Samsung last week gave second-quarter earnings guidance that was far weaker than expectations and is on track for its worst quarterly profit in two years
While some of us might fail to believe that Samsung is losing its ground in the mobile industry, it is true that it is facing a downwards bump because of the cheaper Chinese alternatives and its biggest rival Apple. Samsung’s second-quarter earnings guidance was revealed last week and it wasn’t as the company had expected; the financial results appeared to be weaker than before. The price competition and higher inventory levels in China have driven down the profits for the South Korean tech giant.
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According to research firm Counterpoint's survey of 35 markets which account for 90 percent of the global sales, it was found that the sales for the eight-month-old iPhone 5s stood at 7 million in May while Samsung had 5 million for their flagship Galaxy S5. However, after a March release, the S5 was only in its second month of sales. The survey also revealed that the S5 hasn’t been doing so well for Samsung as compared to the success of the S4 in its early months. We can say that the results of this survey were quite reliable since the data measure retailers' sales to consumers as opposed to typical industry data that look at shipments made by the manufacturer.
Tom Kang, a Seoul-based analyst for Counterpoint pointed out that in June the sales for the Galaxy S5 remained at 5 million units and it this can be attributed to the fact that it didn’t quite meet the expectations regarding display and the outer case. "They made one mistake, one product that didn't hold up to expectations and they are paying the price," he said in a phone interview. "They will have to move forward and leave behind what has failed and focus on the next product."
Apart from the inventory buildup, Samsung is facing other major problems too. Samsung provided no shipment figures and also remained silent on the Counterpoint data. "We will strengthen our product competitiveness by reinforcing our premium brand reputation, powerful product line-up, and cutting-edge technology," the company said in an email statement on Wednesday.
According to a research firm Canalys, Samsung also lost its market share in the first quarter of 2014 when it fell to 18 percent from 20 percent a year earlier. On the other hand, companies such as China's Xiaomi and Lenovo were making gains. The analysts are saying that the answer to this sudden downfall is Samsung’s own fault since they couldn’t keep the S5 as exciting as the consumers had wished for. It just didn’t offer enough to encourage customers to spend more for it.
"Most major smartphone brands worldwide are battling brand fatigue at the moment," said Strategy Analytics analyst Neil Mawston. "Consumers love their smartphones but almost all hardware, software and apps now look, feel or cost the same."
As opposed to Samsung, Apple is having no problems in charging premium prices from their customers who are willing to pay for the apple experience.