Samsung Electronics forecasts 60% fall in quarterly profit(bbc.co.uk)
bbc.co.uk
Samsung Electronics forecasts 60% fall in quarterly profit
http://www.bbc.co.uk/news/business-29516806
51 comments
Are you sure? This seems to be old news and he had regained consciousness. And, this whole thing had apparently happened in May[1].
[1] http://blogs.wsj.com/digits/2014/05/25/samsung-chairman-lee-...
[1] http://blogs.wsj.com/digits/2014/05/25/samsung-chairman-lee-...
I don't understand the Emperor and 'beloved leader' references in your post?
Well, OK, "beloved leader" might be hyperbolic, but portraying Samsung's management style as "Emperor Management" is hardly new. Googling for "이건희 황제 경영" (Lee Kun-hee Emperor Management) gives >1M hits.
Think of it like Steve Jobs-style super-asshole management, and then imagine that Jobs does everything (legal or illegal) to cook the books so that his son (with questionable track record) can inherit the company without paying tax. And imagine reporters who raise the issue in "respectable" news organizations get fired. (One of the leading news organization is led by his brother-in-law.)
* From the latest development, it seems he's not quite brain-dead yet. Sorry about spreading misinformation.
Think of it like Steve Jobs-style super-asshole management, and then imagine that Jobs does everything (legal or illegal) to cook the books so that his son (with questionable track record) can inherit the company without paying tax. And imagine reporters who raise the issue in "respectable" news organizations get fired. (One of the leading news organization is led by his brother-in-law.)
* From the latest development, it seems he's not quite brain-dead yet. Sorry about spreading misinformation.
I suppose it's just a reference to the absurd deference which leaves him as CEO with no replacement when he's in a coma. And the fact that his position will be inherited by his son, no questions asked.
Apparently there are some similarities between North Korean and South Korean culture (which is not very strange, since the border between them is an accident of recent history).
Coma? Brain Dead? Why don't you stick with the facts?
http://koreajoongangdaily.joins.com/news/article/Article.asp...
http://koreajoongangdaily.joins.com/news/article/Article.asp...
It's a side note in this article, but those unfamiliar with Xiaomi should do some light reading on the topic. It's a controversial company that publicly aspires to be the "Apple of China," and is often accused of simply ripping off Apple designs. My hunch is that we'll hear a lot more about Xiaomi in the American press in the next few years, even if in passing, and just as a curiosity.
Xiaomi is not the only reason Samsung's been hurting. But its dirt-cheap pricing strategies have taken a serious bite out of Samsung's position in the crucial Chinese market.
Xiaomi is not the only reason Samsung's been hurting. But its dirt-cheap pricing strategies have taken a serious bite out of Samsung's position in the crucial Chinese market.
Xiaomi just overtook Samsung's market share in China. It sells cheaper priced phones with similar specs. Samsung's margin was hurt because of that. Xiaomi is expanding internationally. Samsung's margin will be further eroded.
It's like the war of the clones back in the PC days, where Compaq the clone leader was cobbled by other better priced clones when all the clones had essentially the same feature.
It's like the war of the clones back in the PC days, where Compaq the clone leader was cobbled by other better priced clones when all the clones had essentially the same feature.
My prediction: Xiaomi is only two years away from a serious entrance into the North American or European market and that entrance will be very disruptive for the existing market players, just like it has been in other markets that Xiaomi has entered.
Xiaomi can't really enter western markets until its designs are more original, otherwise they would be sued out of existence. It will be interesting to see if and how they manage that transition.
Also, Xiaomi is not a very good value. Meizi provides better quality for a similar price if you are into the low end.
Also, Xiaomi is not a very good value. Meizi provides better quality for a similar price if you are into the low end.
Xiaomi releases models in Europe...
And Xiaomi is targeting the humongous Indian Market like crazy. I was once at an off-beat pre-launch for one of their new product (I hid my iPhone at all times) and they're super focused on getting the locals to get to Xiaomi phones. They are pretty successful successful in India and they are Indianizing their offerings for the Indians.
Indianizing their offerings for the Indians.
Localized apps mostly. Many countries have their own social networks, search engines, ecommerce sites, etc...
It is the cycle of things. European industrial dominance was undercut by low quality American knock offs that then went further up the market. Japan undercut the American market with low cost and quality products and then looked like they were going to dominate the world. Korea undercut Japan with low quality products and then went upmarket. Now China is about to...
The key markets have changed since the industrial revolution but last century or so it can most clearly be seen in cars and electronics.
