The modern world is largely influenced by the smart devices and most of this market comprises of the smartphones. A plethora of companies across the globe have tried their hand at making good smartphone and many have succeeded too, however, there is only a handful of them who have succeeded to become a household name. Samsung, the South Korean electronics giant is one such entity, which is the undisputed king of the global smartphone market. Since its advent in the smartphone market in the later parts of the 2000s, it has taken the world by storm. It faced little competition as it had the advantage of being the early player. However, in recent years, it has been challenged by the upcoming players. The smartphone market was very secure for the first decade as only the big players could afford to invest huge amounts in the research and development but the scenario is rapidly changing.
Huawei is another name in the smartphone market that comes up eventually because it is usually linked to the end user directly or indirectly. They are the world’s largest makers of telecom gears and equipment. In recent years, Huawei has been pumped up for making a mark with their smartphone manufacturing. Huawei has recently surpassed Apple to become the second largest smartphone maker in the world, which is a superb feat considering it is a new entrant. According to the company, it is aiming to surpass Samsung to clinch the top spot by the end of 2019. This claim is not in vain as the statistics point to the same thing.
On looking closely, one can find that the South Korean giant is intentionally letting its smartphone business go obsolete. The main reason is it is a low profit or no profit business. According to the Youtube Channel TechAltar, Samsung is earning fewer profits from its smartphone business as compared to the home appliance, display panels, memory chips and so on. Recently, the company on its official website revealed that it is going to invest over $160 billion into new fields of technology such as Artificial Intelligence, 5G networks, smart automotive and so on. This did not mention smartphones and it is evident from their recent smartphone designs. The models that Samsung has released in the last 2 years lack the technological advancements that one expects from Samsung. Martin from TachAltar analysed the profits of Samsung from Counterpoint Research and it showed positive growth in almost all the segments except their smartphone arm.
The European and North American Markets have saturated, while the Chinese market is steadily falling for Samsung. India is the only major growth market for the company but the profits earned from this market are extremely low. The reason behind the low profit is the price-sensitive customer. This compels the company to focus on its maximum profit making business.
The company’s semiconductors and display panels are the most profit making arms. It is planning to grow its production and for that, they are planning to employ over 40,000 employees globally in the next 3 years.
From the consumers’ point of view, it hardly matters who makes their smartphones as long as they are of desirable quality and affordable. Except a few of the brand loyal fans, most of the consumer market has become smart enough to trust their financial gut to go with the companies who keep up with the changing times by providing cheap and best products. Huawei has proved their worth to the consumers as they have improved their design, build quality, software optimization and after sales services significantly. Additionally, the branding has also become extravagant for Huawei. The launch events are now as premium as of any other established brand such as Samsung and Apple. These all lead to a better sales figure than that of Samsung’s. Huawei keeps the profit margins low on their smartphones and that kills more business of Samsung.
The future of Huawei looks brighter and Samsung as of now seems to be sliding away from the smartphone business. In the future, Samsung might get back its mojo but for that, it will have to put in a lot of efforts. In the next article, we will be analysing Huawei’s smartphone business model.
– Soumya De