The Korean Press Finally Sees the Light and Wonders why Apple is Trouncing Samsung in Smartphone Profits
Apple has trounced Samsung once again in smartphone profits and even the Korean press is finding it difficult to understand why Samsung can't match Apple's performance. Yet earlier today, we reported that "The Korea Times" explained that "Samsung sold 99 million handsets in the first quarter – but that the average selling price was $200 per unit." So it's not rocket science to see why Apple is trouncing Samsung is terms of profits.
A new report from Business Korea this morning states that "Thanks to the strong sales of the iPhone, Apple posted US$18.2 billion (about 18 trillion won) in operating profits in the first quarter, reaching a record high for a quarter. Out of the 18 trillion won of total operating profits, 12 trillion won (US$11.2 billion) comes from operating profits related to the iPhone.
In comparison, Samsung Electronics is expected to reach only 2.4 trillion won (US$2.24 billion) in operating profits from its own smartphone business in the first quarter this year. Samsung Electronics got the lead in the sales of smartphones in the first quarter, but Apple overwhelmed it in terms of profit." So in terms of smartphone profit, Samsung only made one-fifth what Apple did in their respective last quarter.
The initial Korean report further noted that "Industry sources are acknowledging that Apple has completely overwhelmed Samsung Electronics in the strategy of high-end smartphones. Some say that it is partly due to the fact that Samsung Electronics has focused on selling low-end products, including the 'Galaxy A' in emerging markets" instead of profits.
Moreover, Samsung is directly involved in manufacturing its smartphones from the investment in the smartphone production facilities to the supply of parts. However, Taiwanese OEM Foxconn produces the iPhone. This is why the production
cost of the iPhone is much lower than the cost of Samsung Electronics. Since Apple's iPhone has lower production cost, higher selling price and is selling well due to high popularity, it is the structure that Samsung Electronics cannot outdo Apple in profits from the start."
Apparently the Korean press has finally seen the light in acknowledging that Apple is trouncing their home grown leader in profits because Samsung is too caught up in the lower end junk-phone business which is making it impossible to match Apple in profits. Yet Samsung needs to hear headlines that make them the leader over Apple, regardless of profit, it's simply a sickness.
Perhaps the Korean press is finally coming to their senses and acknowledging that they've been promoting smartphone shipment "Volume Disease" for far too long and that it's time to pressure Samsung into competing with Apple where it counts: in profits.
That's a nice thought, but I just don't see Samsung ever changing tactics. Research firms like IDC, ABI and others need empty volume stats in order to report false smartphone leadership with – because they couldn't care less about profit. And that's a vicious cycle that's not about to change anytime soon. Samsung needs to maintain the myth that they're the true smartphone leader in the press because the press equates volume with leadership. The joke continues today with Reuters headline: "Samsung Elec overtook Apple as top smartphone maker in first quarter." And why is selling volumes of junky $200 smartphones newsworthy?
The Korean report concluded by stating that "Samsung Electronics is confident to significantly improve its performance in the second quarter with the Galaxy S6. However, it is too early to say that the Galaxy S6 will be a big hit, and some industry sources even say that it will be a 'medium hit' due to the lower sales than expected." We reported on that last week.