Peak Samsung? Why smartphone sales, profits are falling back to Earth

Galaxy S 4 White

Long ruling the Android galaxy, Samsung’s smartphone sales may have peaked. That’s the message being taken away from the company’s second quarter earnings as Samsung reported operating income of 9.5 trillion won ($8.3 billion) compared to the 10 trillion won that analysts were expecting. Speaking to Bloomberg on Friday, KB Investment & Securities Co. analyst, Byun Han Joon noted that smartphone shipments of 74 million handsets was 2 million lower than expected.

Why the slowdown in sales and concern about future quarters? Competition is partly to blame as some consumers could be waiting for the next Apple iPhone, expected within the next few months. And unlike the early days of the smartphone market, the “easy” growth is long behind. Companies that weren’t considered leaders in this area have advanced their products to the point where they’re seen as comparable to Samsung’s devices.

Let’s face it: Much of the major innovation in smartphones has already taken place. At this point, the top devices from different manufacturers, particularly in the Android market, are very comparable. They tend to use the same chipsets, similar display technologies, wireless capabilities and camera options. Points of differentiation now are more limited to software add-ons or unique twists on hardware: Think of HTC’s Beats Audio or the waterproof feature of Sony’s Xperia ZR smartphone. This also explains the 19 different icons on Samsung’s Galaxy S 4 native settings screen.

Galaxy S 4 setting buttons

Will Samsung continue to find it harder to boost sales and revenues? I think so. So too will the other handset makers; just today HTC’s future earnings were under scrutiny for similar reasons. When emerging markets gain the network infrastructure to support high-end, high-priced smartphones we could see more of the old “easy” gains. For the near future, however, it could be tough going for more growth.

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