How to make steady money-making smartphones, when you are not Apple? It is a puzzler. It looked as if Samsung had it figured out. However, in its third quarter, mobile sales fell 15 per cent and profitability collapsed. It could be cyclical – or, like Motorola, Nokia and BlackBerry before it, Samsung may have lost its grip on a slippery market.
It should not be tricky: hardware, operating system, brand. Hardware is easiest, but not enough. The HTC One was loaded with cutting-edge design. It did not sell, and HTC fell off the manufacturers’ league table. The OS is harder. Before smartphones, Nokia ruled. But its Symbian OS was unsuited to rich media. BlackBerry melted down after losing its lead in secure email systems. Microsoft’s mobile operating system, by contrast, is well-regarded. It integrates with the most common PC software. It has all of 2.5 per cent of the market, according to IDC. The lesson is that for everyone but Apple, Android is the obvious choice, given all the apps and media available for it. According to Kantar Worldwide, a consultancy, Android dominates the nine countries they track, with market share from 58 per cent in Australia to 80 per cent in Spain. Even Samsung, market leader since 2011, adopted Android. But proprietary operating systems offer the chance to lock in users. Samsung launched its first phone using home-grown Tizen in June this year. And so to the trickiest bit: brand. This is tied closely to price. Samsung’s market share peaked at 35 per cent in 2013, and is now 25 per cent, Strategy Analytics says. So this week, the company promised to move down-market, to take on low-end Chinese competition, such as Xiaomi. This could hurt the brand, and chasing the low end is a play that has never worked for more than a few years.
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