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Samsung’s co-CEO and mobile chief J.K. Shin is in the hot seat as the company posts its third straight quarter of operating-profit declines.

It’s fascinating to watch how quickly things are turning for the conglomerate responsible for nearly one-fifth of South Korea’s Gross domestic product.

Operating profits were down sharply, decreasing a whopping 25 percent year over year. More importantly, Samsung’s favorite business metric – the market share – is under pressure, too: its worldwide share of smartphones slipped to 25 percent in the second quarter from 32 percent a year earlier.

This is bad news considering that 76 percent of the firm’s profit comes from smartphones. What gives?

The Wall Street Journal on Thursday issued a damning outlook for Samsung and its mobile chief.

As the second quarter accounted for 61 percent of Samsung’s total operating profits of about $7 billion, J.K. Shin, 58 years old, is feeling the heat as nervous analysts begin to think about the post-Shin era at the troubled company.

Analysts have also been harsh in recent weeks. In a note to clients in early July, Daniel Kim at Macquarie Securities wrote that the company needs to “formulate a new mobile strategy from a zero base,” and added that such a move could be accompanied by a “change in top management in the mobile division”—a tactic the company has resorted to many times in the past.

The recent smartphone struggles have reportedly forced “hundreds of senior managers” in Samsung’s mobile unit to take a 25 percent cut in their first-half bonuses. Samsung told WSJ that speculation about management changes is “groundless.”

Some of Shin’s deadliest sins:

  • His forecast of phone sales was too optimistic, leading to a glut of unsold devices. Tim Cook’s mantra that inventory is fundamentally evil applies here as unsold devices pressure the company’s bottom line.
  • Samsung publicly admitted that higher inventories of unsold smartphones are forcing it to increase marketing expenditures to sell the devices.
  • Samsung is pressured on the high-end by Apple and its iPhone. Worse, the premium market segment is now nearing its inevitable saturation point.
  • On the low-end, Samsung is getting squeezed by Chinese phone makers like Huawei, ZTE, Xiaomi and others. These companies build phones that offer same or similar functionality as Samsung, but are a lot cheaper.
  • Apple is seeing a lot of success in China, its third-biggest market. Apple’s revenues in the 1.33 billion people country rose 13 percent from a year earlier to $9.3 billion.
  • Samsung owes much of its success to aggressive advertising, but now it has to reign in costs. In turn, marketing expenditure could be reduced which would further hurt the firm’s market prospects.
  • The Galaxy S5 seems to be a dud as even Shin recently conceded that the flagship handset lacked “eye-popping technologies”
  • Apple’s counterattack is expected in two month’s time in the form of bigger iPhones, new iPads and rumored new products like the iWatch, which will further steal Samsung’s thunder. According to The Korea Times, Samsung is now desperately rushing to bring the Galaxy Note 4 phablet to market before the iPhone 6 launches.
  • According to IDC, (warning: IDC tends to make up their numbers), Samsung’s global smartphone market share slipped to 25 percent in the second quarter from 32 percent a year earlier.
  • Samsung is at odds with its partner Google over UI overlays and its own replacement software for much of Google’s stock Android apps.
  • Tizen, Samsung’s open source, Linux-based mobile OS designed to help the firm distance itself from Google, is going nowhere. Recently, the launch of the Samsung Z, its first Tizen smartphone, was delayed as the firm needed additional time to “enhance the Tizen ecosystem”.

Indeed, Samsung itself in a statement attributed the sales decline to its inventory management, China business and tablet sales, citing increasing competition from low-to-mid-end smartphone makers.

WSJ profiles Shin as a successful executive who joined the company in 1984 and “emerged from relative obscurity” to make Samsung the #1 handset maker in the world. For this, he was rewarded with about $9.4 million in compensation in the first quarter alone.

It’s interesting he didn’t attend a top university and instead graduated from Kwangwoon University in the suburbs of Seoul with a degree in electronics engineering.

In 2011, he took charge of networks and cameras, in addition to mobile phones. By 2013, Shin was promoted to Samsung’s co-CEO.

