Samsung’s Missed Earnings and What That Means for Apple

Credit: ubergizmoHow should smartphone makers respond to the evolving mobile device market? Samsung (SSNLF.PK) failed to hit its earnings expectations for the second quarter, sparking speculation that the Korea-based electronics giant may be in a downward trend. According to Hyundai Securities analyst Jeff Kim via Reuters, 70 percent of Samsung’s total operating profit comes from its mobile device segment, but sales of its latest Galaxy S4 device have started to slow.

As the market for high-end smartphones reaches saturation, sales of flagship mobile devices from Samsung, Apple (NASDAQ:AAPL), and HTC have all started to decrease. “Apple and Samsung have been dominating the high-end of the market and that’s the part of the market that is getting saturated,” IDC research director Francisco Jeronimo told CNBC. In this sense, Samsung’s decreasing sales issues are similar to Apple’s problems.

Most of the growth is now found in the low-end smartphone market in emerging markets such as China. “A lot of people are talking about this market reality, where, if we are talking about the smartphone demand… they are really shifting towards the emerging markets, and what that means is lower margins. They are not really selling the Galaxy S4s,” said Euromonitor International electronics analyst Mykola Golovko.

Although Samsung’s $8.3 billion operating profit forecast has increased 47 percent over last year, the company’s shares have dropped 17 percent in value since early June. Similarly, Apple’s shares have fallen 21 percent over the same period.