Samsung bets on new phones to reverse profit slump | Business| Economy and finance news from a German perspective | DW | 10.04.2015
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Samsung bets on new phones to reverse profit slump

Samsung has had a rough patch, posting declining profits and losing market share to its archrival Apple. But with the release of its new smartphone, the South Korean electronics giant is betting on an earnings recovery.

Amid plummeting sales and losing customers to Apple, one could say that Samsung is undergoing a revolution of sorts: the South Korean electronics company released in 20 countries Friday its latest batch of smartphones, whose makeover took critics by surprise.

For one, the Galaxy S6 underwent a design overhaul, scrapping Samsung's signature plastic for metal and glass like Apple's iPhone. And one of Samsung's models, the Galaxy S6 Edge, features a wrap-around screen.

Critics also noted that Samsung's cameras have been upgraded to take crisper and more detail-rich photos, rivaling the iPhone even in dim light, and that its software was somewhat revamped to make it appear less cluttered.

These sleek new smartphones are Samsung's first flagship products to hit markets since its mobile business suffered a disappointing profit slump last year. Although the company retained its position as the world's top selling smartphone in 2014, several market trackers had Samsung and Apple tied in worldwide smartphone sales in the fourth quarter, while analysis firm Gartner declared Apple to be the world's top smartphone seller.

Time for a reset

Project Zero, Samsung's internal codename for the Galaxy S6, was an endeavor months in the making, as the South Korean electronics giant attempted to revive its fortunes. During its redesign, Samsung replaced executives in its mobile division while keeping the CEO and streamlined its management.

So far, critics believe the changes are paying off.

The Galaxy S6 is expected to set a sales record for the Galaxy series of phones, Samsung's head of mobile marketing, Lee Sang-chul, told reporters. The company is expecting record shipments and said it may even struggle to meet demand for the S6 because the model's curvy glass screen is harder to manufacture.

Analysts think the Galaxy S6 and the S6 Edge will help Samsung regain some lost ground in China, the world's largest smartphone market, but they say these devices probably won't drive the company back to its No. 1 position and overtake Apple in the high-end market.

The reason, according to one analyst, is Apple's brand image - the cachet of the iPhone is its key selling point over Samsung, at least in China.

"Apple is seen as a premium and luxury brand by Chinese consumers, and they are willing to pay a premium price for the iPhone," Xiaohan Tay, senior analyst at market research firm IDC, told the Associated Press. "There are even some less-well-to-do consumers who will save up and spend a few months of their salary just on an iPhone."

Galaxy S6 edge on display

The Galaxy S6 Edge features a wrap-around screen.

Worst behind Samsung?

Samsung was the top smartphone seller in China for years, when competition from local manufacturers was limited. But that all changed in 2014 as Chinese electronics companies Lenovo, Huawei and Xiaomi released cheaper versions to high-end phones, while Apple gained share in the premium market.

Market research firm Canalys reported Apple came out on top in China in the fourth quarter - followed by Xiaomi, Samsung and Huawei.

But Samsung seems confident the latest Galaxy models won't disappoint.

The company said this week that it estimated its January-March operating profit would be its highest in three quarters - in part because Samsung puts its own chips in the new phones, said analysts, who predict Samsung to ship more than 50 million S6 phones this year.

"Some carriers are switching existing orders to get more of the S6 Edge, and it looks like demand for the model will exceed supply throughout this year," HMC Investment analyst Greg Roh told the Reuters news agency. "That means average selling price will fall at a slower rate, which will have a positive impact on Samsung overall."

In South Korea, the prices for the Galaxy S6 and the S6 Edge began at $791 (742 euros) and $899 (843 euros) - more expensive than the S5.

Next week, the company plans to announce prices for China, where they are expected to be comparable.

el/cjc (Reuters, AP)

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