All markets reach a nadir due
to an increase competition or lack of demand and the smartphone market look
like it’s just reached its own peak. While Apple managed record iPhones sales of
$31m which may signal that there is still significant demand for smartphones in
a crowded market, the actions of the market leaders may indicate something else
in entirely[1].
Samsung’s second quarter sales
effectively doubled that of Apple’s yet the South Korean electronics company is
looking invest it capital into other sections of it business particularly memory
chips “used in personal computers and mobile devices”[2].
This decision is clearly moulded by Samsung realizing that the smartphone
market is starting to slow due to a growing number of competitors and weaker
demand especially in developed countries
as “penetration for smartphones is
between 75-85 percent in developed markets, meaning a saturation point could be
reached as early as 2014”[3].
What this means for the future
is that we may see a substantial drop in the price of smartphones or at least
see the release of model that at last cater to the lower end of the marketplace.
Looking at Apple’s example, it quite clear that the magic pill of innovation as
far as the smartphone market is concerned is obsolete as for the last three
years, Apple have been effectively re-releasing flagship models and Samsung merely
making minor aesthetic changes to theirs.
What we will also see alongside
a drop in price will be clear focus in penetrating emerging where smartphone is
much lower. This may suit both companies as cheaper models will cheap to make
despite being obvious need to sell more in order to ensure growth. Marketing
costs will be cheaper which is good news for smartphone makers as apart from
actually making smartphones, marketing them is among one of their biggest
costs. However for Samsung the slowdown of the smartphone market has more
implications for them than most as “two thirds” of its business is dependent in
how it does in smartphone marketplace[4].
Any decline severe decline in sales or profit is taken by investor as a cue to get
bearish.
In sum, all markets reach a
point of saturation some quicker than most but for Samsung and Apple, they can
only hope that the Smartphone market can deft the laws of the marketplace for
sometime yet.
Shamless Plug:
[1]
Sky News, 2013, Record Apple iPhone Sales But Profit Slumps,
[2] M.
Kim, 2013, Samsung to invest in chips,
[3]
M.Clinch, 2013, These ‘smartphone saturation stats could prove Apple wrong, http://www.cnbc.com/id/100913105
[4] P.
Olson, 2013, Samsung Earns $7.9 Billion In Q2, Cites ‘Slower Pace Of Smartphone
Market, http://www.forbes.com/sites/parmyolson/2013/07/25/samsung-earns-7-9-billion-in-q2-cites-slower-pace-of-smartphone-market/
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