Samsung and LG sales disappointments point to a shift in the market

[LeoRex]

I saw this item Anticipated Sales Decrease
Samsung, LG Increasingly Concerned

Both OEMs are reporting some lackluster sales figures.... and the overall opinion seems to be the S6 and G4 are a sales disappointment... but I see things differently.

A few years ago, the smartphone market was still in a state of rapid evolution. Hardware components were still improving rapidly, and going into that year, by the time a phone hit the market, there was a significantly better one in the pipeline already. The latest components were pricy, but they performed above and beyond the lower level bits. So buyers had a choice: purchase a top of the line flagship, or save money and purchase what amounted to piece of excrement. And buyers most often went with the former... sure they cost more, but they worked.

But the tide changed in 2013.

That was the year we saw the release of several phones that gave a combination of quality and performance the platform had not see up to that point. The Galaxy S4, HTC One M7, LG G2, Nexus 5, Galaxy Note 3, Moto X etc... That generation made a HUGE splash and two years later, we still have yet to replicate its impact. Why? Its not that the OEMs started mailing it in, I just see it as a function of the maturity of the platform. Hardware has improved, but the perceived gains now come in increasingly smaller increments. There is less incentive for buyers to replace their phones as quickly as they once were.

Another by-product of the maturity process is that the mid and low-range phones now can reap the benefits of the hardware improvements made at the high end. Those cheaper phones now can perform well on their own. Sure, they might not be able to win in a spring with the big dogs, but on their own, they provide users with more than enough performance for their needs. Someone can now pick up a smartphone for under $100 and it'll do a pretty decent job. To put that into a little bit of perspective... In late 2012, when the Samsung Galaxy S3 was released, Samsung also released the Galaxy Stellar (here in the US) for the 'budget' segment. The Stellar retailed for $469 (and it was, well, underwhelming)

And lastly, we've also seen the rapid rise of Chinese OEMs. They've been flooding the market with lower priced but decent spec'd devices and they've been quickly carving off huge chunks of the low, mid-tier and imerging markets, where buyers there aren't thrilled about (or able to) spending $600+ for a device when they can spend half as much, or less, and get a pretty good phone in return.

So back to LG and Samsung... I think the market is moving to where those high end, 'halo' phones can't be expected to carry the load and generate the bulk of their sales. As great as the S6 and G4 are (and they are), they are no longer so much better than everything else that buyers will be compelled to purchase them as much as they had previously.

Reading around, it seems as though both the OEMs, and the analysts that cover them, are still stuck in 2013.

 

[Golfdriver97]

I think the device that proves your point is the 2013 X. A device that didn't have glowing specs, but was configured so well, that it didn't need them.

 

[LeoRex]

I think the device that proves your point is the 2013 X. A device that didn't have glowing specs, but was configured so well, that it didn't need them.

Precisely... that phone was a sign of things to come. Everyone kind of freaked out over it... they couldn't wrap their minds around the fact that it wasn't a crazy expensive, top of the line phone, but it didn't suck. Now we are kind of silly with them. You can pick up a 64GB Asus Zenphone 2 for $300 (or a 16GB for $200). OnePlus One, Moto G, etc... the middle and low end of the market is getting fat with quality phones.

 

[dpham00]

I would certainly agree that there are diminishing returns...upgrades these days are much more incremental. I would agree that about the S4 time was the last "major" push to fHD. While I didn't have the S4, I did have the Note 3 and G4, which admittedly had the better S800 processor compared to the S4, however, I also had the LG G Pad 8.3 which had the same S600 processor in the S4, and it isn't too bad, even by today's standards. Are my Note 4, S6, and G4 faster than a S4/Note3? Yeah. But the increase is not as substantial as say from my Thunderbolt (2011) to S3 (2012) which was a HUGE jump. Going from my S3/Note II to Note 3 was a smaller jump. And Note 3 to Note 4/G4/S6 was an even smaller jump.