Samsung Galaxy S5 (concept, Concept Phones 002)

The executive is frequently attributed with key decisions such as adopting Android and the creation of the Galaxy S series which led to a multi-year legal spat with Apple over patent infringement.

I’m imagining Samsung’s leaders emailing a link to the WSJ report to their subordinates, with the subject line saying “We have a lot of work to do to turn this around”.

Following the January 2013 Wall Street Journal article entitled, “Has Apple Lost Its Cool to Samsung?” Schiller emailed Media Arts Lab, Apple’s long-time ad shop within TBWA, and told the agency the same thing, that “We have a lot of work to do to turn this around”.

What a difference a year makes for Apple.

To quote Jay Yarrow of Business Insider, the time may have come for Samsung to admit that Apple knows exactly what it’s doing with its iPhone business.

Thoughts?

  • Maxim∑

    I hope Samsung crashes like Blackberry

    • mav3rick

      …and brain washed sheep live only on pomes…

      • Maxim∑

        I dislike Samsung a lot. That doesn’t mean another android competitior can’t take samsungs place.

        Call me a fanboy all you want, everyone knows Samsung is a sneaky company

      • likeaboss37

        and why are they a sneaky company?

      • Maxim∑

        Really….

        Benchmark boosting, leaking internal legal documents, paying others to write negative reviews on other products. And the list goes on

      • likeaboss37

        Apple is not perfect either lol… I am an Apple fan and always will be, but no company is perfect. Samsung makes a good product, it’s just that Apple is better! much better!

      • Maxim∑

        I agree Samsung does make some good products however lately they’ve been hated even in the android community.

        OLED technology is great and so are samsungs displays. But the S5 which I’ve owned was full of the same exact problems that all the previous galaxy models. Which is touchwiz

      • likeaboss37

        you previously owned a galaxy and then bought the S5? again, another galaxy? why you no go Apple?? lol

      • TeChNoStyLeZ

        You can install cyanogen mod which is snappy and has no lag at all or even better ( in my opinion ) just install a custom launcher like nova, uninstall the bloatware you dont need. So you are getting rid of the lag since you are not running on touchwiz anymore and you dont have the bloatware but you still get all those awesome features that samsung provides

      • hush

        No. Cyanogenmod or any other ROM of its kind break all those air gestures and (imho gimmick) features that Samsung provides.
        Also the reason Android community hates Samsung is that knox thing they added in the boot loader.
        If I buy a Samsung Galaxy S5 because let’s say hypothetically I like its design and I install pure google edition ROM on it the boot loader shows knox 0x1 instead of 0x0 which voids my warranty.
        iOS might be closed operating systems and iPhones might not be the spec sheet beasts but they work fast and fluid without user modification required. And even if you jailbreak you can always restore easily and use your warranty. (BTW Samsung copied iTunes as well, it’s called Kies and it wouldn’t work with Samsung devices with modified OS)

      • TeChNoStyLeZ

        I think there is a way to set knox back to 0. I had an s3 about 1,5 years ago which had a hardware problem and got replaced by samsung and it was rooted. I guess I was lucky but anyway. iPhones do what they have to do right without lag or any problems and they also provide most of the features someone would need for his everyday life but an android device provides more. If you are bored and dont know what to do an android device will have a lot more stuff to play around with

      • hush

        I read that it’s impossible to override the 0x1 code (at least on a GSG4)
        I personally love tweaking and messing around but when I’m not doing it I expect my phone to just work. Android (in its form of SGS4 and TouchWIZ) doesn’t work for me. Besides I hate ugliness and inconsistency. I hate when I have to run gingerbread designed apps on kitkat. That’s present on all android devices. Now add to that mess TouchWIZ or Sense + gingerbread apps + kitkat apps and it becomes a total mess. I like nexus but the problem remains. And I’m sceptical Material Design will change anything although it’s really nice. Unless OEMs give up their skins (of which I admire Sense) but that’s not gonna happen anytime soon.
        When I get bored of my iPhone I just jailbreak it 🙂

      • Fabio Rodrigues

        Kies doesn’t work even with stock ROM

      • Kr00

        Samsung have bastardised the Android brand with things like Touchwiz. I don’t know many Android fanboys that like touchwiz one bit.

