After a long running tit-for-tat war against the iPhone, Samsung's executives are now shifting their focus to try to improve their entry and mid-level smartphone offerings, after its net profits crashed by almost half in the Third-Quarter.
The move reflects a broader change in the market as the real gains move from the top to the lower end of the market.
After the Samsung’s poor results were announced on Thursday its stock price jumped by 4.5 percent, and another 5 percent on Friday. It eventually rose by 14 percent. This is because the market had felt that bad Third-Quarter results were coming and had been selling Samsung shares. The stock had fallen by 26 percent since the beginning of June. The recovery since the results were published suggests that the market still has faith in the company.
Impact of iPhone 6 launch
The launch of the iPhone 6 had a massive effect on Samsung’s performance as big spenders waited for Apple to show their hand before committing to a new handset. Sales of its flagship Galaxy s5 have been lukewarm.
The company is still the market leader in China, but that lead is being eroded. The Asian tech superpower accounts for over one third of the global smartphone market, 100 million units were sold there in the Second-Quarter. It is suggested that by mid-September Samsung's market share in China had fallen from 35 percent to 24.7 percent in 12 months.
Could Samsung lose China?
Unfortunately for Samsung, however, China’s indigenous manufacturers have stolen a march on the low-end of the market in the country. Chinese firm Xiaomi is experiencing particularly large gains. Apple is also experiencing a bounce in China since the launch of the iPhone 6.
Xiaomi produce stylish, inexpensive smartphones that borrow heavily from both Samsung and Apple. The company has already expanded out of China and entered the growing Indian market. Its phones are available across most of South-East Asia and the firm is planning to enter the growing Brazilian market.
The growth of Xiaomi and companies like them is worrying for both Samsung and Apple. Buyers in the developing market are more concerned with price than screen sizes and camera specifications.
Samsung is now changing its strategy and will release fewer phones and more basic models. The electronic giant faces a challenge to refocus their smartphone operation and to do it quickly before too many companies enter the lower end of the market. It will also be interesting to see how Apple react to these changes.
