Samsung warns it will have a tough year in 2016

Posted:
in AAPL Investors
While a cadre of Apple watchers have predicted doom for the iPhone maker this year, Samsung has actually warned that it faces stronger than predicted competition this year and that it expects 2016 to be a particularly difficult business environment. That's due in large part to fierce competition and reduced business from its number one competitor and supplier: Apple.




According to a report by Se Young Lee for Reuters, Samsung's chief executive Kwon Oh-hyun informed employees in a New Year's announcement that growth would remain low for the company this year as it navigated increased risks in emerging markets.

"Kwon also warned of greater competition in the firm's main businesses," the report noted, "without offering detailed financial forecasts."

The company has already warned that its profits in the December quarter will be lower than its September quarter. It now hopes to brace investors for the impact of its official earnings releases later this month by issuing "earnings guidance" this Friday for the quarter that just ended.

Samsung & Apple



Samsung is Apple's largest rival in smartphones and tablet production, and also one of its closest partners as a leading chip manufacturer and component supplier.


Samsung began "slavishly copying" Apple five years ago


Throughout 2015, Apple's iPhone 6 models eviscerated the sales of Samsung's Galaxy S and Note models, slashing the Korean giant's revenues and causing its profits to implode. While Samsung continues to build the most phones, most of these are low end models that contribute little to overall profitability.

Of the vast numbers of Android phones sold (including Samsung's own Galaxy flagships), only a minority feature fast, high-end 64-bit processors with advanced GPUs and high resolution, high quality displays. Plummeting sales of its high end Galaxy phones has caused Samsung to rely more upon sales of chips, displays and other components rather than making most of its profits from finished goods such as smartphones and tablets.

While Samsung rather clearly reported its predicament in October, a variety of media sources, including Android fan blogs and even CNBC managed to fumble their own reports, incorrectly stating that Galaxy S6 and Note 5 sales were driving growth and lifting profits when the company itself clearly stated that its "profitability declined" and that it faced a "lower ASP due to a sales mix of lower-end smartphones."

Peak Samsung?



This year however, Apple is reportedly pulling its entire A10 generation of chip production from Samsung's fabs and making TSMC its sole supplier.

That move not only erases considerable revenue from Samsung's LSI, but also threatens to leave its state of the art fabs underutilized, either with nothing to build or reconfigured to manufacture less valuable components. With Samsung in an increasingly desperate condition, Apple faces the weakest significant competition it ever has in the smartphone and tablet markets

That could have a devastating impact on Samsung's ability to invest billions of dollars for continued innovation in chip fabrication, while also funding the development of advanced production of chips in Taiwan, Korea's primary fabrication rival.

With Samsung in an increasingly desperate condition, Apple faces the weakest significant competition it ever has in the smartphone and tablet markets. It also opens the door for Apple to negotiate new component deals with Samsung at less favorable rates, further making Apple 2016 easier while complicating things for Samsung, the company that builds more than half of the world's Android phones.
brakken
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Comments

  • Reply 1 of 32
    horvatichorvatic Posts: 128member
    Who cares! The copycat had its day and took advantage of it. Now that they can't really copy anymore suddenly they have nothing and sales are dropping.
    They couldn't even make there own OS work and have had to stick with the 99% malware driven Android which is another reason there sales are dropping like dead flies.
    magman1979jbdragonsockrolidlito_lupenatallest skillostkiwi
  • Reply 2 of 32
    sflocalsflocal Posts: 4,612member
    Good.  ScamScum deserves every little bit of pain it receives.  I have zero sympathy for them.
    magman1979jbdragonsockrolidlito_lupenaawilliams87
  • Reply 3 of 32
    MacProMacPro Posts: 18,216member
    Image what AAPL price would do if Apple said this!
    jbdragoncornchipnolamacguycali
  • Reply 4 of 32
    noelosnoelos Posts: 103member
    Apple is Samsung's number one supplier? First I've heard of it!
    kibitzer
  • Reply 5 of 32
    radarthekatradarthekat Posts: 3,040moderator
    In warning of a slowdown in its business in 2016, due to a slowing global economy and intensifying competition in smartphones, televisions and memory chips, the head of Samsung Electronics said that in order to make sure their customers stick with their products, the company needs to change from a focus on hardware to software.