The key markets have changed since the industrial revolution but last century or so it can most clearly be seen in cars and electronics.
I believe we are confusing lots of things here.
Profit isn't everything. Samsumg electronics is investing in semiconductors and also in OLED screens production.
I see OLED as the future and just Samsumg and LG investing on them.
OLED are very expensive today because there is no mass production of them, and because they are so expensive nobody buys them on TVs as they have hi def LCDs way cheaper.
It is catch 22. I for one am waiting for OLED TV prices to be reasonable to buy 4 of them.
Samsumg has a very good position as he is using the phones and tablets market to start mass producing OLED panels.
When people change to OLED, and they will(because it is amazing tech), Samsumg will have a big advantage.
Profit isn't everything. Samsumg electronics is investing in semiconductors and also in OLED screens production.
I see OLED as the future and just Samsumg and LG investing on them.
OLED are very expensive today because there is no mass production of them, and because they are so expensive nobody buys them on TVs as they have hi def LCDs way cheaper.
It is catch 22. I for one am waiting for OLED TV prices to be reasonable to buy 4 of them.
Samsumg has a very good position as he is using the phones and tablets market to start mass producing OLED panels.
When people change to OLED, and they will(because it is amazing tech), Samsumg will have a big advantage.
I disagree. Customers will buy OLED simply because the price is right in comparison to other options. Consumers don't want 2k, 4k, OLED, bend-y screens or anything else, which is why OLED is not emerging. Distributers want 2k and 4k so they can sell licenses to previous license owners. (Maybe mobile device manufacturing wants OLED for battery efficiency but it's not a huge power savings anyway.) There are also a number of technical hurdles that become pronounced on OLED screens as big as 50". Polls indicate consumers are quite happy with the current LED LCD HD at the associated price point.
A perfect example is the average consumer doesn't even know what OLED is or what benefits it offers. The fact that you do, means you are not average, and are not considered as the majority buyer group. In fact, the benefits OLED offers, the customer already thinks they have, because screen manufacturing sales lingo is so completely f-ed up. The current top of the line HD LED tv is not backlit. Its edge lit. I did extensive research only to find out actual backlighting, what they call "active matrix backlighting" is only on LED TVs starting around $7k to $15k. All this is an example of 'here is the newest best technology that you need to have'. The bad news is, the customer just spent 2k on a big ass TV 3 years ago and they aren't going to by a new one for at least 3 to 5 more years... OLED is going to take it's sweet time getting here, 3 to 5 years. Meanwhile 2k and 4k is going to arrive in the next year or so because of pressure from distributers.
A perfect example is the average consumer doesn't even know what OLED is or what benefits it offers. The fact that you do, means you are not average, and are not considered as the majority buyer group. In fact, the benefits OLED offers, the customer already thinks they have, because screen manufacturing sales lingo is so completely f-ed up. The current top of the line HD LED tv is not backlit. Its edge lit. I did extensive research only to find out actual backlighting, what they call "active matrix backlighting" is only on LED TVs starting around $7k to $15k. All this is an example of 'here is the newest best technology that you need to have'. The bad news is, the customer just spent 2k on a big ass TV 3 years ago and they aren't going to by a new one for at least 3 to 5 more years... OLED is going to take it's sweet time getting here, 3 to 5 years. Meanwhile 2k and 4k is going to arrive in the next year or so because of pressure from distributers.
Samsumg? How did you consistently spell that wrong?
I'm a full time Android developer. I have to wonder, what % of the slip is Android overall and what % is Samsung specifically. I have to say I'm not pleased with the quality of the latest Samsung devices. Motorola, LG, and HTC all seem to be making higher quality phones.
According to the article, there was no slip in Samsung sales. There was a slip in margins.
They're being forced to reduce margins to keep sales up, so it's effectively the same thing. They can't make good enough phones for cheap enough.
Or, the inverse, they were first to market (and the S series kind of was as the staple Android competitor to the iPhone for quite a while after Motorola and the Droid line dried up) and saw huge returns on that for a while, until competitors caught up.
Samsung sell a range of devices, from cheap low margin product to the high margin Galaxy's. If they have started selling less Galaxy's and more cheap devices, this will have a big impact on their profits.
But at this point the other Android manufactures (at least that have a good presence in the US) aren't making any money off Android phones, only Samsung was.
If Samsung's profits are falling as an Android manufacturer where does that leave users? It's not like Samsung was selling below cost. Without them the others would have a higher market share but would they actually become profitable?
