The Great Smartphone Massacre: Sales And Prices Dropping Everywhere

  • Video and Film
  • Print
  • mse-big-new-banner-03-17-2016-416616a-tonernews-web-banner-mse-114
  • cartridgewebsite-com-big-banner-02-09-07-2016
  • big-banner-ad_2-sean
  • 4toner4
  • 2toner1-2
  • mse-big-banner-new-03-17-2016-416716a-tonernews-web-banner-mse-212
  • 05 02 2016 429716a-cig-clearchoice-banner-902x177
  • 7035-overstock-banner-902x177

The Great Smartphone Massacre: Sales And Prices Dropping Everywhere

 user admin 2014-11-06 at 10:24:15 am Views: 182
  • #41405

    The Great Smartphone Massacre: Sales And Prices Dropping Everywhere
    Samsung, Sony and HTC's pain is your gain

    By Andrew Orlowski,

    Analysis The bloodbath continues for smartphone vendors, results from the leading Android vendors have confirmed in the past week. While it’s a great time to be a buyer, in saturated Western markets, only LG can show black ink on its earnings statements.

    Sony, Samsung and HTC also reported and the pages were awash with minus signs, parentheses and red ink.

    The only profit growth can be found in expanding markets, particularly India and China, which haven’t reached saturation yet. There, tens of millions switch from featurephones to their first smartphone – or straight from no phone to a cheap ‘Droid.


    LG shipped 16.8 million smartphones, helped by cracking the US market open with its G3, in the second quarter of growth after losing money over the previous four quarters. But much of that was achieved by shipping L series devices – which never appear in the West: they are archaic “landfill” devices that running Ice Cream Sandwich or even Gingerbread versions of Android.

    Sony Mobile

    Sony Mobile replaced its chief, Kunimasa Suzuki, last week after posting a ¥180 billion (roughly £1.1bn) loss. It had tried to compete against Apple with high margin, premium designs – and boasted an ASP (average selling price) of $390 – far higher than that of its rivals.

    There’s nothing wrong with Sony’s products, which are quite beautiful, and it has deserved the plaudits for finding power consumption savings in its Z3 devices that elude competitors. But in a straight battle, punters prefer Apple – even at home: shipments fell 63 per cent in Japan.

    And if you’re failing – then why not fail more often? Sony was the only vendor to launch two waves of phones in 2014.


    HTC squeaked a narrow operating profit – it has its costs under control – but revenue was down 36 per cent from the previous quarter and 11 per cent from last year. This despite having the most universally lauded flagship, the One M8. With an operating margin of 0.4 per cent, it barely makes money on each phone shipped. It’s beginning to look like the kind of band that wins "Album of the Year" every year but never has the breakthrough hit, allowing it to drive Rollers into swimming pools.

    HTC’s most recent product was a camera without a viewfinder – but it’s going to need more than rave reviews and novelty accessories to restore its fortunes.


    Samsung’s crash caught the most headlines, since the giant is clearly No 2 in the overall market – by some distance – and has the furthest to fall. It’s been the only vendor to consistently make profits from Android’s march to world domination. Samsung’s crash looks like a BlackBerry-shaped nosedive: mobile revenue is down 20 per cent sequentially, and down 34 per cent in a year. The decline torpedoes three years of phone-powered growth for the group. In the most recent quarter, however, Samsung’s EBIT margin halved to 7.1 per cent.

    Who saw this coming? Oh, you all did

    But this has been a long time coming – it just takes one week of concentrated earnings to hammer home the point. Two huge market trends are colliding.

    One is Western market saturation, where Android has matured nicely but hardware vendors lack a compelling differentiation. Flagships from Sony, HTC and LG all boast lovely design – but are they really £300 better than a OnePlus One?

    Yes, you say: that’s a phone that’s being sold – if it’s being sold at all, which is arguable – at cost. But it shows how much slack there is for a competitor. I’ve used all the aforementioned devices and the One not only “does the job”, it’s really just as nice as the others. (In its own uniquely unobtainable way).

    Only Apple now seems to be able to command its customers to return for another eyewateringly expensive flagship every two years – just as Apple was able to convince people to remain on the Mac platform during the fallow years.

    For Sony, Samsung and HTC, their phone strategy now resembles Sony’s PC strategy: put a lovely case around a commodity software platform, and charge a high price. There’s a niche for this – but most punters will opt for the one with the lower price, figuring it does just as good a job.

    The other compelling trend is that growth into less developed markets is already cutting into this margin flab. Xiaomi snapped up the third place position in the market, elbowing aside Huawei, thanks to growth in India. In a fast-growing market, vendors don’t care too much about margins. And these vendors care less than most, since they don’t have the vast overheads of rivals. Samsung has notoriously bought its success through marketing muscle – a vast $14bn of marketing muscle each year – something that must now be questioned.

    This cloud has a Silver lining

    I wouldn’t bet against the Top 3 Android vendors in three years looking something like: 1. Lenovo (Motorola) 2. Huawei and 3. Xiaomi – in fact, that would make a decent each-way bet.

    Google clearly anticipated this trend when it devised its Silver program – making a Google-owned brand the hallmark of quality, rather than OEM’s brand. After much gnashing and wailing from the top tier OEMs, Silver appears to have been put on ice. But don’t underestimate the desire from operators and the Chinese upstarts to see this revived. (EE sells a perfectly fine Huawei-made 4G phone called Kestrel for £99).

    Silver isn’t dead, it’s sleeping – and perhaps most of us will be using Silver phones some day. Like Osborne, Northgate or Altos – today’s flagship vendors could soon be names in an obscure tech pub quiz. ®