Is Samsung Poised to Fall?

Samsung has risen through the ranks of Android OEMs (Original Equipment Manufacturer) on the heels of its flagship Galaxy S series.  Beginning in 2010 with the original Galaxy S all the way through this year’s S5, Samsung has consistently given users a bigger more powerful upgrade year after year. Each year brought improvements that, along with the Korean Giant’s massive advertising budget, helped Samsung become a household name throughout America. Samsung even renamed anentire airport terminal in a massively expensive marketing push. 

Samsung Galaxy S5 Terminal at Heathrow Airport 

There seemed to be a point in time where you either had a ‘Samsung’ or an ‘iPhone’, and even casual users of an HTC or Motorola handset though they had a Samsung Device. That is a testament to Samsung’s marketing more than anything along with their deep market penetration. I still remember back in 2010 one of my friends got an original S and referred to it as “an iPhone on Verizon”; due to the AT&T’s exclusive distribution of the iPhone 4 in the states.  For years Samsung’s offerings have been the best-selling flagship Android devices, being compared to iPhones in almost every review. In the early days of the S series Samsung produced some of the best hardware available for Android, but it feared it might be lumped in with other OEM it competed with. To combat this they developed their own Touch Wiz skin overlay on top of Android. In theory this gave the advantage of having a Google powered phone but with extra software that was supposed to enhance usability. Average users may not notice the caveats of Touch Wiz, especially if they have only ever owned a Samsung device.

When you buy a new device it's no longer about which phone has the largest battery or the highest clocked processor, because Smartphone hardware is plateauing.  Companies like Apple are fine tuning their operating systems to run smoother on less powerful devices. The new iPhone 6 has a smaller battery and slower processor than the S5, but according to these benchmark tests that doesn't really have a negative effect on overall performance. 

            To the casual observer, the situation looks to be Android vs iPhone (sorry Windows Phone and RIP Blackberry), but Sammy’s biggest competition is really coming from other Android OEMs. 

As the chart above illustrates, the real competition is coming from low cost Chinese manufacturers like Huawei, Lenovo and Xiaomi. In the days of the S2 and S3 Samsung had the advantage of being so big it could leverage the market to produce high quality phones for a cheaper price than most of its competitors, but now with greatly improved software from Google that is designed to run on less hardware (which is now cheaper) that advantage no longer exists.

            Last week, Samsung released its earnings guidance for Q3 2014 and the numbers did not look very good. 

The table above shows the outlook at a glance and while the numbers are not horrible, some believe it could be the start of a trend that could land Samsung at the bottom of the ranks of Android OEM if they fail to curb the problem. The release of the S6 is due out early in 2015, which should help sales. That, along with the recently released Galaxy Alpha, which looks to be a massive leap forward in design, might be enough to keep Sammy at the top. But then again it might not. The market isn’t the same as it was a few years ago when Samsung reigned over Android. Now there’s not one but two bigger iPhones, competition on the high end from the likes of Motorola, LG, and HTC, and a push from low cost Chinese companies. Any one of these pressures could bring them down, but they aren't out yet. 

-Technical Scott