    Just exactly what Apple did years ago and exactly the reason Apple takes most of the profits out of the smartphone industry.  Samsung has already found, through its slow-to-get-out-of-the-gate Tizen software initiative that replicating the iOS or even Android ecosystem this late in the game is near impossible.  Just ask Microsoft, whose smartphones remain a niche even with a fully capable OS that spans PCs and Tablets as well as smartphones.  If any company should have been capable of becoming a viable third player, MSFT was it, and it's time has passed as well in that effort.

    Samsung has a chance of being successful in the television space by continuing to add software capabilities to its connected TVs, which are already some of the best big screen tech available, but televisions are a low margin business where it's all to easy to separate the intelligence and ecosystem into a separate box (ala AppleTV).  There's nothing inherent about a television that gives it an advantage to have the smarts built in.  It's not like people have to carry them around; the thing sits in place for its entire life, moved only when you move houses, and there's the advantage to separating the smarts into a separately upgrade able box.  Apple has done it right and that's why they will never sell the full screens.  The margins suck for the screen hardware.  The profits are in the on-going delivery of content, which is managed by the separate controller box (AppleTV, Roku, etc).  That's where the battle exists in the TV space.  Poor, sad, Samsung, always fighting yesterday's wars.
    chiafudent
  • Reply 6 of 32
    Just a small correction - I think it should say: "number one competitor and CUSTOMER: Apple"?

    I tried a Galaxy S6 in the store the other day and had the following thoughts:

    1) it is a very slick, smooth and attractive phone
    2) but it is weaker than the iPhone on some fronts.  not hugely but noticeably.  it's also ahead on some others.
    3) but, given true pricing (taking into account resale value) and (likely related to pricing, but not entirely) smaller market share
    4) Apple's remarkable and idiosyncratic focus on a handful of products (which, because they all leverage each other, might be counted as few as 4 meaningful products) means that the normal advantages of economies of scale are exaggerated (in the positive sense, not negative) and thus must be severely painful to Samsung.   Against a normal competitor, a nearly-as-good product should capture similar market shares and profit (or even more with good marketing).  Here,  because of network effects and economies of scale, market share is different and profit differences are massive.
    edited January 2016 kibitzericoco3
  • Reply 7 of 32
    kibitzerkibitzer Posts: 1,113member
    noelos said:
    Apple is Samsung's number one supplier? First I've heard of it!
    More like number one customer.
    jbdragon
  • Reply 8 of 32
    First off, no shit sherlock.

    Second - why on earth is this kind of crap posted on Appleinsider? It is purely clickbait to drive traffic?

    noelos said:
    Apple is Samsung's number one supplier? First I've heard of it!
    Not sure if they're the #1, but they provide a lot of parts for the iPhone/Pad, in addition to Storage and Memory chips and panels for desktop/laptop lines. Samsung also make a lot of stuff like capacitors and mosfets, but I'm not sure how many (if any?) Apple uses.
  • Reply 9 of 32
    croprcropr Posts: 935member
    Apple faces the weakest significant competition it ever has in the smartphone and tablet markets?  The market tells a different story.  Market share for iPads has been going down and down and down the last 3 years.  After an initials boost when the iPhone 6 was launched, the market share for iPhones has stabilized: it is still going up in China, but is going again down in the US and European markets.  There is more competition than just Samsung
  • Reply 10 of 32
    jfc1138jfc1138 Posts: 3,090member
    cropr said:
    Apple faces the weakest significant competition it ever has in the smartphone and tablet markets?  The market tells a different story.  Market share for iPads has been going down and down and down the last 3 years.  After an initials boost when the iPhone 6 was launched, the market share for iPhones has stabilized: it is still going up in China, but is going again down in the US and European markets.  There is more competition than just Samsung
    Cheap stuff can sell"numbers" and still be weak competition. Hence the profitshare of Apple in the smartphone space. While also increasing the shear number of Apple phones sold.
    edited January 2016 sockrolidbrucemcnolamacguychiacali
  • Reply 11 of 32
    In warning of a slowdown in its business in 2016, due to a slowing global economy and intensifying competition in smartphones, televisions and memory chips, the head of Samsung Electronics said that in order to make sure their customers stick with their products, the company needs to change from a focus on hardware to software.