      • jack

        stop being a hypocrite

      • likeaboss37

        what are you talking about?

      • Chris

        Perfect reply

      • Ishaan Malhotra

        The only good phone samsungs ever made in my opininion is the note 2. All other products ive owned from samsung have been very troublesome. G S4 and a samsung smart tv i owned gave me a lot of trouble, though the screen quality of the tv was the best ive had.

      • jack

        dont forget their CEO was convicted of tax fraud

      • Kr00

        No, he was convicted of corruption and, to quote..

        “On January 14, 2008, Korean police raided Lee’s home and office in an ongoing probe into accusations that Samsung was responsible for a slush fund used to bribe influential prosecutors, judges, and political figures in South Korea.[21] On April 4, 2008, Lee denied allegations against him in the scandal.[22] After a second round of questioning by the South Korean prosecutors, on April 11, 2008, Lee was quoted by reporters as saying, “I am responsible for everything. I will assume full moral and legal responsibility.” On July 16, 2008, The New York Times reported the Seoul Central District Court had found Lee guilty on charges of financial wrongdoing and tax evasion. Prosecutors requested Lee be sentenced to seven years in prison and fined 350 billion won (approx $312 million USD). The court fined him just 110 billion won (approx $98 million USD) and sentenced him to three years’ suspended jail time. Lee has not responded to the verdict.[23] Months later, South Korean president Lee Myung-bak pardoned Lee so he could remain on the International Olympic Committee.[6]”

      • Ваше Онтатиле Масвибилили

        can you believe at one point they paid apple a billion dollars in 5 cent coins!?

      • Parth Patel

        Yep other android makers are eating into samsung marketshare.

      • mav3rick

        You’re just an user, either make billions on your fervor… After your money they get your devotion, this is the perfect consumer.

      • hkgsulphate

        Many people dislike samsung for being a copycat
        they have no problems with other brands like Sony and LG

    • Dan

      Silly fanboy, you do know that competition pushes companies to innovate right?

      If Apple were a monopoly, they wouldn’t have to work at all to keep their customers. You should wish Samsung good luck and hope they come out with great ideas that will push Apple to do better,

      /rant

      • Parth Patel

        Apple never had a monopoly an never will.

      • Nuno Xavier

        They don’t need to have a monopoly, all they need is loyal customers to the brand’s products, the rest they don’t care

      • Rowan09

        Agree. Apple’s business model will not create a monopoly because they keep their tech for the most part to themselves.

      • likeaboss37

        apple = quality not quantity

      • Dan

        never said they did, why I said IF

      • Parth Patel

        And im saying they never will because its the chinese vendors who are eating into samsung’s marketshare not apple. Apple’s marketshare is declining. If samsung fails, those phone makers will take its place and not apple.

      • Parth Patel

        And btw its samsung who has the highest marketshare now. And LG, xiomi, htc, sony, lenevo etc are doing more innovation by selling high end phone at lower prices.

      • Rowan09

        Apple’a market share in China is increasing not declining.

      • Maxim∑

        You act like Samsung is the only android OEM…

        Plenty of others like Xaomi, and LG are fully capable of growing as large as Samsung

      • grumpyfuzz

        Except they’re the largest OEM. The more OEMs, the better off we are. What do you not understand?

      • Decio Arruda

        Copying, cheating and not innovating is what Samsung is known for. Plus, a company that still insists on not going green, dirty advertisement anf much more? I mean, even Android would be much better off without Samsung.

      • whoajack

        right, and by not innovating you mean coming out with huge phones that apple thought was stupid….. until apple is now copying them with the iphone 6 plus. ok, sure…

      • Technocrz!

        Some what i agree, but instead of samsung any XYZ is welcome.

      • hush

        At this moment I wish luck to HTC, Sony, LG etc because they deserve better market share and appreciation. Their devices are genuinely better and because of Samsung’s shitty galaxies those companies can’t afford to make even better products.

      • Chaotic Buddhist

        You know, that term “fanboy” identifies you as an idiot whose opinion is irrelevant.
        Until you can discuss technology without name calling, you should refrain entirely.

