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Samsung to concentrate on profit rather than handset volume

Posted: , by Alan F.

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Samsung to concentrate on profit rather than handset volume
At the CES in Las Vegas, Samsung CEO Choi Gee-sung told Reuters that increasing profitability is the Korean manufacturer's new number one target. Just the day before, the executive said that Samsung plans on becoming the world's number one handset maker this year to break Nokia's 14 year reign on top. Gee-sung said that Samsung has topped Nokia in terms of revenue, will probably top the Finnish based firm in terms of volume shipped this year, but trails other companies when it comes to profits. "Our target should move on to this," Choi said.

In the third quarter of last year, Samsung became the top smartphone manufacturer and is building on the success of its well-received Samsung Galaxy S II. The company announced at CES that the 5.3 inch Samsung GALAXY Note "phablet" will be coming Stateside to AT&T 4G LTE enabled and smartphone fans are waiting impatiently to see what the specs will be on the Samsung Galaxy S III.

If Samsung is going after profits, they will be chasing Apple which is the most profitable smartphone maker. The Cupertino based firm has a profit margin of 40% which means that of every $1 in sales, it makes 40 cents in profits. Samsung has a profit margin of 17%, which is obviously going to have to rise if it is to challenge those firms ahead of it when it comes to profitability. Gee-sung didn't give away any plans on how Samsung will accomplish this, but it will require the company to either concentrate on cutting corners by squeezing vendors, or by raising prices.

source: Reuters

24 Comments
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posted on 10 Jan 2012, 22:13

1. belovedson (Posts: 821; Member since: 30 Nov 2010)


squeeze vendors and sell it for 199 price like apple. oh my goodness imagine the sgs3 at 199 price!

posted on 10 Jan 2012, 22:42 7

2. downphoenix (Posts: 2231; Member since: 19 Jun 2010)


one thing that will help in profits is charge apple more on components.

posted on 15 Jan 2012, 21:11

24. E.N. (Posts: 2218; Member since: 25 Jan 2009)


Apple is already looking for new vendors for some of its part. If I were Samsung, I wouldn't want to do anything to catalyze this like charging them more for no reason except "we want to make more money."

And I'm glad Samsung is going public with their new business target to move to be somewhat Apple like and launch fewer models and focus on profit. It shows everybody that Android manufacturers don't crap out 100s of phones because of "freedom" or "choice" or "making the phone You." Just like Apple, Samsung and HTC want to make money. If making one device every single year will make Samsung significantly more profit, then you can bet that's what they'll do.

posted on 10 Jan 2012, 22:46 2

3. ardent1 (Posts: 1983; Member since: 16 Apr 2011)


Enjoy your limited fun in the sun. First came HTC, then it will be Samsung's turn. Expect Huawei or ZTE to eat into Samsung's pie as they take share fron Samsung. Remember, whatever Samsung creates, the low cost OEMs can make a copy at the fraction of the cost. It sucks that Samsung spends the money to develop new products only to see these low cost producers reverse engineer the product at pennies to the dollar.

posted on 11 Jan 2012, 08:48 1

12. SGSatlantis (Posts: 205; Member since: 20 Jul 2011)


The price difference is less than 50%, they can`t undercut Samsung by much more. I agree that Samsung is on a roll right now and in a year or so that will change, but R&D is where Samsung is ahead of everyone else. Waiting for SuperAMOLED HD Plus with RGB to roll out in a few months, good luck reverse engineer that and a Exynos quad.

posted on 12 Jan 2012, 01:19

21. ardent1 (Posts: 1983; Member since: 16 Apr 2011)


You need to understand basic business. If a company is an innovator, that company needs to recoop their investment in R&D, supply chain, production, machining, tools and dies, training, etc. That company has to figure out how to manufacture the prototype, manufacture in volume, fix bugs, fix production defects, fix production bottlenecks, get the assembler on the learning curve, develop marketing, etc.

All the copyist has to do is open the finished product, reverse engineer the design, find competing suppliers, hire the same assembler, and VOILA the copyists arrives at a similar product with comparable specs at a fraction of the development costs. Plus, it now rides the coattails of the innovator who spent millions promoting their device -- all the copyist has to do is say our device does the same and is cheaper!

> Waiting for SuperAMOLED HD Plus with RGB to roll out in a few months, good luck reverse engineer that and a Exynos quad.

It's the same argument with Intel chips or AMD chips -- AMD chips are just as good as in it will get the job done. Huawei can get a similar display from Sharp or LG, etc, and it doesn't need the Exynos quad when Qualcomm or Nvidia or Texas Instrument have comparable chips.

Here's the unavoidable fact that Samsung can't ignore -- Android OS is free, Huawei has access to alternative products (i.e. Intel vs AMD), Huawei can piggyback off Samsung's R&D, Huawei can use the Foxconn to assemble their handsets. At the end of the day, Samsung cannot command a price premium as Android users want to pay the lowest amount for their handsets.

Just look at the MS-OS PC's -- it's about being the low cost producer. Acer, Sony, Asus, Dell, etc cannot command a price premium because their products are similar. The same thing will happen in the handset market.

posted on 12 Jan 2012, 06:53

22. SGSatlantis (Posts: 205; Member since: 20 Jul 2011)


You are right on a couple of stuff, in fact on all but one. There is reason why SGSII is the second best selling smartphone in most of the world. It costs 600$ unlocked while the iphone is 800$, people buy what they want and is within their budget. The LG 2X is 350$ and "does the same and is cheaper!" and LG is a familiar brand at that. I guess "Android users want to pay the lowest amount for their handsets." is not a true statement, there are android devices 200-700$ because not everyone can afford the high end stuff.

posted on 13 Jan 2012, 03:51

23. ardent1 (Posts: 1983; Member since: 16 Apr 2011)


> is not a true statement, there are android devices 200-700$ because not everyone can afford the high end stuff.

