Tasting Apple’s bitter pill: Samsung’s smartphone growth story running its course

By , Jul 5, 2013

Samsung anti-iPhone ad (it doesnt take a genius)

In an age of demand for simple, inexpensive smartphones, big is not always better. The latest example is Samsung, viewed until recently as the Asian Apple, it’s Galaxy smartphones keeping Android from sinking into mediocrity. After snickering at the iPhone maker’s spate of bad luck on Wall Street, Samsung Friday lost 3.6 percent of its stock value amid a disappointing quarterly forecast.

With 70 percent of its profits coming from mobile devices, Samsung is in the same leaky boat as Apple. Addicted to high profits from sales of expensive smartphones built cheaply, Samsung Friday forecast $8.3 billion in profit during the second quarter, lower than the $8.9 billion Wall Street expected.

Since early June, the South Korean firm’s stock value has lost $34.2 billion, the market capital of Sony and LG combined, according to one report…

Reuters sums it up nicely:

Now investors fear Samsung may also follow in the footsteps of Apple and other one-mighty players that are struggling with shrinking margins, in an industry where companies live and die by their ability to stay ahead of the innovation curve.

Although Samsung is a conglomerate, more than 70 percent of its profits come from selling mobile devices. It’s that very dependence which makes investors nervous. So is the Galaxy S4 dead in the water already?

“Is Samsung’s smartphone story now over? Not quiet yet,” fund manager Jung Sang-jin tells the news service. At the same time, Samsung’s kick in the shins is directly related to disappointing sales of its newest phone, the Galaxy S4.

Samsung Galaxy S4 ad (Iceland 002)

“It’s growth is indeed slowing due largely to disappointing sales of the S4,” Sang-jin adds.

Samsung earlier this week reported shipping 20 million cumulative Galaxy S4 units into the channel.

Some notable headlines highlighting the Samsung growth story concerns:

  1. ‘Profit at Samsung Disappoints’ by The New York Times
  2. ‘Samsung’s New Problem: High Expectations’ by The Wall Street Journal
  3. ‘Samsung Electronics’ second quarter misses forecast as smartphone worries deepen’ by Reuters
  4. ‘Samsung Faces More Downgrades as Earnings Miss Estimates’ by Bloomberg

Phones such as the Apple device and Samsung’s S4 were introduced at the start and the last breath of what I call the iPhone Parenthesis, a corollary to the publishing industry’s Gutenberg Parenthesis. In short, both companies must deal with a world saturated with high-end smartphones.

Galaxy S4 hanging mid air

“Apple is suffering from iPhone fatigue, while Samsung is suffering from Galaxy fatigue,” opines Strategy Analytics analyst Neil Mawston, whose notable clients include the South Korean conglomerate.

Philip Elmer-DeWitt wrote for Fortune that Samsung may have become even more dependent on smartphone sales than Apple.

Mobile phones accounted for 74 percent of Samsung’s operating profit last quarter. In the same quarter, the iPhone represented 52 percent of Apple’s revenue and 65 percent of its gross profit.

Also, Samsung customer satisfaction losing to Apple on its home turf probably didn’t help either.

Like Apple apparently deciding to build a less expensive iPhone as well as venture into wearable computing (such as the iWatch), Samsung is also reportedly mulling over Samsung Gear, a new wearable technology brand, and temporarily using its manufacturing resources to increase profits.

ISI chart (Apple, Samsung post-launch free falls)
Samsung’s and Apple’s post-launch free falls by ISI’s Brian Marshall, via Fortune.

As we’ve also reported, low-cost handsets already dominate Samsung sales in China and elsewhere. Apart from those measures, Samsung could scale back on its marketing efforts, suggest analysts.

We’re still scratching our heads over this promo for the S4 Samsung aired in Iceland.

While Apple has been criticized for its highly-controlled PR, it’s South Korean rival actually spent more on marketing than on research and development, according to Reuters.

Among the highlights: $4.3 billion – quadruple Apple – on ads in 2012, open shops in more than 1,000 Best Buy shops and even using a Broadway show to kick off the S4.

But did Samsung get much ‘bang for the buck’?

Like a Fourth of July fireworks show during a rainstorm, shipments of the new Galaxy smartphone are expected to increase by 4-8 percent during the second quarter. All of which gives readers a feeling of deju vu.

Of course, Samsung is not alone in releasing disappointing numbers. In related news, handset maker HTC also failed to wow Wall Street.

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  • Gus Me

    Thanks for the S4 Iceland commercial. Not sure what it said or meant but I liked it.

