Sluggish demand dents Samsung profit

Samsung reported a second-quarter operating profit of US$13.4 billion. That’s up 5.7 percent on the same time as a year ago, but behind analyst expectations. Revenue for the quarter dropped 4 percent year-on-year.

The company blamed the missed estimate on weak Galaxy S9 phone demand.

Shipments were 20 percent lower than for the Galaxy S8 during the same period a year earlier.

Unpopular Galaxy S9

The Galaxy S9 went on sale in the first quarter of 2018. It looks set to be the least popular of the Galaxy S models since the S3 in 2012.

While the S9 is arguably the most powerful Android phone on sale, the basic design has changed little since last year’s Galaxy S8. The most noticeable improvement is a camera that takes slow-motion video and better low light pictures.

That’s not proved a compelling reason for S8 owners to upgrade. It’s not much of a step up from 2016’s Galaxy S7. And, to many, the S9 looks ordinary compared to Apple’s iPhone X.

Samsung profit challenges

Samsung faces two challenges. After years of fast growth, the phone market is flat or even declining. Many consumers have learned there is little reason to upgrade phones every year or two and are hanging on to older models for longer.

Yet the biggest threat to Samsung comes from Chinese phone makers who threaten the Korean company’s market lead. Huawei and Xiaomi, hard to find in New Zealand, are Samsung’s fiercest rivals.

All three companies make similar Android phones. In many cases, they offer much the same specifications and features for hundreds of dollars less than Samsung models.

Chinese competition

Chinese companies now also challenge Samsung by making cheaper televisions and displays.

Huawei doesn’t report separate figures for its phone sales. Yet the company saw a 15 percent rise in revenue for the first half of this year. Last week the company said it is on target to sell 200 million phones this year.

Samsung will launch a new “flagship” phone model next week. This will be it’s most important model during the run up to the end of the year, normally the busiest time for phone sales.