Samsung profit margins said to have been highest around Galaxy Note II launch, slipping since then

Samsung profit margins said to have been highest around Galaxy Note II launch, slipping since then
Samsung, the world’s biggest smartphone maker, dethroned Nokia from the number one spot a couple of years ago with an aggressive strategy and full-on engagement with Android, but now, emerging rival companies from China have taken the same stones to try and beat the market leader.

With a huge pile of unsold Samsung smartphones on store shelves, the company has been forced to admit to a sobering 20% decline in net profits in the last quarter as earning shrank.

Now, as analysts are warning about the possible further deterioration in Samsung fortunes, we are seeing more details about the profitability of the phone business at the largest smartphone maker.

Turns out, smartphone margins over at Samsung peaked with the Galaxy Note II, a phablet released in late 2012. The peak occurred in the first quarter of 2013 when the smartphone division of the company operated at a 25% margin, according to analyst Mark Newman of Bernstein Research.

In the year and a half that followed, margins have dropped to 19% currently, and are expected to further slump to 15% next year.

Even worse, hopes to see flexible display technologies revitalize Samsung’s margins are dimmer now, according to analysts. However, with a gigantic sales network, Samsung has one obvious weapon - lower prices down further, a move that is very likely to shut the doors for the emerging waves of affordable smartphone from Chinese companies. The company is obviously in a need for some restructuring, but wouldn’t margins suffer from that, and is it really something that the company should do? We’re looking forward for your thoughts below.

source: WSJ

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41 Comments

1. sharifsumit

Posts: 22; Member since: Jan 27, 2012

instead making AD of poking some one else's mob ph , look at your self and make better phone :p

7. tech2

Posts: 3487; Member since: Oct 26, 2012

Do you realize that's a good news from consumer point of view ? Companies are able to charge us high margin on products is a good news, genius. BTW, for a person who puts 'Die hard apple fan' on his profile, you probably missed Apple's news where their profits declined too:http://www.businessinsider.com/apple-profit-margin-2012-7 Its not only about Samsung and Apple all top OEMs are facing the heat from chinese manufacturers.

29. Ashoaib

Posts: 3280; Member since: Nov 15, 2013

ofcourse profit will shrink when there are so many great and cost effective options from china... samsung should stop saving cost on minor things e.g. body, speakers etc... I have seen usually chinese phones have great speaker sound and their bodies feel pretty solid which is not the case with samsung

39. ecmedic4

Posts: 520; Member since: May 02, 2013

That article you posted is from 2012, this is 2014.

10. The-Sailor-Man

Posts: 1095; Member since: Mar 25, 2014

BASHING SAMSUNG MUST GO ON. They are not US brand. Right? But we are waiting now, for the next worshiping Apple , article. At least 5-6 per day are enough. Even if there isn't any news from Apple, we know, you can invent great rumors , so to make articles.

21. Ninetysix

Posts: 2964; Member since: Oct 08, 2012

PA simply rehashes tech news from other sites. If you want to complain, send hate mails to the original author of the article Mr. Popeye. source: WSJ

33. The-Sailor-Man

Posts: 1095; Member since: Mar 25, 2014

iBS. Every media could choose the sources, the topics, and the way of writing the articles. Right? But.....The Bashing Samsung Must Go On !!!! (and we like that. Right?)

19. ArtSim98

Posts: 3535; Member since: Dec 21, 2012

I gave you a +1 but removed it after reading your profile description.

2. GreekGeek

Posts: 1276; Member since: Mar 22, 2014

Because the Note II was one of its kind! Since then they haven't produced anything remarkable. It was just incremental spec bumps after spec bumps with NO added software features that are actually useful and non-gimmicky.

8. The-Sailor-Man

Posts: 1095; Member since: Mar 25, 2014

Opposite . Ignorant. LOL The profit margin go down , because Samsung is using more and more high end components and tech making the BOM higher, while not increasing the end price. I don't understand , how , less profit margin of the seller is bad for the consumer?? Oooh , yes....you are reading PA.

11. SuperAndroidEvo

Posts: 4888; Member since: Apr 15, 2011

Yes, people just will never get it. +1 for the smart comment

15. elitewolverine

Posts: 5192; Member since: Oct 28, 2013

Because as each year comes and goes, last years tech is cheaper. The price of the Note 2 vs the Note 3 didnt increase because the tech was the same price, even though it got bumped up in specs. It is not like they are using some ground breaking technology here. Maybe with the note 4 but since the note 2 it has been a specs race nothing more. All in all it is not just the note line, it is the whole division. The reason why it peaked at that point is because Galaxy meant something. Now Galaxy just means a phone, not much more, because they have saturated the market. I know plenty of people on the s3 becuase the s5 is to big of phone and the replacement is not worth it to them, like a galaxy Light.