    • Maxim∑

      how can you like that commercial?!?!

      • Gus Me

        I like commercials, the funnier, crazier, “kookier” (which this one falls under) the better. It’s not a Samsung is better than Apple thing… Such hate haha

      • youfanboyslol

        cuz he’s not an applefanboy and doesnt have a dildo up his ass so he can find things funny

    • Mohammad Ridwan

      S4 Iceland commercial is one of the stupidest ad I’ve ever seen…. and I’ve seen a lot of same-song commercial… almost 90% are poor… just begging for attention…

      On the other hand recent iPhone 5 ‘Photos Every Day’ is one of the best ad I’ve ever seen… And almost 95% apple commercial are just exquisite work of art… There is a big difference between these company’s taste…

      • youfanboyslol

        ANOTHER FANBOY HERE

    • alexanderlyd

      its baisically saying ‘s4 understands icelandic’ and critizising iphone for not having icelandic as a language on iphone. the dancing with the sheep i dont get.. this is a crap commercial. also im from iceland.

      • Gus Me

        Thank you for the interpretation, I still would like to know what the sheep/ram has to do with anything.

  • Adham

    Kind of disappointed that expectations rule Wall Street. Both Apple and Samsung have broke their records for profit and sales, but since that does not meet expectation of the investors, it results in damage to both companies.

    • Ignacio Irigoyen

      Even more when the Wall Street expectations are not realistic, they are aware of the market saturation and still expect huge profits, if this is not a way of controlling the market and share price and do not know what it is

    • SirPsycho

      Not at all. Investors/Analysts predict a company will perform a certain way and the stock price reflects those expectations. If the company cannot meet the expectations the stock price/value of the company will come down to reality and reflect the actual situation.

      The only damage is to investors who do not do their own proper research and rely on headlines to make their investment decisions.

  • Piyush

    Disappointing investors with massive profits ? Is there nothing they wont copy from apple ? XD , joking guys.

    • Ignacio Irigoyen

      This comment made my day.

  • bw00ds

    Totally bizarre commercial. There must be something about Icelandic culture that we definitely do not understand…

    • Guest

      racist

  • Dan

    It’s basic business economics. Several competitors fight for the top spots. The market then becomes saturated (everyone has a cell) and companies are forced to innovate to distinguish themselves or die (ie: Blackberry). A few remaining giants remain and share the market. It’s unrealistic to believe sales will always sky rocket.

    • Kurt

      Plus, in America some or all? of the cell companies are making their customers fulfill their 2 year contract before upgrading. That has to be a loss of millions of sales to both Apple and Samsung.

  • Pitchy

    I wish I could lose 34 billion dollars and not have to worry about it.

  • Joseph

    “it’s Galaxy smartphones keeping Android from sinking into mediocrity.”

    Bullshit. There are other good Android devices and you know it. Stop being a fanboy and open your eyes. Your master race OS may be good but Android has it’s own perks. Then there’s the fact that you jailbreak to make said OS more open, which Android is by default. Please, do us all a favor, iDB writers. Stop with these articles directly about Android or Samsung. You’re starting flame wars and pissing everybody off, and it’s not productive at all.

    I came to this blog to read about tweaks and news about my Apple devices, not about Samsung and to see the war going on in the comments. Don’t tell me to look at the feeds for only jailbreak news, this shouldn’t be happening at all. Stick to your home field and keep up with Apple news, not Android.

    • Mykel Monroe

      LOL, dude… you’re the one starting a war about it. This isn’t your blog. The writers who pay to keep the server running are in full control over the content they post. If you don’t care to read the article don’t. I don’t read every post on this site for the sake of reading it. I read them because they interest me.

      IMO Android is mediocre. Just because something is “open” doesn’t mean it is better. I actually like my “closed” OS. I’m really not dreading the fact that I won’t be able to JB iOS7 for awhile. I can do without because they are making huge advances.

      It’s people like you who cause the flaming and trolling. I dig how you have your own opinion about things and you should share it but try to use some points that aren’t old news. All this “open” “closed” shit is stupid.

      • Kurt

        Dude…or Dudette? he is giving his opinion. That’s all. @Joseph has that right, no?

    • mehrab

      Uh it’s kinda true you know? Galaxy loine are the android flagships that people actually buy htc? They are sucking this year in terms of sales Motorola? The same too. If their was no galaxy phones who knows if android wud be here til today

      • Joseph

        Not all Android devices are phones.

