The Chinese and European market for smartphones has really picked up lately and we see some companies in the US taking a hit because of that. For instance, Samsung claims that they expect to see their Q2 profits drop by 25%. Why so big? Let’s take a look.
Samsung faces big competition from these other countries. For example, the OnePlus One. The device is basically the same as the S5 in the fact that it carries the same processor and uses the same Gorilla Glass 3 as the S5. But why is this such a huge problem? I’ll tell you why. $300 is why. For $300 less you could get the OnePlus One for $299 (16GB version). That’s an insane deal for something around the same performance. That’s retail, too. Meaning you could still probably find a pretty good deal somewhere else for less than that!
But smartphones alone won’t make Q2 sales go from $9.4 Billion to $7.1 Billion. Samsung’s tablet line also has something to do with it. If you take into account that smartphones increase in size could make the tablet line suffer if you have a smartphone line that is 5-6″ and you have a line of tablets that are 7-8″. That’s not a big difference. So in order to build up this revenue you would probably want to stick with phablets but also make your tablet line a bit larger in size to give a good size difference.
So here is some trivia for you:
If you want to get rid of inventory, what do you do?
- Lower Prices
- Advertise and Market
- Give Away Products
Which one did you choose? The correct answer was #2. Samsung increased their marketing to get rid of these low-end phones that were high in inventory, causing them to expend more money just to try to sell these products. That caused their profit count to take even more of a hit.
Samsung does have a positive outlook for the future, though. this is mainly because they plan to release their new smartphone line. That line being the update of the Galaxy Note lineup.