle

    I doubt Apple care, they seem to make phones a lot of people do like.

    In the end, the measure of any business isn't marketing spend, cost base, market share or any metric beyond return on investment.In this world, rightly or wrongly profits and therefore ROI count. And actually in the long term Apple don't matter to Samsung,

    Sansung are dependent on Google, which is strategic suicide, just as any x86 system builder is dependent on Microsoft. The only possible outcome where manufacturers can't differentiate is a race to the bottom.

    The bottom line is IOS can do a few things Android can't, just as Android can do a few things IOS can't, but Samsung currently can do nothing HTC, Hauwei or any other Android licensee can't do - usually more cheaply.

    Samsung have done well to defy gravity for so long, but the pressure will always there in the market they're in.It's reaching the point where even Blackberry look like having a better proposition, not better than Android, but better than any single licensee.

  7. Truffle

    Re: @Truffle

    Always nice to read a reply that isnt attributed to AC.

    I agree with your points. Differentiation is key. Where Samsung have an opportunity that HTC, Hauwei et al. dont, is that they could, if they got their act together, create a decent eco-system.

    They already build many of the 'things' in the new 'internet of things' wave. TV's, Fridges, Washing machines, Microwaves etc etc. That's what they should be focussing on, create the automated home with your Samsung Galaxy at the very heart of it.

  8. Captain Queeg

    Re: @Truffle

    we're furiously agreeing here. :-)

    Tizen would be a bold move, but it's the only one that makes sense strategically as a phone only play. The other Strategic options are to get out of the phone business or as you say tie their Android handsets to the internet of things via a closed app/API.

  9. Anonymous Coward
    Anonymous Coward

    Didn't say ALL people and see:

    http://bgr.com/2013/11/28/samsung-2013-marketing-budget/

    http://www.ibtimes.co.uk/samsung-14bn-marketing-budget-biggest-history-525979

    "Samsung will have spent $14bn on marketing and promotion of its products in 2013 - more than Iceland's total GDP."

  10. Anonymous Coward
    Anonymous Coward

    Re: @Truffle

    Samsung have held onto Apples coat tails for too long selling expensive Android phones but now people realise Android = Google and instead of adding value a lot of the bloatware they install to try and differentiate actually makes it worse. At least with Apple you get a premium product and premium support even if a premium price - you get what you pay for.

  11. Anonymous Coward
    Anonymous Coward

    Re: @Truffle

    Problem is no-one would buy a Samsung fridge or washing machine if it did not work with any phone - imagine Samsung locks on your door you have to change if you ever changed your phone. They problem is Samsung phones are nothing special whereas Apple have always made a higher quality product and built up the eco system over time.

  12. johnnymotel

    That $351m ad spend produced several billions in revenue, whereas the $363m spend by Samsung produced what? revenue decline? Way to go Samsung.

  13. werdsmith Silver badge

    Nobody has really sustained a challenge to the iPhone yet. I don't think a lot of people realise that the charm of an iPhone is that it practically disappears as it should being the platform for what you want to do with it - hard to explain, but I'm trying to say that it is the supporting role, the chorus line and the lead actor is the apps that run on it. Whereas with all my Samsung phones it has been the device and the OS that seem to command attention all the time, not its useful purpose.

  14. Anonymous Coward
    Anonymous Coward

    Looking pretty terminal - profits in the phone division down 60%. Conversion to iPhone at a high, no real USP against either Apple or other (cheaper) Android makers and huge competition from literally everyone else. People do not seem to like the Samsung add-ons and would typically prefer a generic Android device which makes it even worse.

    Basically why should we buy your phones when they are more expensive, but no better, than many cheaper offerings. Oh and your support is pretty sucky.

    Samsung rushed out their watch and it's been a flop - Apple will release theirs and it looks to be a success. The iPhone 6+ is winning back customers who wanted a bigger screen but not a tablet and conversion rates to iPhone is at an all time high.

    So they can try and cut costs but you can only cut for a while and every cut will probably be matched by a desperate drop in price to try and buy sales. In the long run it does nothing if your margins are getting thinner.

  15. Dan 55 Silver badge

    Samsung have stuck with SD cards and removable batteries. Probably not huge selling points but if they were really cutting costs they'd have got rid of them by now. Maybe they should do more of a marketing effort about them.

    CyanogenMod support is above average, which is nice.

    They really need to cut a layer of fat off TouchWiz. Sony have managed to stick the Google apps out of the way on the homescreen yet comply with Play rules and make their own apps lightweight and fit into Android's style.

  16. Anonymous Coward
    Anonymous Coward

    The problem is the average or even most users do not need them. A lot of people use streaming services or just buy the amount of storage they need in the first place. Removable batteries are also niche - perhaps with a heavy user but then you can just carry a mains or battery charger. Anything removable is more likely to fail as well.