      • mehrab

        Yeah ikr?okay samrtphones*? There are millions of people using android tablets!!!! And now some laptops too? :OOO SOO COOOLLLL!!!! Oops sorry but ummm people dont really buy those crappy tablets even if they do they are left on their drawer for life after unboxing lol.

      • Joseph

        They’re still better than the bullshit that Apple pulls off where the iPad is stripped of features after a year, with them citing the reason that it’s obsolete.

        Nexus 7 sales surpassed one million last December and are going strong. Galaxy Tab sold 2 million after three months of being on sale. There are more sales numbers for other tablets, go look yourself. The iPad has typically sold much more, but that doesn’t mean that Android can’t hold it’s own, especially once you give it a try.

        I use a Nexus 7 but I go on an Apple blog. Not to troll, but because I use both Android and Apple products (and Windows 8!) because they all have their own perks, all of which are useful for me or that makes the device fun to play around with. It’s barely a silly excuse for an OS when you realize how many people use Android, and how many jailbreak tweak devs port over Android features to iOS. So, do me two favors. Firstly, get the hell out of the past. I know Android used to suck, before Ice Cream Sandwich. It’s a good OS now. Second, stop being a biased fanboy and take a look at both sides *fairly*, not with biased hate towards one side, along with the people who use it.

        Good day, sir. Conversation over.

      • mehrab

        I dont hate tablets for android are not even close i bough a nexus 10 for gaming and web browsing web browsing was okayissshhhh gaming was well it wasnt as good as my ipad 2 in terms of graphics sooo umm yeah. Thendisplay itself was good tho. Tried the nexus 7 too! Eventually the ipad 4 won me over umm like duh? They dont even have tablet apps let alone apps for the nexus 10 res. those sales are sadly no where near to apple sorry. Oh btw the nexus 7 is slower and more laggy then theeeeeeeeeeeeeeeeee galaxy nexus LOL

      • Joseph

        Why should I trust someone who can’t spell for shit, firstly? Secondly, I’m using it right now and it can’t compare. :)

        Anyways, you just decimated your own point by trying to compare an Android product to an Android product when you were trying to defend iOS. Congratulations.

      • mehrab

        Lol who cares if i cant spell? Okay *pays attemtion” no i compared that bcos that tablet was way slower then last last years nexus smartphone lol. The nexus 7 is a horrible tablet. Its horrible for web beowsing and gaming. Its JUST HORRIBLE just scroll thru thevergedotcom just pllay modern clmbat 4/ fifa 13 btw ipad mini plays this games at full settings perfectly oh and btw it is bigger but still thinner lighter all aluminium nice cameras and 400″000 tablet apps i would be surprised if android even has 400 lol. Im sorry i know i sound like a hater but the nexus 7 is just saooooooooooooo lagggggggyy and sloowww i see in youtube comments faandroids going like if you want a good gaming/web browsing tablet buy that shitty low speced ipad mini cos the nexus 7 is slow

      • Joseph

        …I play Modern Combat 4 and FIFA 13 at full FPS. You’re weird. :)

      • mehrab

        Thats not true. And even if you did (which you did not at full fps cos you dont even know what full fps looks like playing those games on a mini) youplayed it on the lowest settings and theres no fifa 13 on android :*

      • Joseph

        Then you just lied about your claim that the Galaxy plays it better. :)

        Also, I benchmark. I can clearly tell what 60fps looks like. Don’t think otherwise, it’s not particularly hard.

      • Joseph

        There is one thing I’ve noticed you’ve forgotten. Android devices tend to have different processors. Just because one game isn’t optimized for Tegra 3 doesn’t mean other great games won’t play amazingly. It just turns out that MC4 plays fine on mine. Your Nexus 7 video also shows it running rather well and enabling features that the other devices didn’t have. The Nexus 10 is different because it’s a different device, different chip, different manufacturer, etc.

      • mehrab

        Haha aww cute! It’s faster the galaxy nexus is faster at basic apps the nexus 7 can’t even scroll smooth on Facebook (you know that I bet) you thing that the regrade 3 OPTIMISATION is showing of s’more effects? That’s true more effects then other andrpid* devices apple devices show the most effects about the processor that’s no excuse that’s why I hate android please checkout mc4 on mini and this “iPad mini vs nexus 7 lockergnome

      • Joseph

        Except you weren’t telling me to compare it to the iPad Mini, you were telling me to compare it to the Nexus. Now, stop typing your comments in twenty seconds. I can hardly read your comments and I see no reason why you’re trying to rebuild your scarred pride on a four day old article where you’ve clearly had your point shattered or proven nonexistent multiple times now.

