Samsung Electronics profit growth slows on smartphone weakness | Reuters


#1

Remember all the predictions of doom and gloom after iPhone 10’s debut?


(Simon) #2

I think Samsung is in a much tougher spot than Apple. Anybody can switch from a Samsung to any other Android as soon as they find something cheaper or better. And while Apple makes tons of money off of few expensive iPhones, Samsung has to sell boat loads of phones at low margins to make some meaningful profit. Once the masses leave Galaxy, they are done. So enter a few low-cost Chinese Android makers and they are in deep trouble. Apple OTOH makes high margins and can get by selling “fewer” devices. Plus, no other manufacturer ships iOS or the App Store. The barrier to switch away from Apple is way higher.

Long-term I absolutely see Apple selling fewer +$1k phones. The current iPhone X price points and iOS market shares are not sustainable. At some point teenagers and hipsters will find some new fad and that’s it (hence their strong focus on services, they know this isn’t going to last). But just as they did very well selling fewer but more expensive MBPs than many PC notebook brands, I can see them settling for ~10% phone market share yet still making +90% of the industry’s profits. It seems that’s the one thing “analysts” never understood about Apple. Strange, because many other markets have similar players. Daimler does very well, yet only ~2% of cars are Mercedes.


#3

I think Samsung is in a much tougher spot than Apple.

I’ll bet they are sorry they ever got into the smartphone business. Samsung’s share of smartphone profits erodes every year; here’s the results from last year’s holiday season:

Apple’s iPhone X has been slammed by reports that demand for the handset is sluggish. But a new report suggests it tops in profitability.

The flagship Apple handset nabbed 35% of the smartphone market’s profits during the fourth quarter, market researcher Counterpoint reported on Tuesday. The iPhone X was the most profitable smartphone on the market, topping Apple’s iPhone 8, which captured 19.1% of the industry’s worldwide profits, according to Counterpoint. The iPhone 8 Plus landed in third place with 15.2% profit share.

In total, Apple’s handsets, ranging from the budget-friendly iPhone SE to the expensive iPhone X, earned 90% of the industry’s profits during the fourth quarter.

http://fortune.com/2018/04/17/apple-iphone-x-profits/

Anybody can switch from a Samsung to any other Android as soon as they find something cheaper or better. And while Apple makes tons of money off of few expensive iPhones, Samsung has to sell boat loads of phones at low margins to make some meaningful profit.

I’ll bet their profits are so small that Samsung regrets they ever got in to the smartphone business in the first place.

Once the masses leave Galaxy, they are done. So enter a few low-cost Chinese Android makers and they are in deep trouble.

Remember Tizen, the Samsung phone OS that was supposed to kill iOS and Android globally with low cost, but “premium quality” hardware? They still try to sell them in India, but nobody paid attention to them anywhere else.

Apple OTOH makes high margins and can get by selling “fewer” devices. Plus, no other manufacturer ships iOS or the App Store. The barrier to switch away from Apple is way higher.

Because the phones are so much more expensive, barrier to switch to Apple from Android is even higher, but people keep switching to more expensive Apple products anyway. In addition to hardware and software advantages, they like that that Apple services all play nice with each other, and that Apple has a great support system. And security has become an even bigger factor recently.

Long-term I absolutely see Apple selling fewer +$1k phones. The current iPhone X price points and iOS market shares are not sustainable.

The highly profitable iPhone X is the biggest reason Apple’s revenues are so good. Historically, after the new iPhone models are released and the holiday season ends, iPhone sales taper off for a while. It picks up for graduation and then for back to school.

At some point teenagers and hipsters will find some new fad and that’s it (hence their strong focus on services, they know this isn’t going to last).

That’s been the recurring theme of years of Samsung commercials tearing in to iPhone users for being mindless fanboys and gals. They ran a really excellent “Growing Up” commercial this past holiday season, but even that didn’t help improve their phone sales one bit:

https://www.ispot.tv/ad/wuHN/samsung-galaxy-growing-up-trade-in-song-by-chyvonne-scott

Mobile phones aren’t just a fad, they become increasingly important to individuals of all ages all the time.

But just as they did very well selling fewer but more expensive MBPs than many PC notebook brands, I can see them settling for ~10% phone market share yet still making +90% of the industry’s profits. It seems that’s the one thing “analysts” never understood about Apple. Strange, because many other markets have similar players. Daimler does very well, yet only ~2% of cars are Mercedes.

Most analysts do get this and recommend Apple stock. But unfortunately, there are some journalists who love to pick nits and cry doom and gloom.