Friday, 26 October 2012

Smartphones Competition. Samsung Leads!

Based on an article from The Sun newspaper :

SEOUL (Oct 28, 2011):
Samsung Electronics Co surpassed Apple Inc as the world's top smartphone maker with more than 40% shipment growth, and forecast strong sales in the fourth quarter, as it aims to consolidate its lead against rivals.

Samsung, which had little traction in the booming smartphone market until early last year, has since staged a strong comeback and reported a record profit from handset sales in the third quarter on Friday.

"Looking ahead into the fourth quarter - when industry demand is traditionally at its peak - Samsung expects sales of mobile devices to remain strong and flat panel TV shipments to increase," Samsung said in its earnings statement.

Profits from the telecoms division more than doubled from a year ago to 2.5 trillion won (RM6.96 billion) and accounted for 60% of the total profit, mitigating a sharp plunge in earnings from its bread-and-butter memory chips.

Shipments of smartphones jumped more than 40% from the preceding quarter and 300% from a year ago.

The growth leapfrogs Apple, which sold fewer iPhones in the third quarter from the previous quarter. Apple's iPhone sales slid to 17.1 million units from the second quarter's 20 million units.

Samsung didn't provide third-quarter sales figures, but the percentage growth numbers suggested shipments may have risen to around 27 million units from second-quarter's 19 million units. Nokia , which is also slowly regaining lost ground, sold 16.8 million smartphones.

By 0125 GMT, Samsung shares were up 1.4% versus a 1.7% gain in the wider market .

Samsung, the world's biggest technology firm by revenue, reported a 4.25 trillion won operating profit for the July-September quarter on Friday, broadly in line with its earlier estimate of 4.2 trillion won.

That was down from 4.9 trillion won a year ago but up from 3.8 trillion won in the preceding quarter.

"I expect to see earnings improve slightly in the fourth quarter, and strongly in 2012. Its telecommunications devices business will continue to do very well, and so will non-memory chips," said Lee Sun-tae, an analyst at Meritz Securities.

Samsung, the biggest handset maker in Google's Android camp, however, faces challenges as the new iPhone, introduced earlier this month, is scoring strong sales, while Nokia is fighting back with its first phones based on Microsoft's Windows software.

Sony Corp also announced on Thursday that it would take full ownership of its mobile venture Sony Ericsson in a bid to exploit its music and video.

Samsung on Thursday announced the launch of its Galaxy Note mobile devices, adding to the flagship Galaxy lineup of products. The devices, powered by the Android software, will square off against a series of new models released by Apple Nokia, and HTC Corp .

Sole profitable DRAM maker

Samsung's mainstay chip business saw its profit more than halve to 1.59 trillion won from a year earlier, but it held up well as its relatively high exposure to lucrative mobile chips helped the firm offset a sharp plunge in prices of commodity computer memory chips.

Samsung was the sole profitable firm among major global DRAM chip makers in the third quarter. Second-ranked computer memory chip maker Hynix Semiconductor and Japan's Elpida Memory swung to deep losses as prices of dynamic random access memory (DRAM) chips used in PCs tumbled about 50% in the third quarter.

Its chip business is also benefiting from strong demand for mobile processor chips used in Apple's iPhone and iPad as well as its own Galaxy smartphones.

Samsung expected demand for PCs to remain weak in the fourth quarter because of weak seasonality, while demand for mobile devices and servers will be relatively strong.

"I see some signs that chip prices have hit bottom as inventories are running out. However, we don't yet know when the industry is going to pick up since macroeconomic uncertainties overshadow the demand outlook," said Park Hyun, an analyst at Tong Yang Securities.

Samsung's display business posted losses for a third consecutive quarter, as weak demand for TVs and PCs outweighed strong sales of smartphones. But losses narrowed from the previous quarter, helped by strong earnings from OLED display, which is widely expected to replace LCD as next-generation flat-screens in mobile devices and TVs.

Samsung competes with Nokia in mobile phones, Sony and LG Electronics Inc in TVs, Toshiba, Hynix in chips and LG Display in displays. – Reuters

SMARTPHONES. Smartphones is now becoming the must-have device to everyone. From teenagers, to adults.  Even for the old folks as well. And don’t get shocked. Nowadays, even the kids that haven’t even entered the kindergarten also play with stuffs like these; smartphones, table, etc. It has become a trend for us that live in this technological era of the 21st century.

