The use of smartphones has been rapidly and steadily increasing over the past few years. Today smartphones can be considered ubiquitous and everyone, from your work colleagues to your mother seems to be owning one.
You might think that given the prolific trend, the world’s biggest smartphones manufacturer like Samsung and LG are making profits like there’s no tomorrow, but the matter is a bit more delicate than that. Let me elaborate on that.
This week, three key Android OEM players in the smartphones market have posted their financial results for the third quarter of 2016, and the news isn’t good.
To be fair, in Samsung’s case, we were expecting it. Following the Galaxy Note7 demise, the Korean tech giant reported an operating loss of approximately $87.8 million, which amounts to a whopping 96% decrease compared to the same period last year. It’s the lowest the South Korean company has seen in the last eight years.
While the mobile division is dragging Samsung down, other subsidies are doing just fine and are quite profitable. All in all, the company announced an overall operating profit of approximately $4.5 billion.
The overall consensus is that Samsung will bounce back from the Galaxy Note7 disaster and the company is currently hard at work, concentrating its forces on its Messiah product, the Galaxy S8. The smartphone will hopefully wipe the slate clean for Samsung and restore its mobile division to its former glory. Or maybe not.
The same story repeats itself at LG. Despite making tons of cash thanks to its home appliances, air conditioners and TV sales, which amounts for a record $340.4 million profit, LG’s mobile division is slumping.
In Q3 LG’s mobile division posted a loss of $389.4 million, with products like the LG G5 and LV20 not doing much of anything to help the company bounce back. Perhaps it would be time for LG to take a step back and find a way to consider its mobile strategy from a new perspective?
HTC posted its financial results too, which revealed a $57 million loss. There’s not much surprise there, though. Gone are the days of the HTC Evo 4G and the company’s new products aren’t really keeping up with the competition.
HTC has been on a downward trend for years and the arrival of the HTC 10 hasn’t done much to reverse the situation, although the company claims the smartphone “has been embraced by the market”. Apparently not enough.
Now what all these three stories have in common is that three major players in the Android smartphone markers are leaking a lot of money through their mobile division. So, what’s happening?
The uproar of Chinese manufacturers that are offering super affordable smartphones with awesome specifications (just look at the new Xiaomi Mi Note 2) might be part of the explanation. Also, people are less than willing to update their smartphone on a yearly basis, especially if said smartphone sells for around $800.
An overall slowdown in the smartphone market has also been noticed. Since everyone owns a smartphone today, new adopters are slowly becoming a dying breed.
In a saturated market, brands need to go beyond hardware in order to succeed. Over the last few years, smartphones have started to look the same, with technology innovation measured in steps rather than in leaps.
This is why when Samsung launches a new premium phone now, mostly die-hard fans are around to mark the occasion. Relatively small, incremental updates aren’t enough to make the masses really want to get their hands on this particular phones, anymore.
Customers are starting to see that real innovation might not come from the tech titans, but from smaller brands like OnePlus, ZTE or Xiaomi which have unique things to offer, at affordable prices. Smartphone giants would do well to treat this threat seriously.