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Most readers know of Apple’s woes. Their shares are down c20% YTD. But most would suggest Samsung has stolen Apple’s crown. But Samsung shares are down almost as much (16% YTD) and fell another 3% last night.
The problem is that the smartphone market in the developed world (where the highest prices and margins can be achieved) is getting to saturation point. Although Samsung is expected to grow revenues in Q2 by c20% to Won56-58tn, analysts had expected rather more. They undershot on profits too.
Samsung now makes two thirds of its profits from smartphones. The S4 sold 10m units in just 27 days. Pretty impressive stuff. But the margins in this market are under pressure – the main issue negatively affecting Apple too. All smartphone vendors are bringing out lower priced units. This will boost volume sales outside the developed countries (like China and India) but will erode margins elsewhere.
The profit heydays for smartphones are well and truly over. It is difficult to see the same profits from products from what will replace that genre as smartphones were unique in attracting subsidies from the carriers. iPads, iTVs and iWatches etc will not.
Yesterday my wife entered the smartphone world for the first time. She went for a cheap iPhone 4 on a deal at just £17.50 a month which she reckoned had all the features (and more…) that she needed. Oh how times have changed!
