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After a long time of a constant rise in profit, Samsung’s profit took a dip several times this year. This Korean tech is having issues selling as many devices as it did for the last couple of years and took a significant hit as far as profit goes. Samsung is still number one smartphone vendor in the world though, but the problems seem to be rather significant. Samsung Mobile executive’s paycheck was basically cut in half in Q3 this year because of such problems and Samsung is looking ways to restructure its business in order to get sales back on track. The company is facing tough competition from other OEMs, mainly from China, and is looking ways to compete with them. We’ve seen Samsung change things up a bit over the last few months when it introduced metal as one of its build materials and some rather odd devices (Gear S and Galaxy Note Edge).
We got some more information about Samsung’s plans thanks to Wall Street Journal’s interview with Robert Yi, head of Samsung’s investor relations. Samsung has announced that it will reduce the number of smartphone models in 2015, as it was expected and rumored recently. That number will be between 25 and 30% according to Robert Yi, which is a significant amount of devices and I believe a good move by Samsung considering their current business model is just not working anymore. “After maintaining smartphone operating-profit margins above 15% for 10 consecutive quarters, Samsung’s margins from its mobile and information technology business were squeezed to just 7% in the third quarter ended September—the lowest level since the end of 2008, before it launched its first Galaxy smartphone. Acknowledging the slide in margins, Samsung executives said during an earnings call last month that its new goal is to maintain a sustainable double-digit percentage margin starting in the new year. They reiterated that pledge during this week’s investor day meeting.”
Samsung still didn’t say which models will be discontinued, but the company will focus its attention to the low and mid-range market, or as a Samsung executive said “increase the number of components shared across mid to low-end models, so that we can further leverage economies of scale.” As I already mentioned, Samsung is facing tough competitions from certain Chinese manufacturers, most notably Xiaomi, a company which is currently China’s number 1 smartphone vendor and 3rd worldwide. This company actually took that first place from Samsung and this Korean giant wants it back, of course, China is the biggest market in the world. Samsung is hoping that the Galaxy A3 and A5 can have a huge impact in China, though I believe those handsets should be more affordable in order to succeed there. Either way, it will be interesting to see what else is Samsung planning, things are getting interesting.