Samsung Going to Reduce Smartphone Range

Next year, Samsung Electronics will reduce the number of its smartphone models in an effort to cut back some of its cost amid the slowing down of smartphone sales and rising competition from lower-cost Chinese competitors. The senior vice-president of the company, Robert Yi, said that the South Korean company plans to reduce the number of its models by approximately 25 to 30%. In an investor forum in New York, Mr. Yi said that the number of smartphone models would either be reduced by one third or one fourth as compared to this quarter. He said that this move would enable the smartphone giant to reduce the prices of the remaining models with the aid of mass production.

The company said overhauling the product portfolio would bring a number of benefits including increased efficiency as the company would be able to shift its focus onto more competitive models. However, the South Korean company didn’t offer any numbers regarding the number of handsets that it actually has available in the market currently. This move comes after the company made the announcement of its weakest quarterly earnings of the third quarter in the last three years. Increasing competition in the smartphone market from both ends has eaten into the share of the company.

Three years ago, the company had been dominant in the rapidly expanding smartphone market and had beaten some of the top companies in this competition. But, now, in the premium market, the larger screen iPhones of Apple Inc. have gained immense popularity. As far as the low-end market is concerned, Samsung has been facing a growing threat from Chinese competitors such as Huawei, Xiaomi and Lenovo. In the third quarter of this year, the market share of the company in the global smartphone market fell from 35% last year to 24.7% this year.

Apple retains second place in this race while Xiaomi claimed third place when it saw a rise in its market share from 2.1% to 5.6%. Last month, Samsung had announced that it would be offering more attractive phones in the market at low prices. The company aims to save costs by using standard components in various models. The operating profit margin of the company that’s derived from the mobile business also saw a decline of 7% this year in the period from July to September, which had been 10% for the last 10 quarters.

Last month, the company’s executives said that they would attempt to maintain margins of double-digits in the next year. So far, Samsung has produced multiple models for catering to every segment of the smartphone market and this has made it difficult for the company to reduce its costs whereas fewer models are produced by rival, Apple Inc. It is predicted by analysts that Samsung will adopt an aggressive strategy in terms of pricing and specifications in the low to mid segment for the purpose of regaining the market share it has lost. Nonetheless, it would still be difficult for the company to increase its margins to higher than 10%. 

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