Or is there just a glut of Android devices on the market to the point that no one would have an easy time making a profit in the current environment? Is this just a sign of a shake-up?
If Samsung's profits are falling as an Android manufacturer where does that leave users? It's not like Samsung was selling below cost. Without them the others would have a higher market share but would they actually become profitable?
Or is there just a glut of Android devices on the market to the point that no one would have an easy time making a profit in the current environment? Is this just a sign of a shake-up?
On your not making any money comment, HTC has been profitable the past two quarters (https://gigaom.com/2014/10/03/by-managing-costs-htc-sees-ano...) and LG has also been profitable in part due to their mobile division (http://www.lgnewsroom.com/newsroom/contents/64590). Motorola seems to be heading towards profitability as well.
Perhaps Samsung's decline has been in part to the success of these other handset manufacturers?
Perhaps Samsung's decline has been in part to the success of these other handset manufacturers?
That's good to know since Samsung used to be eating everyone's lunch and it was becoming a two horse race.
As an outsider to this whole thing (Apple guy with little interest in buying an Android phone at this time) it has always seemed like there was a pretty big oversupply unless you only considered the flagship phones (and even then it's still arguable).
The market share between the various Android manufacturers starting to even out sounds good to me, but I wonder what it would do for prices and how that would effect Android vs. iOS.
As an outsider to this whole thing (Apple guy with little interest in buying an Android phone at this time) it has always seemed like there was a pretty big oversupply unless you only considered the flagship phones (and even then it's still arguable).
The market share between the various Android manufacturers starting to even out sounds good to me, but I wonder what it would do for prices and how that would effect Android vs. iOS.
The market share may even out in the low end segment, where many local manufacturers in different countries build cheap (and possibly outdated, from a first world perspective) hardware and slap whichever Android version they can accommodate (it may not be the latest).
But overall, Samsung still holds a big chunk of Android market share and it would take several years for that to come down to something we can consider as stiff competition. Samsung has a lot of muscle and money to continue its "hardware machine gun" spraying tens of devices to see what sells, which is also aided well by a big marketing budget (probably the largest marketing budget among all, including Apple and Microsoft in the mix).
The push to make Samsung more equal to other Android device makers could be from different directions. One is Samsung's desire to go with Tizen and sunset Android. This may not sit very well with the user base since the app market for Tizen needs to be built, and that's one reason why Tizen may likely shine in the nascent wearables segment than in the established smartphone, phablet and tablet segments. The other push is really good devices from HTC and Motorola that come with the latest version of Android and (especially for Motorola, in my knowledge) the ability to easily get updates easily and quickly. If HTC and Motorola survive for a few more years and continue whatever good work they're doing, then they do stand a chance to improve the overall market for the benefit of everyone.
But overall, Samsung still holds a big chunk of Android market share and it would take several years for that to come down to something we can consider as stiff competition. Samsung has a lot of muscle and money to continue its "hardware machine gun" spraying tens of devices to see what sells, which is also aided well by a big marketing budget (probably the largest marketing budget among all, including Apple and Microsoft in the mix).
The push to make Samsung more equal to other Android device makers could be from different directions. One is Samsung's desire to go with Tizen and sunset Android. This may not sit very well with the user base since the app market for Tizen needs to be built, and that's one reason why Tizen may likely shine in the nascent wearables segment than in the established smartphone, phablet and tablet segments. The other push is really good devices from HTC and Motorola that come with the latest version of Android and (especially for Motorola, in my knowledge) the ability to easily get updates easily and quickly. If HTC and Motorola survive for a few more years and continue whatever good work they're doing, then they do stand a chance to improve the overall market for the benefit of everyone.
Samsung is destroying everyone in terms of market share. However companies like LG and HTC tend to intentionally just make the high price point phones where there is a lot more profit margin.
$21 million for HTC isn't much, and doesn't help after the big losses after the last few years. LG looks like it is doing well.
Overall, this is much better for Android, rather than having one big company.
Overall, this is much better for Android, rather than having one big company.
The airlines are proof that wide profit margins are not necessary for massive gains in customer experience.
(In the airline case, this experience is in the realm of vastly lower ticket prices, rather than an actual comfortable flying experience. But the point remains that you can fly today for 50% of the real cost of flying thirty years ago.)
(In the airline case, this experience is in the realm of vastly lower ticket prices, rather than an actual comfortable flying experience. But the point remains that you can fly today for 50% of the real cost of flying thirty years ago.)
