For Samsung Electronics, 2019 was a dreadful year, with the company lurching from one bad news story to another.
First there was the fiasco that followed the launch of the Galaxy Fold. Mobile division boss DJ Koh needed to publicly admit his embarrassment after hurrying the #1,800 handset to market just for review versions to break as soon as they had been analyzed.
Then there was the problem of the company losing market share.
By SIMON LUCAS
Then there were also the financials. Samsung cautioned at the start of last year that things were likely to be tough, but it wasn’t until last month the full extent of this has been laid bare. Global sales for the period were down by 13 percent to $193.7 billion (#149.7bn) while net earnings, which have now fallen for five consecutive quarters, plummeted by 55 per cent, from $40.3bn to $18.2bn.
From the organization’s standpoint, the decrease was driven by a slump in its semiconductor business. Really, Ben Suh, head of investor relations in the firm, said the overall picture had been colored by”unfortunate conditions” in its memory and large screen business.
The figures certainly appear to bear this out. Having accounted for a quarter of total profits in 2014, the semiconductor company – making the memory chips that drive Samsung’s own and most competitors’ consumer electronics – had grown to dominate the company. In 2018 it accounted for 76 percent of total profits, producing a bottom line figure of over $30bn. But despite Samsung ploughing the great majority of $20bn a year since 2017 into developing memory processors, last year the unit contributed only 50 percent of total profits.
Daniel Gleeson, principal analyst for consumer tech at research firm Ovum, says the main reason for the decrease is that memory-chip profits was artificially inflated in the years leading up to 2019. While Suh said that market conditions are this season”forecast to improve gradually on the back of data centre demand and increasing adoption of 5G smartphones”, costs are unlikely to come back to their previous heights. The outlook for its semiconductor business therefore remains far from certain – and that is before concerns regarding the so-far lacklustre adoption of 5G handsets have been shrouded in (recent study by Gartner predicted that there will be zero growth to 5G mobile sales in the coming year).
The terrible news for Samsung is that these problems serve to highlight just how much its own smartphone company was allowed to decline in recent decades. As lately as 2014 phones generated 58 per cent of its overall profits; by 2019 that’d tumbled to 33 per cent. As opposed to try to counter that with a marketing splurge, the company seems to get beaten something of a retreat – from the united kingdom market at least. Marketing spend, once seemingly unlimited, appears to have dwindled in the past few decades.
By SIMON LUCAS
Advertising matters, however, and the impact of this reduced spend is clear: between 2014 and 2019 while Apple’s share of the UK vendor market rose from 33 per cent to 50 percent, Samsung’s nudged up from 22 percent to 28 percent. In light of this, at the start of this year that the company attempted to kickstart slow sales of its Galaxy A90 5G handset by slashing its UK price by #180 only three months following launching. That the deal was extended into February is telling.
In america, in which its hardware launches are still declared with a bang and where the company is seen as the sole Android brand, Samsung has increased its market share by close to five percent points because 2014 versus Apple’s three.
Despite this, Conor Pierce, corporate vice president of UK and Ireland at Samsung, asserts that 2019 had been an”encouraging year from our general performance” in his region, and that the company needed”record premium retention” of 81 per cent returning clients.
He admits that 5G has not removed at the way Samsung had hoped. “We had much higher expectations of 5G at 2019. If you look at the united kingdom, we achieved 91 percent market share in 5G last year, albeit in a much smaller market than we anticipated. However, what’s important is that we’re building that wave, not being part of the wave.”
Nevertheless Pierce – who says his plan is based on 5G, IoT devices and client”loyalty” – asserts he is not in a position to deal with the broader strategic concerns about the direction of Samsung.
From ANDREW WILLIAMS
“I will talk on behalf of mobile, because that is what I am responsible for,” he states. “We will keep on remaining calm, focusing on our approach and continuing to search for ways in which we could make 5G economical. I’ve a very clear vision, to make the largest, most joined, most loyal fan base in the UK and Ireland. That’s what I’m setting out to do.”