  17. DougS Silver badge

    SD cards & removable battery

    aren't the selling points that people posting on Apple vs Android threads seem to think. If Samsung was the only Android OEM that had those features they could be effectively marketed, but they're not so if Samsung tries selling on those features it'll be wasted money marketing against Android competition. iPhone buyers are self selected from the set of people who don't give a damn about those features so it is wasted there, too.

  18. Anonymous Coward
    Anonymous Coward

    Samsunk (to copy the headline) want people to think they are in some way premium Android - it's clearly not working and many would buy Nexus or other more generic devices. Their stuff is really no better than many of the cheaper Android devices, build quality is average, service is average (if I'm being generous).

    Basically all the Android makers are cutting each others throats on margins for volume in a race to zero while Apple build their ecosystem - with Android Google are the real winners here - it's basically a Google vs Apple fight. Samsung will soon be a component supplier (who have lost major contracts with Apple) while other Android makers take their market share.

  19. Jah

    Note 4 and Note Edge are premium devices. The little information we have suggests these did sell well otherwise Samsung's performance would have been even worst.

  20. PaulR79

    Didn't learn from HTC

    HTC were the kings of Android early in the cycle and had a massive period of growth. Then they started thinking they could do no wrong and pumped out new phones so frequently that there were phones competing with their own kin. I checked back and one year they released something like 23 phones! Samsung started doing the same and also seemed to have the same update policy where you might get one update to bring a device up to the current version which it should have had already but after that you're out of luck.

    In the case of HTC they're still trying to recover and the One M7 and M8 have done a lot to win praise but not the sort of customers they'd like. Hopefully if they continue with the series or a new flagship model they will do well again. Samsung, if they want to do better again will have to cut down on the models released and try to make something that isn't plastic for a change. If HTC can manage it then surely Samsung can with all their massive resources.

  21. Dan 55 Silver badge

    Re: Didn't learn from HTC

    I think only Nokia back in the day managed the trick of releasing loads of models every year, probably because there was enough differentiation between models. Nowadays you can replace your slab with a slab. No thanks, I'll keep my slab.

  22. VinceH Silver badge

    Re: Didn't learn from HTC

    "Nowadays you can replace your slab with a slab. No thanks, I'll keep my slab."

    Exactly this.

    My S3 is now well out of my original two year subsidy contract, so I'm well past the point where I could commit myself to another two years of paying for a new phone - but it does everything I need, and it's a comfortable size. So why bother? I'll stick with this phone until it breaks, then I'll look at the options.

  23. Jah

    Re: Didn't learn from HTC

    I blame Apple. I don't like slab but no one makes any other form factor now.

  24. Jah

    Re: Didn't learn from HTC

    The S3 was the last non Note device that was actually different, great little phone.

  25. Charlie Clark Silver badge

    Re: Didn't learn from HTC

    The S3 was the last non Note device that was actually different, great little phone.

    I really like my S4 Mini (with CM12 battery life is noticeably improved). The S2 and S3 were Samsung's boom devices. I think many people are happy to stick with them and go PAYG so they have more cash to spend on other things: lots of people are now spending more in a month on their phone than I do in a year.

    Wouldn't surprise me to see people sticking with Samsung on but stretching the replacement cycle.

  26. VinceH Silver badge

    Re: Didn't learn from HTC

    "The S3 was the last non Note device that was actually different, great little phone."

    Prezactly.

    I think it's fair to say (thanks to the size) that it's the first phone I've ever had where I can truly and honestly say it does everything I want. That has never been the case with any previous phone I've had.

    (There may have been other phones available for which I could have said that if I'd had them - but I didn't.)

  27. Steve Davies 3 Silver badge

    Apple does not bake their own silicon

    They use the likes of Samsung and TSMC to do it for them.

    Other than that, it seems that the writing is on the wall. If they don't manage a specucalar turn around their high end (and thus the bigger profit margin) devices will become a liability.

    At the bottom end, can they really compete with the likes of Lenovo and Xaoimi?

    It appears that they can't, Then IMHO it looke like Samsung Mobiles will become a niche player much like HTC etc

    Now if only the Google devices were more widely available.

  28. I ain't Spartacus Gold badge

    Re: Apple does not bake their own silicon

    Samsung managed to undercut Nokia at the low end - who'd fought of competition for years, by having a really well managed supply-chain. They do lots of their manufacturing in China, so I don't see why they shouldn't be able to continue to make something on the low margin end of things.

    My suspicion is that their problems are in the middle of the market (where they've got too many models), and at the top-end. In the mid-market they seem to have a lot of 'cut down' version of the top end stuff,that's still labelled Galaxy, but is £200-£300, while being worse than the sub £150 Lumias and stuff like the Moto G. At the top end, there's a lot of competition, and I suspect that although the list prices are really high, most are sold via the operators, and there's a lot of heavy discounting going on.