As a general comment, it is a true statement because you purposedly left out the qualifier "at the end of the day". It's true rich people are indifferent to the price of the devices i.e. they will pay without looking at the sticker price), however, you would be amazed at the "ELASTICITY" (an economic term for price sensitivity) on handsets for the rest of us.

You will see that as technology advances and the market is matured as it becomes saturated (i.e. at the end of the day), people will buy the low cost devices. Right now, android hand sets are still rather new as the smartphone market is still growing. You know this smart market is a young market due to the high growth rate -- mature markets have very low as in low single digit growth rates.

To be clear, I am not talking about today or now, I am talking about the future when I use the term "at the end of the day". I have posted that it will take about 2 years for Huawei and ZTE to learn the US market and then (i.e. 2 years in the future) they will take share from the established players like Samsung.

The second best selling handset is NOT the SGSII -- the Apple 3GS and 4 are two best selling phones in the world. To put things into peerspective, there is an estimated 85 to 90 million iPhones to be sold in calendar year 2011 so there is NO way SGSII is the second best selling phone.

posted on 10 Jan 2012, 22:50 1

4. TechyMexican (Posts: 17; Member since: 02 Jan 2012)


"phablet" is a term owned by technobuffalo :]

posted on 10 Jan 2012, 22:52 8

5. AndroidTroll (Posts: 359; Member since: 05 Mar 2011)


I don't see how they can reduce costs even more because what's cheaper than plastic?

posted on 11 Jan 2012, 00:54 5

8. jasrockett (Posts: 20; Member since: 05 Oct 2011)


Wax coated paper pulp ...

posted on 11 Jan 2012, 04:01 3

9. harsh_732006 (Posts: 65; Member since: 15 Aug 2011)


you..

posted on 11 Jan 2012, 00:37

6. GeekMovement (Posts: 1497; Member since: 09 Sep 2011)


Looking forward to SGSIII but if prices are going to raise, I am definitely going to start looking into the Sony/Nokia devices.

posted on 11 Jan 2012, 11:06

17. mctcm (Posts: 204; Member since: 19 Oct 2011)


Sony is making some awesome devices. I hope they come to VZW

posted on 11 Jan 2012, 00:49 1

7. jasrockett (Posts: 20; Member since: 05 Oct 2011)


If I was in the market for shares that would be grate but God, thats my God not yours, told me just before I was born that my mission was to consume state of the art electronics on the lowest wage possible. Don't piss him off Samsung!

posted on 11 Jan 2012, 06:54

10. hunted (Posts: 287; Member since: 21 Sep 2011)


Samsung can break Nokia's crown as market leader. But how? by releasing 'n' number of phones ranges from cheap to high using the open os? Nokia & Apple's OS are unique and they are best in smartphones range. Sammy release smartphone for $150 and $200 and $450 and its keep going. So everyone will buy those cheap products and say Hey i have an android smartphone that costs lesser than you. this is a good idea. Smartphones must be like BMW & Mercedes and not like any small cars

posted on 11 Jan 2012, 08:52

13. SGSatlantis (Posts: 205; Member since: 20 Jul 2011)


That is just a terrible comparison friend. I assume you drive 760L?! And btw nokia started first with the Symbian 3, the cheap 5800 and so on. Right now the cheapest five smartphones are Nokia.

posted on 11 Jan 2012, 08:36

11. InspectorGadget80 (Posts: 5634; Member since: 26 Mar 2011)


Just glad I didnt pick up the GSII their not getting ICS. Ill wait for the GALAXY NEXUS or SGIII

posted on 11 Jan 2012, 08:55

14. SGSatlantis (Posts: 205; Member since: 20 Jul 2011)


SGSII is getting ICS and Nexus is available in most of the world.

posted on 11 Jan 2012, 10:12

15. gotphone (Posts: 10; Member since: 30 Jun 2011)


so Alan.... are you insinuating that Apple "cuts corners" (in bold letters) and "raises prices" (again in bold letters) where it may not need to??
since that's the ONLY way Samsung will make higher profit margins?

posted on 11 Jan 2012, 11:05

16. arcq12 (Posts: 733; Member since: 13 Oct 2011)


Crapsung to use cheaper looking plastics on their devices again to make room for higher profits..

posted on 11 Jan 2012, 11:31

18. gallitoking (Posts: 4630; Member since: 17 May 2011)


Samsung needs to focus on their Galaxy line and not degraded by releasing low end devices... we have enough of that... just be like Apple less is more...

posted on 11 Jan 2012, 12:07

19. 530gemini (Posts: 2198; Member since: 09 Sep 2010)


Hmmmm, I'm surprised fandroids did not react negatively on this. They always bash Apple for being profit hungry, and now they have nothing bad to say about this?

Once again, fandroids are eating their own words :)

posted on 11 Jan 2012, 12:26 3

20. SGSatlantis (Posts: 205; Member since: 20 Jul 2011)


This is related to Samsung and not android. 16gb iphone 4 costs 20% more than SGSII, tell me that`s not overpriced for a year old model.

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