      • Kr00

        What a stupid comment. Apple run their own race, they always have. They don’t have meetings about what they can make that someone else is doing, they just make their own stuff. No company in history has done what Apple have done, and they won’t stop doing it.

      • Dan

        You are seriously delusional if you think that. Apple borrows features from the jailbreak community and from android all the time. Apple is rarely the first at anything, they just do it right when they do, which. Is good.

      • Kr00

        I think you’re the delusional one, with an agenda. You seem to get your knickers in a twist about who does what first, but what the most important thing in the end, is who does it best. Without the iPhone, there would be no jailbreak community, or android as you know it today. How many attempts did microsuck have at making a tablet device? A few, and they all failed. Apple does it one time, and well, the rest is history. Same with MP3 players, laptops, desktops, yet I dont see you screaming about those who have copied and followed Apple. I’m not sure why you come to an Apple blog to spew your uninformed bile, but may I suggest you see someone about your inferiority complex. It’s sadly obvious. Now back under that bridge with you.

      • Dan

        I didn’t get my knickers in a twist you twit, I said apple isn’t the first but they do it right. And I said that was a good thing. Which is why I have an iPhone and an iPad. I think you are the one with an inferiority complex. Go back to your basement.

      • Kr00

        Your response just proved by point. Thanks.

      • Dan

        Whatever man, done wasting my time. Glad it made you happy. Good day to you.

    • CS

      Stupid. Apple will be able to hike up prices on everything with no competition. They also won’t have the motivation to revolutionize their products. We’d still have a tiny screen if it wasn’t for Samsung making bigger screens on their phones.

      • RuddyN

        I, along with many, many others, actually prefer a smaller screen. That was one of the best features.

      • aw81

        Couldn’t agree more, no idea what the fuss over bigger screens is about…

      • Michael

        old mindsets left over from the 90s. Remember when everyone wanted a bigger TV? Basically the same, thoughtless motivation. Bigger is better, right!? Murica!

      • likeaboss37

        no they were just the first to come out with it. That’s like saying “we wouldn’t have had smartphones if Apple had not come out with the original iphone back in 2007” … bigger screens would have come

      • Rowan09

        I agree people repeat the same cycle. We didn’t want big phones which existed on Windows Mobile (I had like a 7″ smartphone) because we wanted smaller phones and now we’re moving back to bigger phones again.

      • likeaboss37

        indeed. Well said sir… Supply and demand. The market follows the demands of the people

      • Rowan09

        This is just not true. Regardless of what company they will be forced to innovate because of investors and inflating price is also not true. While I agree competition is great sometimes it doesn’t do much. Most companies all follow each other for example throttling data, unlimited minutes, etc especially here in the US. Samsung is reaping what they sowed, they bragged and blamed Apple for not innovating and raising sheep while they are looking for the same cult following. The S3 looks like the S4/5 and they blamed Apple for the 5-5s looking very similar. They use to brag about sales number, but they stopped giving sales figures and now only give shipped numbers. From my experience IOS owners don’t hate Android they prefer IOS but, Android owners in most cases hate IOS.

      • Parth Patel

        That only happens when apple is a monopoly.

      • hush

        only credits don’t go to Samsung!
        HTC was the first company that made their flagship device with a screen bigger than 4.3 inches. At that time Samsung was still trying to make the galaxy an iPhone with a Samsung branding.

      • Kr00

        Ummm, Apple pioneered the PC market and innovated their ass off, when no-one else was interested, not even IBM. Then guess what happened. Apple do what they want, and siting on their ass isn’t one of them.

      • CS

        They did because of competition. Apple didn’t invent the computer- they improved upon it .Apple didn’t invent the tablet- they improved upon it. This is all because of competition with Samsung and other companies. Samsung failing would create a huge gap between Apple and other companies allowing them to be less quick to the punch on innovation because there isn’t another company that’s going to do it!

      • Kr00

        Please don’t verbal my comments with your biased crap. Did I say Apple invented the computer? If so, please highlight it! Please show me where I said Apple invented the tablet? Your straw man arguemnets show you have no understanding of anything I’ve said. Samsung have a seriuosly bad track record of outright copying competitors, under cutting on price to kill it’s competitors to monopolise the marketplace, just for profits. If you can show me where Apple have done this, anywhere, I’ll shut up.

