Samsung warns it will have a tough year in 2016
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 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."
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.
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.
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.
Comments
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.
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.
Second - why on earth is this kind of crap posted on Appleinsider? It is purely clickbait to drive traffic?
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.
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.
So maybe Cook has decided to play this a bit differently.
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.
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.
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.
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.
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.
ipad sales weakening doenst mean theres more competition. it means less annual sales. apple/ipad still owns the tablet sector.