Although only sold in the first half of March, but the Galaxy S7 and S7 Edge huge contribution to revenue and profit of Samsung. However, even with the significant contribution from the new series, the profit is likely to only slightly more than this time last year and down about 22% compared with the first quarter of 2014.
Samsung has two turbulent years with rivals such as Xiaomi rapid progress and Huawei. Therefore, the Korean giant has strategic back this year: lower the cost of our products in the Asian emerging markets to override this reverse 2 opponents.
Take Siddharth Sharma, a 35-year-old man living in New Delhi, India. He did not have to buy a Samsung smartphone for emerging technology startups in India as Micromax has launched products with similar features for the price by about 2/3.
But earlier this year he Thê catching the Galaxy J2 quite affordable. This series was launched in India since September last year, with the battery strength is high, the data transmission speed faster and quite beautiful display, cost about 130 dollars. Earlier, the segment's products are sold Samsung doubled prices.
According to him, the "quality of much more stable than the cheap brand I've ever used."
This gamble was to be part of efforts to expand market share in smartphone sales from Samsung cheap. Cabine Xiaomi flagship product launched using the same processor Samsung has used for just 250 USD or Apple last February also recently launched iPhone version configured crisis at $ 399 showed price war between the smartphone will be intensified this year.
Samsung's flagship product this year is $ 600, but in recent years, the company has been quietly adding advanced features to the mid-range models cost only US $ 100-300 around.
Field Galaxy J with similar design premium Galaxy line is covered extensively in India and Indonesia. Price at half line S, the Galaxy J also gives users a full range of features including saving mode used in data storage is extremely suitable for the emerging markets, where the budget for 3G people still tight.
However, analysts said that the price cut will make Samsung's profits fell significantly and can not be a long-term strategic business segments are staggered its smartphones. Compared to about 2 years ago, this segment has lagged profits to 60% (1.85 billion dollars) in the fourth quarter of 2015.
Specifically, even if Samsung successfully with cost reduction strategies in the emerging markets, the company will also be adversely affected by reduced margins (predicted only about 10%), although the consulate the company's senior management remains committed to bringing this marginal profit rate back to 2 numbers. Compared with the estimated profit margin of Apple (40%), this figure is quite bitter result for Samsung.
According to data from market research firm Gartner, last year, Samsung's global market share also dropped from 31% to 22.5%, net profit margin decreased from 16.1% to 8.9% in the same sign.
Samsung said the leaders will put margins above 10% by cutting costs of production or the product line. However, according to D.J. Koh, head of Samsung's mobile unit, the work of cutting production costs or components will take a lot of time.
According to an analyst from the market research firm Counterpoint Technology, Samsung's product cost is still higher than the same segment from local rivals about 25%, but this was its great effort as before then, the figure was 40%. Samsung also declined to comment on its pricing strategy.
In India, this price reduction strategy helped Samsung took back an array of market share (up from 22% to 26% in the last quarter of 2015) and beat local rivals Micromax. Micromax CEO even resign as the company's share fell from 22% to 13% in just 3 months of the end of 2015.
In Indonesia, Samsung took the No. 1 position in the third quarter after a telephone company Evercoss Indonesia cheap inland pinched in the second quarter last year.
According to an analyst, for the first time during the first 9 months of 2015, wholesale prices have dropped to Samsung 145 USD, equivalent to 1/4 the price at the same time a year earlier.
In China, Samsung launched mid-range Galaxy series A front camera is improved in an effort to regain the crown after falling to # 6 on the sheet market. According to the director of Samsung smartphone segment, the situation was bleak past and about the future, Samsung will definitely be a turnaround.
Xiaomi President Lin Bin say this really is not a sustainable strategy and future competition by cutting prices only profit becomes a vicious circle of Samsung.
Patrick Moorhead, an analyst with Moor Insights & Strategy of Strategy, Samsung is another risk faced is that cutting costs will ruin carrier-class brands have tried for years to build. He said, "If they continue to discount the Samsung brand, they will have to sell at the lower price range, Apple continues scapegoat and many more in the future".
It is too early to predict the strategies used cheap materials and provide advanced features in affordable products to explore the emerging Asian markets is successful or not, but surely this can not be a long battle term during configuration and price competition has become fierce red ocean for any technology company.