20. tedkord

Posts: 17346; Member since: Jun 17, 2009

The whole industry, including Apple, has seen their margins compress. That's what happens in tech. Computers, TVs, stereo equipment - all of it. Margins drop over time. People buy a smartphone for $200, they expect to never pay more from then on, even if the cost of materials rises (along with labor costs, etc...).

27. michaelmicro unregistered

The only company likely to weather the margins storm is Apple, simply because they stubbornly cling on to their margins.

34. Cicero

Posts: 1123; Member since: Jan 22, 2014

Alpha is coming for them.

35. The-Sailor-Man

Posts: 1095; Member since: Mar 25, 2014

iBS. Samsung is putting more , and more expensive tech in their devices every year.

36. elitewolverine

Posts: 5192; Member since: Oct 28, 2013

more expensive or more current. Unless you start citing product pricing and showing some evidence, your iBS, is just blown smoke of what you think. And not actual tech trends that happen year over year. You cannot compare the price of a note 2 snapdragon at launch to a note 3 snapdragon at launch. When all things are equal and adjusted for the tech costs the same. It is why a galaxy light is 200 out the door yet 4yrs ago that same phone was a flagship for 500-600 instead.

3. exxperian

Posts: 25; Member since: Dec 07, 2013

Why Americans hate Samsung I know it is not their home band

4. wilsong17 unregistered

I'm guessing LG is going the same way Samsung maint point was bigger screen but know everyone have big screen and cheap company are making the same Sammy has to look for another game change hopefully the new bendable scree flex

6. mayur007

Posts: 593; Member since: Apr 10, 2012

Samsung should not try to copy iphone in margin, I know its a business but asking 100 marks for 80 marks writing thats too much. They dont have the charm like apple. Apple its self have different identify in mobile world, they are less smartphones n more prestigious phone. They should rather compete with chinese phones bcoz chinese phones are giving charming looks and giving more value than samsung phones. When you compare a samsung phone with gionee or xiaomi, oppo etc. you find Chinese more premium.

9. JakeLee

Posts: 1021; Member since: Nov 02, 2013

First, Sammy should launch separate value brands and limit the Galaxy naming to the flagships, S, Note, and maybe Alpha. Second, they should optimize their softwares instead of extending them with gimmicky features that hardly anyone needs. Third, they should get rid of TW. That thing simply sucks.

13. CyberFalcon

Posts: 223; Member since: Apr 17, 2014

For the first time... I agree to ur statement...

18. Arte-8800

Posts: 4562; Member since: Mar 13, 2014

Same to here, agree to him aswell. Non biased post, accept the Touchwiz, which requires and takes up 1gb of Ram when all features are activated. Surely Samsung should start using 3gb Ram as standard.

23. elitewolverine

Posts: 5192; Member since: Oct 28, 2013

Agree, the Galaxy is not longer a phone distinguished by premium/flagship. It is now a name they slap on their phones. They need to change that. As stated they need a value name, perhaps Solar or Lunar, and their high end Galaxy line. For me Alpha would be one off phones like their K brand or their unique awkward phones.

28. michaelmicro unregistered

Samsung had a great brand name in Galaxy when they first launched, but they've since completely mismanaged this and dilluted the brand down to essentially meaningless.

40. ojdidit84

Posts: 462; Member since: Jul 16, 2011

I... I can't believe that I'm in complete agreement with JakeLee. Definitely hit the nail on the head. They're taking an HTC-ish route, although in a different way an not nearly to the extent of trouble they're in and also somewhat of an Apple-ish route to where they're not seeing the Chinese OEM's as a threat and in reality, they're a HUGE threat to all of the major Android OEM's. Not for a while anyway.

12. NokiaFTW

Posts: 2072; Member since: Oct 24, 2012

Its funny how some fandroids will bash Samsung for their poor design and TouchWiz and want them to fail and blah blah, but don't realize that if Samsung go down, a HUGE chunk of the Android market share will also go down. No real fandroid wants that. So stop bashing Samsung you Android fans. Remember, they're still the only OEM making money off of Android. Let us WP & iOS fans do the bashing.

14. CyberFalcon

Posts: 223; Member since: Apr 17, 2014

So now you are calling ifans for ur support??? Dude understand one thing before making a statement... Samsung is going down bcoz of Chinese Manufacturers who uses AOSP... Not bcoz ur precious Micro$hafts...

17. elitewolverine

Posts: 5192; Member since: Oct 28, 2013

He never said anything about MS in his comment, re-read. Basically he is stating that people who love android shouldnt bash samsung as they literally define the android market with something of 80% share etc.

22. tedkord

Posts: 17346; Member since: Jun 17, 2009

No, as Samsung's market share drops, other Android OEMs will rise. Even as Samsung has faltered, Android market share hasn't. Samsung's problem is that they're not the only one making great Android phones anymore. Others are making better phones , and in some cases like the Moto X, at much better prices. My wife is using the X, and I have to say that other than the screen size, I'd take the X over the GS5 any day. Even the resolution difference wouldn't say me.

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