        FYI, Apple only became a competitor with Samsung when they made the iPhone copycat. Before then, Apple created those markets.

      • Dogen Zenji

        This statement is quite inaccurate. Apple revolutionises its technology not because of what others are doing or what the market wants but rather what it firmly believes what will be the next big thing and how to deliver it best.

    • Krishna101

      Samsung is not the only thing to think about. If it were to ‘crash’ then South Korea’s Economy will take a heavy hit. Competition between Apple and others will be non-existent since Apple will be the prominent smartphone maker! So think twice before wishing for something on a whim.

      • Rowan09

        But the smartphone race now on Android is totally controlled by Samsung and yet other manufacturers are still surviving. If Samsung fails which I don’t think they will someone else will take their place.

    • Parth Patel

      I hope htc takes their place.

      • likeaboss37

        htc would be much worse

      • Parth Patel

        No. Htc makes the best android phones.

      • hush

        not only they are well constructed
        not only they are designed beautiful
        but also Sense is so much better and faster than TouchWIZ

    • likeaboss37

      you do know that Samsung creates several parts for the iphone, right? So if Samsung goes under… Apple will be in a wad over their parts that they need to make their phones…

      • Maxim∑

        Lol you do know apple is worth half a trillion. And generate several billion in revenue per quarter. They have plenty of resources. Samsungs fabrication plant is only being used because apple is locked in a contract until 2016

      • Arsanny Lintang

        What are you guys talking about?, blackberry is still the best phone I the market. Lol

      • Exactly! I laugh at comments suggesting Apple needs Samsung when they could quite easily build their own factories and create components in-house should they have to…

      • @dongiuj

        Apple could buy into Samsung keeping Samsung afloat while getting greatly reduced prices on the parts that apple require. I think that’s what Apple did with Sharp, isn’t it? Sorry, I could be wrong about that.

      • Kr00

        Samsung are run by a Korean cartel family. You’d never find a non Korean run that lot, let alone anyone from Apple.

      • Rowan09

        Samsung’s phone division and manufacturer division aren’t the same. Samsung makes money on both ends with the phone division being number 1.

      • Michael

        Apple’s moving away from using Samsung, which is just more bad news for Samsung.

    • Matt

      Just what I was going to comment *grin*

    • Chris

      Let’s say samsung crashes less competition for apple = new phones with nothing new in them I personally hope Samsung ups the stake = better phones for all

    • Jadǝ Purǝlica

      Wow, that is a very non-educated and valueless comment. I’m sure even Apple wouldn’t wish that on Samsung. Competition keeps innovation and intelligent minds alive.

  • theappleogist

    Must you finish what was otherwise an incisive article with a quote from a polluted source – Business Insider?

  • Leon

    I like Samsung and I like competition, I hope the company turns this around. Competition leads to better prices for consumers.

    • Rowan09

      No it doesn’t. All these prices are all similar and industry standard.

    • Michael

      I like good competition. Samsung has only facilitated a race to the bottom of the junk market.

      Bring on HTC and Motorola.

    • Kr00

      Except Samsung have been found guilty many times over the years in corrupt price fixing deals. Screens, chips, hard drives, etc. I wouldn’t trust them. The only time they drop prices is to kill off its competitors. Ask Pioneers television devision.

  • Flyhigh

    What the hell is this quote at the end of the article ? xD

    It’s just about the fact that everyone has a smartphone nowadays and not everyone changes it every year like a blind (put-your-favorite-brand-here)sheep consumer ! The market is satured, end of discussion.

  • JP105

    This reminds me of when people were freaking out about Apple’s profit declines. And this guy talking about Samsung’s “collapse” is delusional. It is not like Samsung is losing money. It still made 7 billion in profit. Like Apple, they now have to deal with the price declines they helped to create. The rise of the galaxy squeezed (I’m talking relatively here) Apple’s margins for once, and now the rise of numerous other phone makers, especially in China, are squeezing Samsung’s margins.

