Why Samsung forecasts falling profits for 1st quarter 2014 (Part 3 of 3)
Why Samsung’s headaches could continue in 2014 with increasing competition
In the previous article of this series, we discussed why Samsung’s (SSNLF) flagship product, the Galaxy S5, got off to a slow start. We discussed the temporary ban on South Korea’s mobile carriers, such as SK Telecom (SKM) and KT Corp. (KT), selling the Galaxy S5. We talked about the lack of eye-catching and innovative features of this smartphone as another reason for the slow start. But there’s more to it than that. Samsung’s problems could continue even in the later part of the year, when Apple (AAPL) announces its new iPhone, the iPhone 6, and Lenovo (LNVGY) makes use of Motorola’s operations—which it acquired from Google (GOOG) in January this year—to expand into developed markets.
Apple could challenge Samsung in the later half of 2014
According to the above chart, Apple leads the lucrative U.S. smartphone market with a share of 42% and is way ahead of Samsung, which has a 27% share. Apple’s market share increase in 2013 was helped by the September 2013 release of the iPhone 5S and iPhone 5C models in the U.S. and other markets. However, the main challenge for Samsung in the later part of 2014 would be the launch of the iPhone 6 by Apple in September or earlier. We discussed evidence for an earlier launch of the iPhone 6 in the Market Realist article An earlier iPhone 6 launch would help Apple avoid Samsung’s threat. In that article, we discussed the reports from DigiTimes and the China Times that suggest Apple could launch the iPhone 6 earlier than expected.
Lenovo could become another major challenge to Samsung
Lenovo is a strong player in emerging markets, but it doesn’t have much presence in developed markets. To reverse this trend, Lenovo acquired Motorola from Google earlier this year for a valuation of $2.9 billion. Motorola is the fourth largest player in the U.S., with a market share of 6.4%, as the above chart shows, so this will help Lenovo gain presence in developed markets. Motorola will help Lenovo in another way. It will enable Lenovo to join Apple as the only major technology company with global product lines in PCs, smartphones, and tablets. Corporates generally prefer buying all their devices from a single vendor so as to strike a better maintenance deal. Lenovo is already the world’s largest player in the personal computer business, and Motorola will help it become a major player in the smartphone market as well.
To learn more about investing in mobile device companies and other technologies, see the Market Realist series Why the world tech sector is poised for major growth in 2014.
Browse this series on Market Realist:
- Part 1 - Why Samsung forecasts falling profits for 1st quarter 2014
- Part 2 - Samsung could see a tough 2014 as Galaxy S5 sales start off slow
- Information Technology
- Technology & Electronics