Samsung Found a Way to Buck One of the Scariest Trends for Smartphone Makers

(The Washington Post) -
The logo of Samsung Electronics is seen at its headquarters in Seoul, South Korea. (Kim Hong-Ji/Reuters)
The logo of Samsung Electronics is seen at its headquarters in Seoul, South Korea. (Kim Hong-Ji/Reuters)

Samsung’s Galaxy S7 and S7 Edge have led the company to its most profitable quarter in two years — not bad for a firm that cautioned 2016 could be a rocky one for the smartphone market.

Samsung this week said that its mobile unit accounted for more than half of its approximately $45.2 billion in revenue and its $7.22 billion in profit. The company said that it will continue to shore up the high-end of its smartphone business, which could help it entice customers who seem bored with the latest smartphones. Samsung is expected to unveil its next premium Galaxy Note smartphone in August.

It should be said that it’s a little hard to put these numbers in perspective. Samsung doesn’t explicitly say how many units it’s sold; estimates in South Korean media last month said the S7 and S7 Edge were approaching a lifetime sales number of 25 million units. Apple, last quarter, sold 40.4 million iPhones across all lines.

But one can say that Samsung seems to have had a better quarter than it or many analysts anticipated. And it did it all by making a really good phone. Reviewers raved about the S7 and S7 Edge smartphones, and the S7 Edge is widely considered the best Android smartphone on the market — possibly the best ever made. The combination of a sleek design and strong battery life, along with favorite features that had been removed from previous models and competitors’ phones — such as the option to expand storage with an SD card and waterproofing — appealed to customers.

That (combined with the firm’s enormous marketing budget) helped Samsung buck a lot of the trends in the smartphone market, even as many analysts say that consumers around the globe are increasingly willing to sacrifice some device quality and cool factor for a smaller price tag. Yet the expensive, high-end S7 Edge actually accounted for more than 50 percent of its smartphone sales, Samsung said.

“Outside of Samsung’s Galaxy S7 flagship, a majority of vendors, including Apple, have found success with more affordable models compared to their flagship handsets,” said Anthony Scarsella, research manager at the analysis firm IDC.

According to numbers released Thursday from IDC, shipments for Samsung are up 5.5 percent from the same period last year. Apple’s are down 15.5 percent. Samsung is still the largest smartphone maker in the world overall, as it also sells many lower-end phones.

The smartphone market overall is still expected to see slower growth overall this year, analysts say. Companies such as Apple have focused more on providing services through their smartphones to make up for people buying fewer devices.

Still, analysts said, all firms will need to step up their game to keep customers coming back for more.

“As smartphone prices continue to drop and competition escalates at the high-end, vendors will need to continue to push ‘flagship-type’ devices at affordable price points to encourage upgrading on a more frequent basis,” Scarsella said.