    The problem with software and Samsung is cultural... software has always sucked hind teat to hardware at Samsung, and that's not going to change soon, if ever.

    This story doesn't mention it but this announcement of Samsung's is being made on the very eve of CES, which really throws cold water on Samsung's showing at CES. No matter what they say and show at the CES show, in the back of everyone's mind will be, Samsung as a wounded giant staggering through 2016.

    Very wisely, Apple has stuck to their knitting through all this and chipped away at Samsung indirectly while playing the long game. All the doom and gloom pundits have overlooked one thing while predicting iPhone sales slump; the iPhone can continue to grow sales by taking market share from Android. None of the players in smart phone hardware are strong going into 2016—even Google/Alphabet has sputtered to a near-stop on Android development. The software is reaching its limits within the design constraints imposed on it by the initial hardware parameters. There's a performance limit set by a thermal dissipation limit within a tiny mobile device.  
    sockrolidlostkiwi
  • Reply 12 of 32
    radarthekatradarthekat Posts: 3,040moderator
    Sog, you keep railing against Cook based upon the stock performance and suggesting he is responsible to prop it up.

    Set the stock aside and tell us how Apple the business is doing. Then tell us how Google is doing in comparison. I believe you'll find Apple, even as a much larger company in terms of revenue, managed to grow its earnings more than Google over the three-year period ending 2015. By almost any business metric Apple is doing very well.

    Seems analysts should examine the context of Apple's business if they truly want to understand its stock performance. Here is the only company I can think of that, as a single company, that is aligned against several entire industries. It's Apple versus ALL PC makers, plus Microsoft. Apple versus ALL Android smartphone manufacturers, several of the larger of which are also PC makers, plus Google.  Apple versus ALL tablet manufacturers.  Apple versus all music streaming services.  

    In each case Apple is rarely evaluated on business merits (you know, like profits?) but instead the company's position within each of its markets is compared against whichever metric is most unflattering to the company while also typically least important. Look at market share, for example. What is meaningful about having majority marketshare of smartphones that Apple doesn't have with their minority market share? Share of profits? Apple's got em. Developer support? Apple has the best and is first in line for app support. Economies of scale in manufacturing and parts costs? Apple wrote the book on that. Clout with suppliers to ensure they get the latest technological advances? Got that too. All with minority market share, and yet analysts carp on about meaningless numbers.

    Let's ask ourselves, why is the company that is singularly aligned against all other companies in each of its markets treated the way it is by analysts and the press? Could it be that Apple represents an existential, and also very real, threat to so many that they simply cannot afford to give the company its due; to assess the company on a level playing field? Think of the ratio of ad dollar spend with all the publications, Apple versus everyone else it's aligned against. Think of the IT sector many analysts cover, with its Tower-of-Babel/high-wizards-of-protected-knowledge approach to doing business that Apple has been tearing down for 40 years. There's your answer as to why Apple coverage is skewed and therefore shareholders are scared out of giving the company a higher valuation.  And that's also the answer to why anything Cook says will have no lasting effect; the analyst and press community simply won't have the conversation from a business perspective.  

    So maybe Cook has decided to play this a bit differently.

    Sure, Cook could rail against the idiots and disingenuous press and analysts, like Jobs did. But Jobs wasn't trying to buy big chunks of an obviously undervalued stock off the market, Cook is. You want to understand Cook, start by reading Art of War. Then we can talk more.
    edited January 2016 sockrolidbrucemcnolamacguygoodbyeranchchiaicoco3calilostkiwi
  • Reply 13 of 32
    jbdragonjbdragon Posts: 2,112member
    cropr said:
    Apple faces the weakest significant competition it ever has in the smartphone and tablet markets?  The market tells a different story.  Market share for iPads has been going down and down and down the last 3 years.  After an initials boost when the iPhone 6 was launched, the market share for iPhones has stabilized: it is still going up in China, but is going again down in the US and European markets.  There is more competition than just Samsung
    Yes iPad sales have dropped inthe last 3 years if you want to point that out.  Soooooooo What?  You left out the fact that everyone else's table sales have tanked!!!  So Apple sales have dropped, but they're still outselling everyone by far.