This is just the return to the natural state of the licensed OS market. Samsung got all that business by using their verticals to undercut everyone by pennies and then turned those carrier deals into profits via scale and by going with more inexpensive components. Quality of low end competitors spiked and these advantages are being eaten away and maybe the carriers have an interest in Samsung not becoming too big.
> carriers have an interest in Samsung not becoming too big.
Unlikely. Carriers care about their margins. And if there are cheaper phones to sell that customers truly want, then the margins for the carriers can be higher as they can take a percentage of the price differences for themselves. Thus carriers want to have as low priced hardware as possible that still work on the high end networks and that customers want so they can sell more service subscriptions -- which is where they make their money.
Unlikely. Carriers care about their margins. And if there are cheaper phones to sell that customers truly want, then the margins for the carriers can be higher as they can take a percentage of the price differences for themselves. Thus carriers want to have as low priced hardware as possible that still work on the high end networks and that customers want so they can sell more service subscriptions -- which is where they make their money.
This fundamental problem is almost identical to the problems PC manufacturers constantly ran into as the market and its margins were in constant turmoil over the late 1980s - mid 2000's. One minute a company would be booming, the next it would be hard times and weak margins. With the understood history being that only a few PC makers survived at all, despite the extreme sales scale of the market.
Not to mention that Apple ended up eating up almost all of the profits of the PC market. It really is starting to feel like history is repeating itself
Microsoft and Intel, not Apple, ended up eating almost all of the profits in the PC market.
Comparing Apple only to the manufacturers who had to deal with those two giant monopsonies who supplied the two basic requirements for a "Wintel" PC is missing the point massively.
It also makes things interesting for this time around as Google and ARM have very different business strategies than Windows and Intel did at that time.
Comparing Apple only to the manufacturers who had to deal with those two giant monopsonies who supplied the two basic requirements for a "Wintel" PC is missing the point massively.
It also makes things interesting for this time around as Google and ARM have very different business strategies than Windows and Intel did at that time.
You're right in terms of the '90s and early aughts, but I believe the commenter is referring to current market conditions. That is, "Apple ended up eating almost all of the profits in the PC market" means since about 2009 or so. Between MacBooks and iPads, Apple claims an outsized portion of the industry profits relative to its market share, as with iPhone.
Somebody correct me if I'm wrong: hasn't Apple seen its Mac line market share grow for something like 26 straight quarters? And, since they're high-end / premium devices (> $1,000), the margins (and therefore profit) are higher (again, like iPhone).
Somebody correct me if I'm wrong: hasn't Apple seen its Mac line market share grow for something like 26 straight quarters? And, since they're high-end / premium devices (> $1,000), the margins (and therefore profit) are higher (again, like iPhone).
It's hard to get good figures since it's not something they generally break out, but according to some guesstimates from Asymco, Apple took in 5 Billion in revenue and made 1.1 Billion profit in Q4 2012 from selling PCs.
http://www.asymco.com/2013/04/16/escaping-pcs/
This is more than the top 5 Windows vendors combined, and about as much all Windows vendors combined.
Microsoft on the other hand (though interestingly they actually made an overall loss that quarter as they wrote of a 7 Billion company they purchased a few years before) made about 4 bilion revenue and maybe 2-3 Billion profit from consumer Windows sales directly and that's not counting servers, or business licences, or Office each of which is roughly of the same magnitude.
Intel's PC client group took in 8.5 Billion that quarter. Possibly half of that being profit (overall gross margin was 58%.)
So Apple makes a lot of money from PCs, Microsoft and Intel have always made more.
Note that from selling iPhones and iPads Apple recently made more profit than Microsoft, Intel and a few others combined. But for desktop and laptops, Microsoft and Intel have always claimed the vast share of industry profits unless you go out of your way to exclude these two companies from the industry.
http://www.asymco.com/2013/04/16/escaping-pcs/
This is more than the top 5 Windows vendors combined, and about as much all Windows vendors combined.
Microsoft on the other hand (though interestingly they actually made an overall loss that quarter as they wrote of a 7 Billion company they purchased a few years before) made about 4 bilion revenue and maybe 2-3 Billion profit from consumer Windows sales directly and that's not counting servers, or business licences, or Office each of which is roughly of the same magnitude.
Intel's PC client group took in 8.5 Billion that quarter. Possibly half of that being profit (overall gross margin was 58%.)
So Apple makes a lot of money from PCs, Microsoft and Intel have always made more.
Note that from selling iPhones and iPads Apple recently made more profit than Microsoft, Intel and a few others combined. But for desktop and laptops, Microsoft and Intel have always claimed the vast share of industry profits unless you go out of your way to exclude these two companies from the industry.
