How Samsung turned its smartphone business around this year

Last quarter, Samsung recorded the best profit for its handset business in two years. Even though the growth wasn't as impressive as seen in the peak years, it was still a nice turnaround for the global smartphone leader. Samsung's issues started in 2014 with fierce competition from lower cost Chinese manufacturers, and a flagship phone that was considered to be more plastic from the manufacturer.

The Samsung Galaxy S5 surprised consumers, many of whom were expecting a metal clad handset. In its first three months on sale, the phone sold 25% or 4 million fewer units than its predecessor during the same time period. The Galaxy S5 was the first of Samsung's non "Active" models to have an IP certification (which was IP 67 in this case).

While things started turning around with 2015's Samsung Galaxy S6, the big step up came with this year's Samsung Galaxy S7. Adding back two highly-demanded features that were removed in the Galaxy S6, the latest iteration of Samsung's flagship phone has an IP68 certification rating allowing it to be submerged in water. It also comes with a microSD slot.

Samsung made subtle improvements with the Galaxy S7 that are big in terms of performance; unlike the waterproof Galaxy S5, which used plastic flaps to keep water out of the microUSB charging port and the 3.5mm earphone jack, on the waterproof Galaxy S7 these ports are treated with a special nanocoating that keeps water out even without the protective caps.

Samsung also made the decision to go from the 16MP rear snapper on the Galaxy S6 to the 12MP camera on the Galaxy S7. In the never ending MP arms race, Samsung worried how it would look to potential smartphone buyers if it offered a new flagship phone with a lower MP count. Samsung waited until the last second before it decided to go with the 12MP sensor that employs an improved auto-focus and takes better pictures under low-light conditions.

As it turns out, Samsung made the right move. More than half of all Galaxy S7 buyers in the U.S. said that camera quality was a main selling point leading them to buy the phone. That compared to just 33% of the buyers of rival phones who cited the rear camera as a selling point. The Galaxy S7 is selling like hotcakes and is on track to set a company record for first year sales of a new smartphone.

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But overall, Samsung is facing some strong headwinds. Overall smartphone growth this year will be in the single digits for the first time in history (7% says Gartner), and Samsung can no longer rely on growth in the overall market to help stir up demand for its phones. With that knowledge, the company is being more deliberate in an industry that has had its best days behind it.

Kim Gae-youn, vice president in charge of Samsung's smartphone product planning, says that the company is now focused on the premium end of the market, which includes those handsets priced at $600 and above. He believes that Samsung is one of the few manufacturers with the ability to compete in this segment of the smartphone market.

source: Reuters

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