    Apple sells more iPhones every year, year after year.  Right now we're in the expected S series year.  Even though it was a pretty huge update for a S series iPhones, the iPhone 7 will hit new records.

    Apple is not really competing against others.  No one else makes iPhones and uses iOS.   Samesung on the other hand is competing against HTC, Motorola, Sony, LG and the list goes on and on and on.  Really, the only winner with Android is Google.  Apple is making about 94% of the Smartphone Profits.  Samesung around 13%.  Do the math?  Ya, that's more then 100% because others are LOSING money on Android!!!  There's no money to be made with Android.  They're all becomeingmore and more the same.  You can't bump screen sizes anymore to get ahead.  Most high end phones are using the same CPU's, and the low end phones users a cheaper, but also same CPU.  Samesung may use their own at times.   The only way to stand out anymore with with your own Skin, and people would rather have stock Android Interface these days.    

    So you can't make a profit on your Android phone.  maybe even losing  money.  What do you do?  Well install 3rd party crapware.   You can't offer your own services for Android.  No one will use them,  Samesung keeps trying, but people would rather use Google's services.  So you can't make may any money after the same, yet people still expect you to release a OS update on the phone which costs you even more money.  To top it all, you have ZERO control of Android!!!  Whatever Google does, Google does!!!

    Samesung should have jumped on and pushed TIZEN years ago.  Instead they screwed themselves and pushed out Android, being the #1 Android seller.  Now look at them.  Android is to BIG with 80% of the global market.   Fandroids still seem threaten by Apple!!!  If Samesung went Tizen, they would control the OS, hardware and services just like Apple or Blackberry for that matter.  Well until they gave up and basically threw in the towel by releasing a Android phone.
  • Reply 14 of 32
    cnocbuicnocbui Posts: 3,613member

    When you read reports on this news on other sites, competition from a host of cheap and very capable Chinese Android phones is given as a major factor in Samsung's sales decline, not just competition from iPhones.

    AppleInsider said:
    This year however, Apple is reportedly pulling its entire A10 generation of chip production from Samsung's fabs and making TSMC its sole supplier.

    That move not only erases considerable revenue from Samsung's LSI, but also threatens to leave its state of the art fabs underutilized, either with nothing to build or reconfigured to manufacture less valuable components. With Samsung in an increasingly desperate condition, Apple faces the weakest significant competition it ever has in the smartphone and tablet markets

    That could have a devastating impact on Samsung's ability to invest billions of dollars for continued innovation in chip fabrication, while also funding the development of advanced production of chips in Taiwan, Korea's primary fabrication rival.

    With Samsung in an increasingly desperate condition, Apple faces the weakest significant competition it ever has in the smartphone and tablet markets. It also opens the door for Apple to negotiate new component deals with Samsung at less favorable rates, further making Apple 2016 easier while complicating things for Samsung, the company that builds more than half of the world's Android phones.
    If Apple are pulling their entire A10 chip production from Samsung, what components will Apple be able to negotiate better rates on?

    I hate to break the bad news, but Samsung are reportedly going to be manufacturing 14nm chips for AMD.  They are already supplying high end Exynos 7420 CPUs to Meizu and of course they make 14nm processors for Qualcomm.  Then of course there's the 14nm chips they are making for Nvidia.  But let's not let any facts get in the way of the truth or a good Samsung dis.

    Poor Samsung, making low value - whoops, that's not true is it - 14nm chips for everyone except Apple.  Things couldn't possibly be bleaker for them.

    Have you thought of writing fiction instead of factual articles?   This work shows promise in the former field.



    techlover
  • Reply 15 of 32
    sflocalsflocal Posts: 4,612member
    sog35 said:
    crowley said:
    Good job.