    Apple and Samsung are both completely fine people…

    • likeaboss37

      well said

    • Rowan09

      Not true. Samsung needs Android, while they are trying to distance themselves with Tizen it’s just not working. Samsung isn’t broke but you watch trends and they are on a downward trend especially with their new S5. Samsung doesn’t even give sales figures anymore only shipped numbers because they knew this was coming. Google is the winner with Android and that’s why Amazon and forked versions are kept away by Google for Google services unless rooted.

  • Rowan09

    Samsung should have known this was coming, Google is obviously the clear winner with Android. Samsung was suppose to use Google to build its brand and go to Tizen, but it didn’t work out for them as planned.

  • Byron C Mayes

    Samsung isn’t going anywhere. Samsung’s CEO, on the other hand, will be out sooner than later.

    • Kr00

      Back in jail perhaps?

  • Jason Baroni

    This may be my favorite article for the past 2 years, and not because it crashes Samsung, but actually because it shows what is really going on. I am sick of people saying that Apple is going behind the market after Steve Jobs, and believe me, the media in my country feeds light users with such news from nowhere.

    Samsung is a great competitor, but they put themselves in an awkward position trying to sell 50 models of smartphones for every different country in the world, just to compete. They have missed the DNA thing.

  • Arthur Geron

    I’m sure there any lots of companies ready to be a new competitor for Apple..

  • jack

    wtf is a co-ceo

    • Dan

      Google is your friend.

      abbreviation for co-chief executive officer: the title given to each of two people who share the job of chief executive in acompany:

      Mr Michaelsen will be chairman and co-CEO in charge of the offshoreoil production business.

  • Darryl Barnes

    Before the iphone samsung was trying to rip off blackberry than after they started ripping off apple. Not a single original thought.

  • TeChNoStyLeZ

    the note 4 is gonna be a beast. But I already see the applefanboys saying ” 5.7 inches is way too big for a smartphone ” while waiting for the 5.5 inch iphone 6. ( btw im not against apple , I had an iphone 5s, ipad 3 and a lot more apple devices in the past but I got tired of the iOS simplicity, I want features lol )

    • TwinSon

      The S3 was a Beast.
      The S4 was a Beast.
      The S5 was a Beast
      The Note 3 was a Beast.

      Chill.

  • Technocrz!

    Samsung problem was they showed all their cards so fast, now they have nothing, iPhone will be 4.7″ this year almost after 5 years since samsung launched big screen, but this is hype and now they will become cool.

  • JulianZH

    Samsung ran out of ideas to copy?

    • Michael

      I think their last shot was trying to “copy” the iWatch while it was still a rumor. Didn’t go very well.

  • jbelkin

    Samsung is being out copied by Xiaomi who claims that their mock iphone looks nothing like an iphone so they’ll have a 3 year run and be replaced by the next copier … basically the android OS scenario is the same as the WIN PC market* – it’s a race to lower prices and margins – EVERY #1 WIN PC that holds that crown is either out of business, out of the PC business or losing money after a year or three …

    * At least in the WIN PC market, manuafcturers and MS made a trillion dollars – meanwhile, Google’s Android skipped the money making 15 years and simply went from intro to fight to the lowest price money losing race.

    Of course, Apple stays above this fray as it does on the PC side – the iphone has 3X the AVS price of the android phone as it does on the PC side with the mac. Gee, you think Apple might be smarter than an analyst sitting at a desk on WS?

  • Royce Otero

    I get what I pay for.

  • GuyBey0ndC00L

    Samsung makes 20 Galaxy phones a year lose sells. Apple makes one phone (5c is just a i5 in plastic lets be real) a year and destroyed all.

  • Roland Adi Nugraha

    recall what Jobs said “People who are serious about hardware should make their own software”. unlike Blackberry that blinded by its own myopia, Samsung should find solutions, fast.

  • Diego

    Samsung owners usually just consider the hardware, oohh I’m have octa core, I’m have 2 3 4 gigas of ram, I have 10 20 30 megapixels on my camera.
    Just number to impress the non informed people that only care about who have the biggest number.

  • chris125

    It has more to do with the fact there is so much competition in android, not the case with IOS.