When the original Moto G came out at $150-200ish, it was a really good bang for the buck. But by today's standards, it isn't that great anymore. You can get the OPO for $250, or the ZF2 for $200/$300. You can pick up older flagships like the G2 for $150 on sale, which I recently used extensively while travelling...and it is not that far behind my S6 which I also had with me. Still very usable. Are the S6/G4/Note 4 better than the G2? No doubt. Are they worth 3-4x as much? I would say for most people who use their phones mostly for occasional email, browsing, facebook, etc? I would argue no. I have the Zf2 ($300) model, and honestly, it runs very close to the G4/S6. Though, for those on a budget, I would argue that the $200 is a better deal. Sure, my G4/S6 has a better camera and better display, but for most people, I don't think that it would be worth the additional cost.

I realize that I have gone off on a tangent a bit, but essentially, my point is that technology has gotten to the point where a $150-250 phone is adequate for most people. Bringing it back to Samsung/LG, they are used to higher profit margins. Their unlocked phones in the $200 price range really suck, compared to Asus, opo, or older flagships. Asus, opo, and the like are willing to sell phones at razor thin margins, Samsung and LG being huge corporations, has a have a hard time competing.

Sent from my Samsung Galaxy Tab Pro 8.4

 

[Golfdriver97]

but it didn't suck

I think this was the biggest headscratcher for most people. I was shocked at how well the 2013 X could perform.

a $150-250 phone is adequate for most people

Very true. I agree wholeheartedly, but a caveat is people still need to be careful as to what phone they look at. There is still a plague of devices that are barely worth the paper the specs are written on.

 

[dpham00]

I think this was the biggest headscratcher for most people. I was shocked at how well the 2013 X could perform.


Very true. I agree wholeheartedly, but a caveat is people still need to be careful as to what phone they look at. There is still a plague of devices that are barely worth the paper the specs are written on.

Very true. Samsung and lg both have current devices in that price range. For example the Galaxy core prime is $168 and comes with a qHD screen (not QHD), 8gb internal, s410...these are very low specs. For $200, the zf2 gives you a lot more. You can buy a good phone for $200...if you did your research. If you walk into the store without doing research and ask a salesman... You would probably get a sub par phone.

Sent from my Verizon LG G4

 

[LeoRex]

For example the Galaxy core prime is $168 (snip). For $200, the zf2 gives you a lot more.

That's why Samsung is taking a bath. Not only are they losing low/mid-range sales to the competition, they are also losing customers who may have otherwise bought an S6... Why not save $400 and get the ZenPhone 2 instead? Seems clear that a lot of people are opting to lose a few bells and whistles and keep their wallets happy.

 

[syspry]

It's not just the low end that's eating into their sales, you're looking at this from an Android-only perspective. The introduction of larger screens to iPhones ending something that used to be exclusive to android phones has also eaten into sales at the high end

 

[Geodude074]

Market saturation also plays a large role in my opinion. No need to buy a Galaxy S6 when you already have an S5. Heck, even an S4 will do the job just fine. This is the same problem that tablets are now facing, the iPad being no exception. Growth rates are declining, and eventually they will plateau as all consumers who want a flagship device will now have one, and it will be good enough for years to come, so no need to upgrade.

You'll see the same thing with the iPhone 6s coming up. Sales won't be nowhere as good as the regular 6 was, because the people who wanted a large-screen iPhone, already bought one.

 

[LeoRex]

It's not just the low end that's eating into their sales, you're looking at this from an Android-only perspective. The introduction of larger screens to iPhones ending something that used to be exclusive to android phones has also eaten into sales at the high end

Keep in mind that Apple, even with all its dominance and massive revenue, only accounts for about 18% of the phones used worldwide. And they are only fighting over that top exchelon of users willing to fork over big bucks for a phone... a group that is losing members now that we are seeing really good, really cheap phones coming into the market.