Samsung is throwing away its one shot at getting back at Apple
Samsung's smartphone business has historically been very strong. And, true, it's still the number one handset manufacturer in the world today. But it's in an unenviable place right now, squeezed on all sides. At the high-end, the iPhone 6 - and now the iPhone 6s - has hammered demand, while at the low-end it is being undercut by low-cost Android manufacturers.
Its newest flagship devices' sales have been lacklustre, according to reports. But it didn't have to be that way! By misjudging demand, the South Korean electronics company shot itself in the foot earlier this year - and now it's throwing its one unique selling point away.
Samsung botched a comeback opportunity
Right now, the global smartphone market is booming. Global sales are predicted to jump by more than 10% this year. But, according to research firm Gartner, Samsung's sales earlier this year have been declining.
Previously, Samsung held a unique and profitable niche. It offered high-end smartphones with glorious large screens. If you wanted a premium phone above a certain size, no matter how much you love Apple - tough. You'll have to shell out for an Android device. But with the launch of the iPhone 6 and 6 Plus, back in 2014, everything changed.
Since then, sales have dropped - catastrophically so in China, one of the largest markets in the world. Between Q1 of 2014 and Q1 of 2015, its sales market share dropped by more than 50%.
In April, Samsung launched the Galaxy S6 and Galaxy S6 Edge. They are Samsung's most premium devices - its iPhone killers. Samsung also found a new unique selling point (USP): The signature curved screen found in the S6 Edge.
But when it released its profits guidance for Q2 2015, it said the impact of the launch of the S6 "was quite marginal due to low smartphone shipments and an increase in marketing expenses for new product launches."
The AP now reports that "handset shipments are believed by analysts to have gone up" in this last quarter, but that profits from its mobile division are nonetheless down, because the sales are coming from its less profitable lower-end and mid-tier smartphones.
So what happened? In part, it appears that Samsung managed to misjudge demand. According to a report in The Wall Street Journal in July, Samsung assumed demand for the devices would be around four to one in favour of the regular S6. But the more expensive S6 Edge has turned out to be much more popular, and demand is closer to one to one. The company was left scrambling, with excess inventory of S6 units and not nearly enough of the more expensive S6 Edge units to satisfy demand.
That supply outstrips demand is, on the face of it, a good thing for Samsung. It means people want the company's phones! But it's also an entirely avoidable problem. And with the launch of the iPhone 6s and its record-breaking sales, it has now got a lot harder for Samsung to persuade consumers that it still has the hottest new device around.
Shooting itself in the foot
It's difficult to gauge how well Samsung would have done this year, had it managed to correctly predict demand for its S6 devices. But it's clear the curved screen is pretty popular. Samsung has stumbled on to a good thing.
Now, here's a quote from a Financial Times report on Samsung's most recent profit guidance:
Samsung had a unique selling point - its big-screened, high-end devices. Then it lost that, and struggled. It has successfully found a new one, curved screens, which resonate with customers - so well it can't keep up with demand. And now it's throwing it away!