Samsung’s Poor Q2’14 Results

Reuters: Samsung’s 2014 second quarter operating profit is estimated to have fallen 24.5% Y/Y to 7.2 trillion won (US$7.12 billion).

[…] Samsung said second-quarter earnings would be hit by slower global smartphone market growth, competition in China, inventory buildup in Europe and the strength of the won, which appreciated by around 9 percent on average against the dollar during the second quarter.

What does Y/Y growth really tell you? I’d say, not much. 2014 is a different year with new challenges and opportunities. In three months Samsung made over $7 billion in operating profits; the company is doing something right. Are any other major brands making this much money? Apple, of course, but anyone else?

Chinese competition. Big names such as Huawei and Lenovo as well as lesser known brands such as OnePlus make high end smartphones that compete with the Galaxy S4 and S5 for much less. Take the OnePlus One for example: packed with high end components (a 5.5-inch 1920×1080 LCD, 13 megapixel f/2.0 camera, 2.5 GHz quadcore CPU with 3GB RAM, etc.) that outperform the highly touted and affordable $349 Google Nexus 5, but for $50 less, and for less than half the price of a Galaxy S5 ($660 at T-Mobile in the US).

If Samsung continues to compete on hardware alone the company will eventually lose to competition from China.