Amid Quarrels, Samsung and Apple Both Stung By Huawei

Source: Thinkstock

Source: Thinkstock

Samsung Electronics Co. Ltd.’s (SSNLF.PK) Q2 earnings, which were released Tuesday, were lower than the company initially expected, according to Reuters. The consumer electronics company expected higher earnings during the second-quarter due to a pick up in sales of high-end televisions and smartphones. This marks the company’s second straight quarter of less-than-stellar quarterly profits, and this year is the first year that Samsung has reported a loss in smartphone profits.

Still, the company is optimistic that sales of pricier televisions and smartphones will be driven higher by soccer’s World Cup in Brazil, which will create a renewed demand for the products in the current quarter. “Orders for display panels that are used for premium smartphones and TVs are expected to increase, as new mobile devices are rolled out onto the market and consumers look forward to the upcoming World Cup in Brazil,” Sasmung said in a statement.

Analysts, however, aren’t quite so optimistic. “Their handset shipments guidance suggests there will be low single-digit growth for smartphone shipments for the second-quarter, which I think might be below street expectations,” said Maybank Kim Eng analyst Warren Lau, per Reuters.

“There is more competition than ever coming from the second-tier smartphone brands,” said senior analyst Linda Sui, per TechCrunch. Sui noted that Samsung competitors Huawei and Lenovo are both threatening to take more marketshare from the market leaders. “Huawei remained steady with 5 percent global smartphone marketshare in Q1 2014, while Lenovo has increased its global presence from 4 percent to 5 percent share during the past year.”

Analysts say that the profit drop is due to the ending of an era; Samsung is no longer responsible for the most innovative new smartphones, and therefore the company is witnessing its profits slump. Previously, the company saw five straight quarters worth of profits — until the first-quarter of 2013 rolled along.

“Samsung continues to face tough competition from Apple Inc. (NASDAQ:AAPL) at the higher-end of the smartphone market and from Chinese brands like Huawei on the lower-end,” said Neil Mawston, a researcher at Strategy Analytics told Reuters. Apple’s upcoming large-screen iteration of the iPhone is likely to put pressure on Samsung’s higher-end models, while the speedily improving Chinese model smartphones are threatening the company’s lower end phones.

“Huawei is expanding swiftly in Europe, while Lenovo continues to grow aggressively outside China into new regions such as Russia. If the recent Lenovo takeover of Motorola gets approved by various governments in the coming months, this will eventually create an even larger competitive force that Samsung and Apple must contend with in the second half of this year,” Sui added, in an interview with TechCrunch.

Analysts note that Apple, too, is losing market share in emerging markets, such as Latin America, where consumers are increasingly buying smartphones from second tier manufacturers.

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