adminSEOUL – Samsung Electronics confirmed that it has been cutting its reliance on sales of pricey mobiles to meet the growing demand for budget smartphones in emerging markets.
But that doesn’t necessarily mean that Samsung has shifted its priority towards low-end smartphones.
Rather, according to the latest company release dubbed the “2014 Sustainability Report,” it is promoting a “two-track” approach – high-end smartphones in developed countries and low-end devices in China and India.
“In the past, developed markets drove smartphone market growth. But, we see the market axis has shifted to emerging markets, and this means those emerging economies will drive up the demand for smartphones.
“China and India are now the world’s biggest and third-biggest smartphone markets, respectively,” it said in the statement.
Such a strategy change is sided with the new market trend as new order prevails in the global smartphone industry thanks to the emergence of budget smartphone vendors.
Specifications are no longer a key deciding factor for consumers as they are attracted by competitive device pricing and software factors.
The Samsung statement added that the global smartphone industry shipped more than 1 billion smartphones last year and it is estimated that the industry will grow at an average rate of 10 percent throughout 2016 powered by new demand in emerging markets including China and India.
“As well as the premium smartphone market, Samsung is going to actively feature ‘Galaxy Identity’ even in budget smartphones. By loading customised specifications according to markets, we will try hard to satisfy consumers with maintaining affordable pricing strategies,” Samsung Electronics said.
On tablets, which the South Korean technology giant identified as its next growth engine in its mobile division, Samsung said it will seek to strengthen its competitiveness in content, appealing to surface design and improved after-sales services.
In a rare admittance, the company’s chief financial officer Lee Sang-hoon said its second quarter earnings would be “not that good.”
Thus, Samsung’s second quarter earnings performance may cause some concern in the company.
“It’s fair to say that a decline in profits this year will be logical and the problem is that the profit decline is an indication that Samsung should prepare for what’s next,” said an official at the company, adding other brands are tirelessly delivering quality low-end mobile devices, while the Android market gets oversaturated by many alternatives.
Samsung is closely monitoring the effects of Amazon’s latest Fire Phone as that phone is customised for target consumers with “competitive pricing.”
With AT&T of America, the phone costs less than $199 on contract, though users could access Amazon-owned content.
Investors and market analysts say such changed strategy will boost margins of its mobile division thanks to a better mix.
“Overall, we still see the mobile division profits up in 2014 from the previous year. Samsung wants to prepare for a refreshing of the mid- and low-end product line-ups for the remainder of this year by clearing up remaining inventory,” Bernstein Research senior analyst Mark C Newman said in a note to clients.
“The decline in smartphone margin we see happening due to more low-end smartphone unit mix is moderate,” the research firm added.
Thanks to Samsung’s unrivaled scale, cost competiveness and distribution, the company is well-positioned to continue to grow handset volumes profitability even at lower prices.
The Samsung statement said it will lead over rivals in devices that support super-fast Internet – fifth-generation (5G) – as it is eyeing bolstering its presence in 5G-enabled devices in the United States, Japan and Europe.
As for its software strategy, Samsung said it operates separate development units according to different software segments and stressed it’s been consistent in scouting qualified research personnel from design staff members to software developers.
One interesting point that the Samsung statement publicised that it has identified “human resources” as one of its priorities to keep its core corporate competency.
As of last year, the total Samsung employees rose to 286 000 from 190 000 in 2010. More than 60 percent of its employees or 190 486 are working outside the Korean Peninsula.
The number of Samsung workers that were directly hired by recruiters in overseas affiliates reached to 97,937. – Korea Times.
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