With Samsung’s disappointing earnings, the Internet is awash with negative thoughts on their future. At the same time, there are some people who say that Samsung will continue to be successful in the high-end, even as the Chinese and Indians eat their market share in the low-end.
I have also chimed in with my idea on how to view Samsung’s situation.
Jan Dawson has done an excellent post which compares Samsung’s mobile business to other consumer electronics markets. What this clearly illustrates is that without significant differentiation, consumer electronics businesses ultimately end up being low-margin (<10%).
Given the strategic importance of smartphones as a potential hub for your digital life, competition in this market will likely be more fierce than other consumer electronic devices. Hence I predict profits will probably end up being much much lower than 10%.
At this point, we do not have any knowledge of how Samsung will counter this predicament. It will nonetheless be quite a steep uphill battle.
Naofumi Kagami 