2013-06-21 14:41:01
By Leo Kelion Technology reporter
Samsung showed off a smorgasbord of new smartphones, tablets and cameras at its
latest press event on Thursday.
Among the highlights: a water-resistant version of its flagship Galaxy S4
handset; a tablet that runs both Android and Windows 8; a phone with a 10x zoom
lens; and a camera with swappable lenses that uploads pictures over 4G
networks.
It was typical Samsung - a device to suit nearly every need, all dished up with
high production values.
But travel away from the glitz of the launch to the more sober trading rooms of
the big banks and you'll find a different story being told about the firm.
Galaxy S4 Zoom Samsung's Galaxy S4 Zoom features a 10x optical zoom lens and a
16 megapixel sensor
On 5 June South Korea's Woori Investment & Securities cut its earnings forecast
for the tech giant, and was briskly followed by JP Morgan, Goldman Sachs,
Merrill Lynch and others.
The cause? Fears that sales of Samsung's most important products were not going
to meet expectations.
"Galaxy S4 momentum is slowing much faster than the previous version," JPMorgan
told its clients.
Samsung Electronics has seen its share price fall nearly 14% as a consequence
and more than $27bn ( 17bn) has been wiped off its parent Samsung Group's
market value.
The sell-off needs to be put in context.
Samsung had previously said it was enjoying "record" demand for the S4,
reporting 10 million units had been sold in its first four weeks. Market
research firm Strategy Analytics has also suggested the company now accounts
for 95% of the Android smartphone sector's profits.
Even so, investors have been spooked - the Wall Street Journal even reported
the share price slide "was reminiscent of the fall in rival Apple shares
earlier this year".
The BBC asked four experts whether there was any real reason to be concerned
about Samsung's smart device strategy.
David Pierce, The Verge
Start Quote
Samsung appears to be learning that you can't always buy a hit
A year ago, there was no question: Samsung made the best Android phones on the
market.
From the screen to the camera to battery life, the Galaxy S3 bested its
competitors before even getting to the litany of software features and
customisations.
Samsung's impossibly powerful marketing arm then took those advantages and
trumpeted them on every surface and airwave possible, and the phone took over
the industry.
With the Galaxy S4, however, Samsung appears to be learning that you can't
always buy a hit.
The phone came out to mild reviews, and next to the gorgeous HTC One and the
omnipresent iPhone 5 it simply hasn't stood out in a crowded market.
As 1080p screens and 13-megapixel cameras have become commonplace, buyers have
put a premium on design; Samsung's laundry list of features can't stand up to
the fact that the phones next to it on the shelf just feel better in your hand.
David Pierce
Senior reviews editor at tech news site The Verge
Has also written for Wired, the Washington Post and PC Magazine among other
publications
The Verge
In every other category, too, it has focused on being biggest, or strangest, or
most feature-laden, but it's forgotten to focus on making sure its products do
their job properly.
As a result, Samsung's stock is down, and its reputation as an unstoppable
force appears to be in jeopardy.
The Galaxy S4 is still a very good phone, and it's selling very well, but
Samsung didn't become a behemoth through marketing alone; it did so by building
the best phone on the market, and then making sure everyone knew about it.
That's what Samsung needs to do again. Without great devices, there's no great
story for its huge marketing department to tell.
Neil Mawston, Strategy Analytics
Start Quote
Samsung has few credible mass-market alternatives to Android
Make no mistake, Samsung dominates Android.
Samsung captured a huge 95% share of all profits in the global Android
smartphone market during the first three months of 2013. Samsung makes more
profit from Android than Google does.
Those financial trends will worry Google.
First, they raise questions about the profitability of the Android ecosystem
for hardware makers.
There are hundreds of smartphone vendors worldwide using Android software, such
as Huawei or LG, but almost none of them are making any serious profits. Even
Google's own Nexus range is not yet generating major income.
Second, the stats emphasise how powerful Samsung has become.
Samsung is easily the world's biggest Android smartphone manufacturer.
Android's success today as the mobile industry's most popular smartphone
platform is largely down to Samsung.