        On that note, I take my final leave, and you can have fun talking to yourself and proving your point to no one.

      • mehrab

        Wow bro. How dumb can you be? The galaxy nexus performs better then the nexus 7 and thenipad mini trumps the nexus 7 that was my point.

  • Gorgonphone

    samsung suuucks… that is all

    • Kurt

      Enjoy your iphone made of LG and other inferior company’s parts

      • Cameron Chao

        I never once felt its inferiority. Maybe i should tell myself its made by LG and feel depressed by that fact.

      • Kurt

        LG screen vs Samsung screen

      • mehrab

        Made by lg,samsung,sony just to name a few? I have/had flagships smrt phones from all those brands except lg. and you know what? I still prefer the iphone. 5 reasons why. IOS (simplicity it seriously was weird how it took them a while to get quick toggle tho but they perfected it on ios 7) appstore performance consistensy design.

      • Kurt

        Ughhh…people upvote your comment when you’re not even talking about what we were talking about. LG and Samsung have been making iphone screen as well as ipod touch and iphone. NOT APPLE.

        LG screen’s on ipads and so on, are inferior to the Samsung ones. My wife’s 4s is an LG screen. it is very yellow and dark compared to my Samsung which is very white and bright. My iPad has an LG screen which has a big problem with ghosting. And quit disliking my comments when you are not even talking about the same thing as I am.

      • SkyFall

        Samsung uses AMOLED which is known to produce lively colors but most of the times over saturated. Also Apple switched back to Samsung to make its iPad/iPhone displays. Also LCD screens ( Apples uses them ) are known not to displaying colors as goodly as AMOLED displays do. And Steve Jobs said ( Steve Jobs biography ) that they aren’t making their own parts for their devices cause it is too expensive.

    • Dominik Odobašić

      I think Disqus should limit commenting to those older than 12.

      • Gorgonphone

        I think samsung should suck less

      • SkyFall

        If Disqus had that your account would be one of the first to close.

      • Dominik Odobašić

        Uh, I don’t think so.

  • Carlos Franklin

    Well its because of Android you apple fans are getting more options in the next iOS.
    Competition is good, as this keeps R/D moving!

  • Kurt

    “Also, Samsung customer satisfaction losing to Apple on its home turf probably didn’t help either.” wasn’t it a point difference? And by the way, no one owns iPhones in korea anymore. everyone owns Samsung devices. Doesn’t that matter? Only die hard apple fans, who are very satisfied with their device, own iPhones. It’s rare to see an iPhone anymore.

    • mehrab

      Its rare to see an iphone anymore. Ummm WHAT?????????

      • Kurt

        Come to Korea and try to find one.

      • mehrab

        No I’m good.

  • Girish

    die die shamesung!! :P

    • Dominik Odobašić

      Oh, that would so positively affect the industry! Dumb people everywhere.

  • leart za jmi

    Shamesung always sucks.

    They build their popularity through vulgar ways…

    Paying people to express their fake love for Shamesung.

    Copying up to details the competitors.. (Apple, Blackberry, Nokia etc etc)

    Paying the web site, to always keep the first page of their product..

    Paying tolls to bad mouth competitors.

    And their product is not that good and highly overpriced for a copy product since they used technology invented by someone else…

    Whenever I hear the word Shamsung i feel disgusted…

    • Joseph

      I bet you feel disgusted with your iPhone, then. :)

      • Guest

        Ok

      • leart za jmi

        you are free to bet

      • Joseph

        I was referencing how they currently make some of the parts for it. No need to dislike.

      • leart za jmi

        I was talking about etiquette, not about hardware components

  • D.

    How random was the dancing in the ad? Like the ad wasn’t random as f*ck already.

  • Erutnevda Emit

    I can see why there is always pointless arguments over the internet of apple fans and android fans of which phone is better, but for samsung to continue with these ads that do the same is pathetic. Samsung should act like an industry that “supposedly” innovates.

    • Joseph

      Some of their features like pausing a video when you aren’t looking are innovative, but pessimists and Apple fanboys/girls just say it’s completely useless and say it’s not innovative at all, which leads to comments saying that Samsung doesnt innovate.

      Afterwards, when a feature Samsung made is finally included on the iPhone, Apple fanboys/girls fangasm. It’s a vicious cycle.

      • Erutnevda Emit

        It really doesn’t matter who makes what anymore. Its only a matter of time before all phones are identical in every way because innovation will be a thing of the past.