Samsung Mobile smartphone profits decline; unit sales to shrink for 2015

Posted:
in iPhone edited October 2015
Samsung Electronics' IT & Mobile unit reported shipment growth in phones but noted that its "profitability declined" due to the fire sale pricing incurred to boost sales of its disappointing Galaxy S6, along with a lower handset Average Selling Price "due to increased sales of mid- to low-end products."


Source: Samsung


Samsung Mobile profits rose to 2.40 trillion won (US $2.09B) from 1.75 trillion (US $1.53B) in the year ago quarter, but remain far below the 6.28 trillion won (US $5.49B) in quarterly profits the group reported back in the middle of 2013, when pundits and marketing groups such as Strategy Analytics were suggesting (albeit inaccurately) that Samsung had surpassed Apple in handset profits.

While Samsung has seen its phone and tablet profits implode over the past year, Apple just reported quarterly profits of $11.1 billion, twice that of Samsung Mobile at peak-Galaxy and five times what it is now earning.

Apple's blockbuster results come despite the export handicap of a stronger U.S. dollar, while Samsung's profit performance has been exaggerated due to a weak Korean Won. Samsung credited currency markets for adding 800 billion won (US $700 million) to its stated results.

In addition to building phones, tablets, music players and other products comparable to Apple's operations, the Samsung Mobile division also sells networking equipment, which contributed to offset the decline in profitability of its beleaguered smartphone business. Network profits "improved QoQ due to overseas carriers' LTE network expansion," the company stated in its earnings report.

A report by CNBC claimed that the profitability in Samsung's mobile division was "lifted by sales of the Galaxy Note 5 as well as new lower-end products," but that's not what the company itself reported.

Samsung said its unit shipment growth had been driven by the release of new models, but explicitly noted both a "slight increase in revenue while profitability declined," and a "lower ASP due to a sales mix of lower-end smartphones."

Android Central also incorrectly reported that Samsung's mobile growth was "largely driven by a significant increase in smartphone shipments from the Galaxy Note 5 and Galaxy S6 edge+," when in reality Samsung only credited networking gear sales with improving its Mobile division profits, adding that tablet demand was weak and that earnings from tablets remained flat.

Looking forward, Samsung expects its smartphone and tablet unit sales to grow, "while competition [is expected] to intensify under strong seasonality," without commenting on its expected handset profits.

Earlier this month, analysts told the Wall Street Journal that Samsung's chip division was likely responsible for about half of the company's profits this quarter; Samsung has now reported that 63 percent of its total profits came from its Device Solutions group, which includes semiconductor chips and display components.

Apple is a major customer of Samsung's Device Solutions group, but a direct competitor of Samsung Mobile, which it has accused of shamelessly copying its work after suffering a "crisis of design" in response to Apple's iPhone.

Two years ago, Samsung Mobile was the most profitable segment within Samsung Electronics, contributing 65.9 percent of its total profits. The group now accounts for just 32.4 percent of its profits, a dramatic reversal directly attributed to the implosion of higher-end Galaxy products wrought by the launch of iPhone 6.

CNBC did note that "despite a major overhaul of its product lineup, researcher TrendForce says Samsung's smartphone shipments will shrink for the first time in 2015 due to competition from Apple Inc in the high-end market and Chinese rivals in the low end."
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Comments

  • Reply 1 of 54
    Couldn't be happening to a more deserving company. Die already, Samsung.
  • Reply 2 of 54
    It looks like the company is reaping the rewards of its business practices.
  • Reply 3 of 54
    Ah... but Sammy will bounce back with their new, enormous 18.4-inch Galaxy View tablet! Size, especially inches, matters to us guys! /s
  • Reply 5 of 54
    Ha, but wait!
    You all apparently forgot about new Note6, Galaxy S7, Galaxy S7 Edge, Galaxy S7 Corner, Galaxy S7 Active, Galaxy S7 inactive, Galaxy S7 Uber, Galaxy S7 Flat and other devices from a "small" line of top-tier devices that are yet to come. They will definitely be iPhone killers.....just like S5 was, and Note4, and S6...

    Ugh...and Samsung can't even understand, why it is happening to it... They are clueless, yet they continue doing the same thing over and over again.. Makes you recall what Einsteins said about insanity.
  • Reply 6 of 54
    Samsung cannot compete with Apple, for sure. But it is the second best mobile manufacturer, by far, with billions in profits. Definitely not a failure.
  • Reply 7 of 54
    Ha, but wait!
    You all apparently forgot about new Note6, Galaxy S7, Galaxy S7 Edge, Galaxy S7 Corner, Galaxy S7 Active, Galaxy S7 inactive, Galaxy S7 Uber, Galaxy S7 Flat and other devices from a "small" line of top-tier devices that are yet to come. They will definitely be iPhone killers.....just like S5 was, and Note4, and S6...

    Ugh...and Samsung can't even understand, why it is happening to it... They are clueless, yet they continue doing the same thing over and over again.. Makes you recall what Einsteins said about insanity.

    But wait... There is more.