    They're also a bit of a user-interface mess. I got my friend to buy a Galaxy Note. Lovely phone, and he got it so he could take photos onside, then sketch his designs on them, and email those back to the office for quoting. He's a cabinet maker. It took me about 2 hours to set the bugger up for him. It was too complicated for him to do it, he even struggled to set up his iPhone.

    There were something like 160 settings in the main menu, and some of those had sub-menus. Plus there's setting up the main screen, short-cuts and widgets. Then getting the right apps. And it didn't help the Samsung duplicate almost all the Google apps. To be fair, some of theirs are better.

    Then to add to the fun, they did a software update that broke the S pen, which was the whole point of the phone. Although they hadn't actually broken it, so much as removed the link between the original image-handling app and the pen. The update introduced another 2 s-pen image apps, but only one of these two could now be launched autmomatically when the pen was used - and the origianl app was there, but you'd have to take the pen out, find the photo you wanted to annotate, save it on the phone, then open the original app, then use that to open the photo. So I just set him up with one of the new ones, and taught him how to use that.

    What this tells me is that they're a UI mess. There's probably no-one in overall charge of things, and it's all getting designed by committee or infighting. Remember Nokia guys? That didn't end well. It also suggest they're wasting loads of money on software development, given they're sometimes developing more than one app to compete with themselves. And yet their customers don't care if there's a Samsung calendar app, or a Google one. Just so long as they've got one on the phone. So they may as well save their money there. Or put their money where their mouth is and fork Android, or use Tizen.

  29. Captain Queeg

    Re: Apple does not bake their own silicon

    > Or put their money where their mouth is and fork Android, or use Tizen.

    Well said. Use the profits to differentiate. Change or die...

  30. Ramazan

    Re: Apple does not bake their own silicon

    > where they've got too many models

    the first thing Steve Jobs did when he'd returned to the Apple was to reduce number of Mac models to just four -- PowerBook, iBook, PowerMac and iMac. With phones you must only have 2 models -- PowerSamsungPhone and CheapSamsungPhone, and the Apple managed to do with just one, BTW.

    All that high-end, medium and low-end is utter bullshit. It's either high or low, there's no middle ground.

  31. big_D Silver badge

    Poor Samsung

    only $5 billion profit. I guess the shareholders will all be heading down to the soup kitchen for lunch then.

  32. Anonymous Coward
    Anonymous Coward

    Re: Poor Samsung

    It's relative isn't it - when the phone division which makes a lot of the profits is down 60% you might feel a bit nervous. Imagine you earned 100k a year and you were made to take a pay cut to 40k - sure you would still avoid the 'soup kitchen' (as you say) but it's still a bit drop.

  33. Bullseyed

    Not this again

    Samsung releases updates to the Galaxy S line between March and May each year, roughly. Their sales are down in the late fall/early winter because their flagship is 'old' by then. The Galaxy Note release in September keeps their supply chain rolling at a hibernation pace in the meantime. It is part of their strategy. It is going to happen every. single. year.

    It is not news, it is not cause for alarm. It does not mean Samsung is in trouble.

    Additionally, since Android devices last longer, most people do not feel the need to upgrade every year like Apple users do. Therefore, every other Galaxy S device sees significantly higher sales. The S5 was lower, so the S6 will be higher due to pent up demand.

    I myself will be looking to upgrade around June/July, 2 years after my S4. The frontrunner will be whatever Samsung phone comes out in the spring, although Moto has been doing good things lately and will be worth a look.

  34. s_wilson

    Re: Not this again

    "Additionally, since Android devices last longer, most people do not feel the need to upgrade every year like Apple users do."

    This statement is so frighteningly wrong, I wonder if you are intentionally trolling, or just trying to be a comic parody of yourself. The idea that Android devices "last longer" than the iPhone is so far off it makes my skull hurt.

  35. Medixstiff

    This is my number one gripe with my S3:

    2. Stop putting duplicates of Google services on the phones. It fills them with them crud and, let's face it,the Galaxy app store etc. are just never going to happen. Give in.

    Other than the Samsung account pestering me once a week to update and other stuff, the S3 is perfect for me size wise and speed wise. However it's an international version, so only has 1GB RAM, so Samsung won't be rolling out anything past Jelly Bean for it.

    I just hope Google does a new Nexus around the size of the S3, as the current Nexus 6 is too large. I use my S3 when riding to work, going to the gym etc. in an arm band, there's no way you could do that with a chunky Nexus 6.

POST COMMENT House rules

Not a member of The Register? Create a new account here.

  • Enter your comment

  • Add an icon

Anonymous cowards cannot choose their icon

Biting the hand that feeds IT © 1998–2018