Neil Mawston
Executive director at consultants Strategy Analytics
Holds a postgraduate diploma in marketing
Strategy Analytics
What if Samsung decides it cannot squeeze any more profit from Android?
At 95% profit share, Samsung arguably has limited scope for growth. Might
Samsung switch some of its valuable resources to rival operating systems?
Well, Bada, an ageing platform developed by Samsung, is now being phased out
because of poor sales.
Tizen, a new platform being introduced by the firm, has low brand awareness and
an unproven services ecosystem.
Meanwhile, Microsoft's Windows Phone, which Samsung sells in a few models, has
a reputation for being more expensive to license than Android.
Thus, we must conclude that Samsung has few credible mass-market alternatives
to Android at the moment. Google may not like it, but Samsung will continue
dominating Android for now.
Ben Wood, CCS Insight
Start Quote
Samsung's scattergun approach is a statement of confidence
Samsung's enormous range of mobile devices seemingly flies in the face of a
trend towards a smaller, more focused set of products, as offered by its
arch-rival Apple and others such as Sony.
In recent months Samsung has launched an avalanche of devices, many of which
appear to be very similar. This has led to accusations that it's diluting its
impact and confusing potential buyers.
Although there might be some merit in this argument, the substantial profit
margin generated by Samsung's mobile division suggests otherwise.
We estimate it's about 20% - far higher than any other phone-maker apart from
Apple, whose profit margins continue to defy gravity.
Most mobile phone manufacturers are struggling simply to make money.
Samsung's scattergun approach is a statement of confidence by a company that's
riding high in the consumer electronics business. It's one of the few players
that can afford to push out lots of products, see which ones really appeal and
then use its colossal marketing budget to promote those devices.
Ben Wood
Chief of research at analyst firm CCS Insight
Owns a collection of several hundred mobile phones from 1984 to present day
CCS Insight
A broader range of products also provides a strong defensive position.
A good example of this is in the so-called "phablet" category of mobile phones
with giant screens.
Samsung was a pioneer in this area with its Galaxy Note devices and most of its
rivals are now preparing or offering similar products.
To defend its lead Samsung has quickly added two more models with different
screen sizes, making it harder for competitors to carve out a niche by offering
something that Samsung doesn't.
Despite its current position Samsung should be aware that having an excessively
large product range can end in tears. Just look at Nokia.
At its height it became obsessed with creating a phone for every single type of
customer. It lost all focus and has now paid a very heavy price.
Jasper Kim, Asia-Pacific Global Research Group
Start Quote
The rise of China's emerging electronics companies... should serve as a wake-up
call
In 2011 I warned the rise of China's emerging electronics companies was a
tangible threat to the world's bestselling smartphone maker.
As we have seen, emerging tech titans from the mainland, such as Huawei and
ZTE, have since made gains. It should serve as a wake-up call to the South
Korean firm.
Samsung's recent string of smartphone successes have largely, but not entirely,
been linked to the relatively straightforward formula of offering consumers
larger screen sizes with an American-based operating system - certainly
evolutionary but not exactly revolutionary on Samsung's part.
But assuming that we are now at the limits of how big one-hand display screen
sizes can get, the focus will shift more towards price points and brand
familiarity than a "bigger is better" mentality.
Samsung's ultra-aggressive and expensive marketing strategy was a key factor in
its brand awareness outside of South Korea.
But to capture the billion-plus mainland Chinese market, homegrown firms, such
as Huawei and ZTE won't need to expend the same amount of marketing resources
to gain brand familiarity and consumer trust.
Jasper Kim
Founder of the Asia-Pacific Global Research Group consultancy
Teaches at Ewha University's Graduate School of International Studies in Seoul,
South Korea
Asia-Pacific Global Research Group
Chinese firms will also be naturally positioned to know exactly what its
domestic consumer base wants before any other foreign tech firm, including the
likes of Samsung and Apple.
Samsung should not rest on its laurels. This week's introduction of Huawei's
Ascend P6 - the world's "slimmest" smartphone - is just the beginning of future
innovative products to follow.
If Samsung fails to pay heed, the rise of such Chinese tech firms could be tied
to the decline of Samsung's market share in China and beyond.