    So instead of facing the problem head on (Tim Cooks refusal to articulate Apple's vision successfully) you want to just ignore the problem and sweep it under a rug.
    I guess that's how you 'solve' all your problems.
    You seem to have plenty of time to rant about your same tired subject, yet (to my knowledge) haven't answered about backstopping on your self-ban promise.  I don't want to block people but even I'm reaching a limit with you beating that same dead horse to glue.  Either sell your stock, or short some stock, and move on will ya?
    nolamacguysingularityicoco3jbdragontechlover
  • Reply 16 of 32
    lkrupplkrupp Posts: 7,062member
    sog35 said:
    Samsung will have a tough 2016...............that means Apple will tank! SELL! SELL! SELL!

    Yet Apple CEO sits on his hands and does nothing to stop the bleeding.
    The stock is down over $30 in a few months.

    Stock was close to $570 billion.
    A few months ago it was $760 billion.

    Apple has lost almost $200,000,000,000 in market cap yet the CEO does NOTHING.

    Believe me, you wouldn’t like what Wall Street would want Tim Cook to do to get back in their good graces. Investors don’t care about Apple’s DNA, its proud history, its products. All they care about is short term profits at the expense of everything else. 
    radarthekatchiaicoco3jbdragon
  • Reply 17 of 32
    lkrupp said:
    sog35 said:
    Samsung will have a tough 2016...............that means Apple will tank! SELL! SELL! SELL!

    Yet Apple CEO sits on his hands and does nothing to stop the bleeding.
    The stock is down over $30 in a few months.

    Stock was close to $570 billion.
    A few months ago it was $760 billion.

    Apple has lost almost $200,000,000,000 in market cap yet the CEO does NOTHING.

    Believe me, you wouldn’t like what Wall Street would want Tim Cook to do to get back in their good graces. Investors don’t care about Apple’s DNA, its proud history, its products. All they care about is short term profits at the expense of everything else. 
    It's in the interest of analysts and brokers to foment uncertainty and churn in order to increase buy-sell activity. Pay no attention to these people. Their interests are not yours (or mine).
    chiajbdragonlostkiwiapres587
  • Reply 18 of 32
    steven n.steven n. Posts: 1,115member
    sog35 said:
    jfc1138 said:
    OR Cooks the reason it's not at $10 like some predicted a while back?

    He's there to manage the company, not the stock, in any case.
    WTF. His job is to manage the stock and the perception of the company.

    The entire Wall Street is saying Apple has peaked and will go fall from here. Its Tim Cooks job to articulate a vision that those are lies. Cook gets paid $100,000,000 a year. Of course he needs to protect the stock and shareholder interest.  If not Cook should quit and be a CEO for a private company.
    Only to the MBA talking business heads. You need to watch the WWDC video with Steve Jobs doing a Q&A session back in the late 90's.

    Cook's job is to run the company. Worry about the products (and he seems to be doin okay on this) and let the stock take care of itself. 
    nolamacguychiaicoco3jbdragonlostkiwiapres587
  • Reply 19 of 32
    nolamacguynolamacguy Posts: 4,758member
    sog35 said:
    Samsung will have a tough 2016...............that means Apple will tank! SELL! SELL! SELL!

    Yet Apple CEO sits on his hands and does nothing to stop the bleeding.
    The stock is down over $30 in a few months.

    Stock was close to $570 billion.
    A few months ago it was $760 billion.

    Apple has lost almost $200,000,000,000 in market cap yet the CEO does NOTHING.
    reported for trolling. this discussion has shit-all to do w/ Apple CEO Cook. get the fuck over yourself and stop pretending to be a day trader.
    singularitySpamSandwichicoco3jbdragon
  • Reply 20 of 32
    nolamacguynolamacguy Posts: 4,758member

    cropr said:
    Apple faces the weakest significant competition it ever has in the smartphone and tablet markets?  The market tells a different story.  Market share for iPads has been going down and down and down the last 3 years.  After an initials boost when the iPhone 6 was launched, the market share for iPhones has stabilized: it is still going up in China, but is going again down in the US and European markets.  There is more competition than just Samsung
    ipad sales weakening doenst mean theres more competition. it means less annual sales. apple/ipad still owns the tablet sector.
    jbdragon
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