Smartphone giant Samsung is taking a big hit from a decline in smartphone sales. As I’ve mentioned in the past, I believe we hit “peak smartphone” about two years ago.
We’re seeing company profits now being impacted by the oversaturated smartphone market in a big way:
Samsung Electronics Co Ltd said on Friday it was heading for its lowest quarterly profit in more than two years as a glut in memory chips, slowing panel sales and rising competition in smartphones hit margins.
The South Korean tech giant said first-quarter operating profit likely slid 60 percent from a year earlier, missing market expectations and putting it on track for its weakest quarterly profit since late 2016.
Samsung supplies memory chips and screens for its own smartphones and Apple Inc, and server chips for cloud companies such as Amazon. Its semiconductor business is the main profit driver.
Samsung’s premium Galaxy smartphones meanwhile are struggling to be profitable due to rising costs of innovation, competition from Chinese rivals and the reluctance of consumers to upgrade, analysts have said.
Samsung is betting a new line-up of smartphones including a foldable handset and a 5G-enabled model will help boost its market share in China, which crashed with the advent of cheaper Chinese rivals like Huawei Technologies Co Ltd.
But its latest phones are expensive to make, weighing on profitability even as its sells faster than its predecessor, analysts say.
Samsung is betting on foldable smartphones to try to reverse the sales decline. While this is a neat gimmick, Samsung is selling the phones for the ludicrous price of $2,000. There is no way that this is going to be a panacea at that price level – these companies are already struggling to push prices into the $1,000 mark, as it’s almost certain these sky-high prices are part of what’s driving the smartphone sales decline.
It seems like it’s going to be some time before smartphone manufacturers come to realize that they will have to cut prices if they want to remain competitive.