Patience is a virtue that not many possess, but good things come to those who wait. And they stand to get them at a bargain price, too.
With a little more than one month to go for the Cupertino-based Apple Inc. to launch its next spearheads, the iPhone 7 and iPhone 7 Plus, its South Korean rival Samsung Electronics has already announced a ‘price adjustment’ for its own spearheads, the Galaxy S6 and S6 Edge.
In its financial guidance for the remainder of 2015, Samsung cites “mounting challenges” in the second half of the year.
“While 2H 2015 is expected to present mounting challenges, the company will try to improve earnings,” Samsung said in a statement while announcing its second quarter results.
“While the IT & Mobile Communications (IM) Division is expected to face a difficult business environment, the sales momentum for high-end products will be maintained by adjusting the price of the Galaxy S6 and S6 edge and introducing new premium smartphone models,” the firm confirmed in the statement.
“New middle- and low-end models will also be introduced,” it added, maintaining that the IM Division would continue to work on improving efficiency of expenditures.
“The mobile business plans to firmly maintain its sale of premium smartphones by flexibly adjusting the price of the Galaxy S6 and S6 edge, and launching a new model with a larger screen,” Samsung notes even as it cautions investors not to expect robust H2 growth in its smartphones business.
“In 2H 2015, the smartphone market is expected to grow year-on-year; however, the growth rate is expected to slow down,” the firm said in a muted outlook for the second half.
Its cautious guidance for the second half is not without good reason.
Arch-rival Apple traditionally unveils the next iteration of its iPhone in the second half of the year, usually in September.
With eager fans putting off their smartphone purchases months in advance, that puts a dampener on rivals’ smartphone sales in the third and fourth quarters of the year.
The fourth quarter in particular is impacted for other smartphone manufacturers as the new iPhone roll-out traverses an increasing number of countries.
Despite being a marked improvement over its predecessor, Samsung’s Galaxy S6 smartphone seems to have failed to bump up the firm’s financial fortunes in part because of the huge marketing spend that it undertook to promote its new devices in addition to a demand-supply mismatch.
“Despite the launch of Galaxy S6, improvement to earnings was quite marginal due to low smartphone shipments and an increase in marketing expenses for new product launches,” Samsung said.
According to a Reuters report, Samsung’s mobile business booked a 38 per cent decline in April-June operating profit at 2.76 trillion won.
It expects smartphone shipments to rise in the third quarter from the second, but said average selling prices could fall due to price adjustments for S6 models aimed at boosting sales.
“Supply issues concerning the Galaxy S6 edge have been addressed. Moreover, the IM Division plans to enhance efficiency across the board, including product line-ups, marketing and R&D,” the firm says.
Once the undisputed king of the smartphones domain, Samsung’s dominance has been chipped away by several competitors in all the segments of the fiercely competitive market.
Even as Samsung remains the overall leader in terms of smartphone shipments across categories, sales figures of Apple’s iPhone 6 and iPhone 6 Plus almost match that.
In addition, Apple’s iPhone firmly sets the benchmark in the premium segment, and therefore is immensely profitable, while a majority of Samsung’s smartphones are across the mid- to low-end range where margins are squeezed at best.
Analysts maintain that Samsung continues to face intense competition from Apple at the higher-end of the smartphone market, from Huawei in the middle-tiers, and from Xiaomi and others at the entry-level.
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