Smartphone had actually been introduced by a long time ago, in 1996 and the first smartphone introduced was the Nokia Communicator. However, during that time, not many people care to even have any phone. Only rich people will do. At this state, we can see how inelastic the demand curve of the smartphone is.

But as time goes by, the popularity of smartphone rises up. This has begun in year 2010 where the first generation of Apple iPhone model was first being introduced. And now, over billions of people have it. Maybe it’s kind of too complicated to explain it in words. So, to summarize it up, refer to the graph provided below.

               after some times had elapsed -->

Assuming that the price does change to lower, after the release, but still during those earlier years, no one really uses smartphone; even if there’s any. It would be just a small number of people. This might be because the smartphone wasn’t really recognized by many in those days and our knowledge about how to use these devices is still very shallow. Yeap. It’s inevitably true that we just use the black and white screen colored phones and the bulky computer desktop to assist us in our workings and daily routines. Time passes; the world undergoes the development toward modernization, education about IT being given in school. We came to know what are these new technologies are. Some give a try, and then others follow. Why? Because that’s what we call it TREND.

At this rate, the smartphones price elasticity of demand is considered as price elastic. Just a slight change of price will affect the quantity demanded. This is because everyone is like competing with each other to try newer and newer things.

Samsung was initially the most leading device products. But in the time of smartphones being introduced, Apple overtook Samsung and become the No. 1 leading smartphones products. However, Apple was no less experiencing the growth of a leapfrog. They were being too comfortable with their rank and expect it to stand for like forever. The company was unaware of the difficulties they might come over. Just because they were the first to make the smartphones to become popular, doesn’t mean that they are going to hold themselves in the first rank like forever.

So after a while being dropped, Samsung then take over its place as the number one throne. They studied about the Apple’s technology and improvised it by a lot. And since Samsung is an older company compared to Apple, it is much easier for them to win their ‘competition’ with Apple company because of these 2 main reasons; which are the technology and the bigger firm size.

Comparing Apple and Samsung, we can take Apple as a short-run company and the Samsung as a long run company.

So, basically through that perspective, Samsung can produce more production and in a better way because they are more advanced in the technology thus allowing them to produce the product more efficiently and with a cheaper cost. Besides, for being long enough in the market, it means that their firm size also has gone larger and larger. Larger firm size guarantees them a lower cost of raw materials. This is because the company has many contacts for the materials and they would know who are the best in which. Also, because they are having good relationships with many other firms, they may also get large discounts for the materials they bought. Make sense? 

But that’s not only it. Competitions of smartphones are not only happening between Apple and Samsung product. There are many other alternatives too, such as HTC, Blackberry, Nokia, Motorola, Sony Ericsson, etc.

We already know that one of the factors that affect the quantity of demand is the availability of substitutes. So in this case, There are two things that we can obviously see. First, Samsung demand curve is inelastic. Second, Apple product is quite elastic. Why am I saying so? This is because Samsung can still maintain its rank as the best smartphone compared to others even though there are a lot of rivals coming in their way, whereas Apple only hold the first place at the beginning, and its performance is now falling and falling and keep falling time by time. Other brands smartphones are not as bad too. They are quite good actually. So especially when the iPhone prices are not so reasonable when their features are just a so-so, people will refrain themselves from buying Apple iPhones already. The demand curve is very elastic. Different from Samsung. The demand curve is quite inelastic. Even if the price are high, well.. The demand might go down by a bit. But it’s not that noticable.

Price elasticity of demand
for Samsung Smartphones


Price elasticity of demand
for Apple iPhone

Not to be biased about these products or anything, but from this article, we should actually know and always be aware of the possible upcoming challenges.  Always know the how the environment around us is and be alert about SWOT (STRENGTH; to know where and how to use it, WEAKNESS; to fix it and make things better, Opportunities; So that we know when to take it and it’s not wasted just like that and THREATS; so that we could be prepared and able to plan things wisely so we wouldn’t have to face any loss.

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