With the difference being that, this time, Apple with full control over their entire supply chain (notably not beholden to Motorola/IBM/Intel as chip manufacturers), can outmaneuver their competitors in ways that were simply not possible even a decade ago.
It is a race to the bottom.
Which is strange, since Samsung top of the line are almost as expensive as Apples.
Which is strange, since Samsung top of the line are almost as expensive as Apples.
"a race to the bottom" between corporate manufacturers is the very definition of free-market competition.
It's very odd to see that talked down as if it was a bad thing on Hacker News as in any story not involving Apple free-market competition would be hailed as the driver of basically all social improvement and technological progress in the last century or so.
Also, that's why it's not surprising that in this particular "race to the bottom" that there would still be high-end models being sold by HTC, Samsung etc., though you would expect them to be putting pressure on competitors to be offering more value and/or lower prices across their entire range.
It's very odd to see that talked down as if it was a bad thing on Hacker News as in any story not involving Apple free-market competition would be hailed as the driver of basically all social improvement and technological progress in the last century or so.
Also, that's why it's not surprising that in this particular "race to the bottom" that there would still be high-end models being sold by HTC, Samsung etc., though you would expect them to be putting pressure on competitors to be offering more value and/or lower prices across their entire range.
Sales of each individual phone model are a tiny fraction of iPhone model lifetime sales though, so I suspect they don't get anywhere near the same economies of scale. Then of course there are Apple's revenues from licensed accessories, which are highly profitable and sell well.
There have been parallels appearing now for some time, showing Samsung alongside Nokia's doomed path. Samsung have neglected their software development just as Nokia had (in terms of interface not being iterated and updated). On top of that, hardware has not seen dramatic improvements. The public and loyal journalists have been becoming increasingly disgruntled (since the S4).
If they don't innovate dramatically with the S6 there is trouble on the horizon for this behemoth. Samsung also need to position their experimental products (the new edge and the old round) as their lead products and fully get behind them. I always get the feeling they are hesitant like a person testing the water by dipping their toe in, when they just need to take a dive. The development is done and its in production so why not take a leap. If it fails at least they will be known as a company with innovation at its forefront and they can regress to their current practice.
If they don't innovate dramatically with the S6 there is trouble on the horizon for this behemoth. Samsung also need to position their experimental products (the new edge and the old round) as their lead products and fully get behind them. I always get the feeling they are hesitant like a person testing the water by dipping their toe in, when they just need to take a dive. The development is done and its in production so why not take a leap. If it fails at least they will be known as a company with innovation at its forefront and they can regress to their current practice.
Cell phone seems to always be high revenue, high margin business but ONLY for a few years for any one company.
Whoever won the top slot in cell phone biz can get tremendous revenues and profit boost - Motorola, Blackberry, Nokia, HTC, now Samsung. Apple might last a bit longer because of app/iOS infrastructure - but it will be tough to compete with Android.
Whoever won the top slot in cell phone biz can get tremendous revenues and profit boost - Motorola, Blackberry, Nokia, HTC, now Samsung. Apple might last a bit longer because of app/iOS infrastructure - but it will be tough to compete with Android.
Something to note in this article - this is Samsung Electronics - combined mobile, TV and various other electronics manufacturer.
I wonder how bad the mobile division is doing if the entire electronics company is forecasting a 60% profitability drop?
I wonder how bad the mobile division is doing if the entire electronics company is forecasting a 60% profitability drop?
Some high-tech industry sectors are actually labor intensive, such as the mobile OS. I only see 3 mobile OS with real potential now: iOS, Google Android, and MIUI (actually adapted from Android). Samsung is doomed because they don't have the whole ecosystem. Their lead on only the hardware part is not sustainable forever.
Sooner is better than later, see whether they can fix it...
Sooner is better than later, see whether they can fix it...
Curious to see how Amazon's fork fares.
Samsung has rested on its laurels for too long and has ignored important criticism of its products. So I'm not even sad about it. They also own too much of the Android market, and there should be more equilibrium, or at least have someone else dominate the market for a few years.
good. hard to find a more corrupt and unethical company.
So, many mid- to high-level managers in Samsung could be postponing highly visible projects until the new leader steps in and clears up which way the company will be heading. (I once heard, from someone in a different Korean company, that there are implicit agreements to not be "too good" on the book in such a situation: if your company does just as well when the beloved leader is on bed / in prison / whatever, then the leader might not be the reason for the company's success. Can't have that.)