    CNBC will proclaim the next set of Samsung devices...
    Are showing Samsung's innovative abilities to outclass Apple
    Are setting a new standard of quality that Apple must beat to remain relevant
    Are keeping Samsung ahead of Apple for the next six to nine months
    Have taken 3D Force Touch above and beyond Apple's implementation of the technology
    Have taken fingerprint sensor technology leadership away from Apple
    Will increase shipments throughout 2016
    Will help Samsung remain the worldwide leader in phone shipments

    Go, Samsung! Go!!
  • Reply 8 of 54
    Time for Apple to stop using Samsung chip production.
    That will hit them where it hurts most.
  • Reply 9 of 54
    19831983 Posts: 1,158member
    "While Samsung has seen its phone and tablet profits implode over the past year, Apple just reported quarterly profits of $11.1 billion, twice that of Samsung Mobile at peak-Galaxy and five times what it is now earning"

    Gloat won't you...????
  • Reply 10 of 54
    matrix07matrix07 Posts: 1,993member

    Doesn't look like Samsung phones have effect on iPhone sale much.

  • Reply 11 of 54
    So when Xiaomi decides it wants more than 5.6% of the world market and red lights a relabelling campaign of it's top class smartphones so [email protected] and other large carriers can complete with Apple (and at the same time sell Apple's lineup), we may see their % double rapidly. There is still room for smartphones that cost less in most markets/income brackets but dumbing down and buying Samsung hasn't worked so far. Keeping a smartphone "smart" and stylish is what smaller companies like Xiaomi does so well. And fills a need for a feature rich, less expensive phone.
  • Reply 12 of 54
    So US $2.09B minus the $700 Million for currency fluctuation leaves $1.39B which is less than last years profit by $0.14B but everyone is reporting a profit increase impressive.
    IanMC2
  • Reply 13 of 54
    Samsungs business model can not be sustained. I have alway believed this and know it shows.
    Apple's success is building phone and improving it over two years then build a new one, but keep selling the first one for 4 years to maximize profit while also hitting lower price points. When you have a full page of models to maintain you attention is divided.
  • Reply 14 of 54
    entropysentropys Posts: 1,617member
    cfugle wrote: »
    So when Xiaomi decides it wants more than 5.6% of the world market and red lights a relabelling campaign of it's top class smartphones so [email protected] and other large carriers can complete with Apple (and at the same time sell Apple's lineup), we may see their % double rapidly. There is still room for smartphones that cost less in most markets/income brackets but dumbing down and buying Samsung hasn't worked so far. Keeping a smartphone "smart" and stylish is what smaller companies like Xiaomi does so well. And fills a need for a feature rich, less expensive phone.
    that would trigger the mother of all litigation, that would make the Samsung- Apple war just a small territorial incursion. If you were a carrier you would not want to go there.
  • Reply 15 of 54
    lkrupplkrupp Posts: 6,783member
    Quote:

    Originally Posted by SpamSandwich View Post



    Couldn't be happening to a more deserving company. Die already, Samsung.



    Not dying. Something worse than dying. Becoming an also-ran in the mid-to-low end market.

  • Reply 16 of 54
    matrix07 wrote: »
    Doesn't look like Samsung phones have effect on iPhone sale much.

    And from reports coming in from South Korea, that includes even within that country too.

    Meanwhile, in North Korea the Arirang, as the locally manufactured sorta-smart phone is called, is out-selling all other brands, even Samsung. Production, in a factory toured by Kim Jong Phoney as he proudly announced the shipment of two-million units in the last two years... barely keeping up with demand.

    700
  • Reply 17 of 54
    boredumbboredumb Posts: 1,414member

    So...it turns out that derivative, second-tier junk does sell!

    ...It just doesn't make much money - who knew?

    Samsung teaches us yet another elusive business principle...

    we have so much to thank them for...:no: 

    IanMC2
  • Reply 18 of 54
    jungmarkjungmark Posts: 6,658member
    So much for Sammy being the next big thing. It's more like the next big disappointment.
  • Reply 19 of 54
    nolamacguynolamacguy Posts: 4,758member
    cfugle wrote: »
    So when Xiaomi decides it wants more than 5.6% of the world market and red lights a relabelling campaign of it's top class smartphones so [email protected] and other large carriers can complete with Apple (and at the same time sell Apple's lineup), we may see their % double rapidly. There is still room for smartphones that cost less in most markets/income brackets but dumbing down and buying Samsung hasn't worked so far. Keeping a smartphone "smart" and stylish is what smaller companies like Xiaomi does so well. And fills a need for a feature rich, less expensive phone.

    you do realize Xiaomi can only do what you claim because they operate in a region that doesnt enforce IP laws, right? that they stole all their R&D and design from apple, which is why they dont operate in the united states, right?
  • Reply 20 of 54
    MacProMacPro Posts: 18,142member
    The whole Google concept of copying the Microsoft model, as in steal Apple's IP and distribute through anyone that wants it, failed to realize that the Microsoft model isn't exactly working these days. The Mobile industry is running through the time line at 10x the rate as the PC market did so it makes sense that the model would end this way round about now.
    IanMC2
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