Samsung warns profit to fall 60%
taipeitimes.com
taipeitimes.com
>Samsung said it received fewer orders from cloud service providers, such as Amazon, as well as from handset makers, such as Apple, which has recently seen a slowdown of its own smartphone sales. This low demand in the cloud services and smartphone markets for both DRAM and NAND flash chips have pushed the prices of these chips down.
>According to Bloomberg, data centers are still going through their unused memory chips right now, Apple has cut its forecasts for iPhone sales and China’s economy, which is Samsung’s largest market for embedded components, has also slowed down this year.
>According to IHS Markit, a research firm, the market for DRAM is set to reach $77 billion in sales this year, which is a drop of 22% compared to last year. In this last quarter, DRAM prices fell over 30% (38% for server DRAM), which is the “sharpest decline since 2011," according to TrendForce.
https://www.tomshardware.com/news/samsung-q1-2019-earnings-p...
I think it basically boils down to few things.
1. Surprise Drop of Smartphone Unit Sold, we saw the first YoY decline in total Smartphone Unit shipment. ( Unit, not revenue ). Out of a 1.3B Smartphone market, even a 5% drop is a huge volume to fill.
2. Better than expected yield of 3D NAND. Which means you actually have an increase in output. And it just happen all three, Samsung, SK Hynix and Micron were able to yield better at the same time. To be fair they have been very conservatives with their estimate.
3. More Chinese DRAM and NAND are being used in the Domestic market. Which is unofficially required for selling phones in China.
All these along with the improved efficiency of DRAM and NAND Fabs for trying to fill orders during 2017 and 2018 without building new Fabs. Meant the DRAM / NAND are hit with a perfect storm.
[1] As well as AMD has been doing with Ryzen, most large computer purchasers are still Intel buyers and are slow to change.
I'm not aware of a similar pattern in DRAM, which if anything has been suspiciously high for a while to the point that many assume price fixing was to blame as has happened in the past.
finally
25B (2016), 47B (2017), 54B (2018). 2019 Q1 profit is similar to 2016 Q1 profit. Things are simply going back to 2016 before DRAM/NAND price craze.
Who's 'we'? Are you speaking on behalf of someone. Your sig doesn't hint at anything.
Example: https://www.amazon.com/gp/product/B07N124XDS a few months ago 32GB SODIMM was near unobtanium, a less known brand on eBay alone sold 'em for like 350-375 and now the Samsung ones are on Amazon at below 230 USD. Still has a 25-30% premium over smaller sticks but that's expected.
He may be right about Apple being 3rd, but Apple looks to be the only one making a decent profit from their phones.
How do they manage that when they have to pay for both hardware and software development, when all the others get the software for free?
People paid for it, even people who couldn’t afford it found a way to pay for an iPhone
The huge cash burst into Apple meant everyone was scrambling to deal with them.
Then economies of scale, negotiating leverage with third parties and sheer momentum propelled them
From a CPU perspective, they still are:
https://www.anandtech.com/show/13392/the-iphone-xs-xs-max-re...
(for the rest of the features, that's indeed debatable)
Fun fact: Samsung made the chip for the first iPhone. Steve Jobs was so dissatisfied with the experience that Apple bought PA Semi to design the chips in-house.
Not that I'm against extra horse power, we'll find a use for it. But we're in "desktop land", almost, for smartphone CPUs. They're good enough.
The real smartphone battles now are in camera quality, gaming oomph and battery usage.
I think it's been longer. I'm on a non-flagship from last year, watching YouTube in PiP mode while writing this comment. Way more than necessary power for causing use.
Probably also a case of modest needs, but still.
When you buy the highend they become average in a few years which is completely useable. However, low end phones quickly fall behind the curve and only keep dropping.
Now, that’s not to say the phone will physically last longer. Just that having headroom becomes more noticeable over time.
I thought PA Semi's specialty was in power management and many didn't consider the acquisition a success as most key figures left the company not too long after the acquisition. Are you sure that Apple actually designed the SOC in-house? Wasn't it Intrinsity, Samsung's collaborator, that co-developed Samsung's Hummingbird core (also used in Apple's A4) to compete with Qualcomm's APs and go beyond the 1Ghz barrier, changed the game?
I always thought the Hummingbird was the breakthrough that made the A chips competitive -- Apple bought Intrinsity afterward.
It's their ecosystem, all their hardwares work very well between each other. You have Apple messenger on a macbook connecting to your iphone. For android you need to download pushbullet. I'm not in the ecosystem I prefer Android but I can see why people such as consumer would continue to buy Apple stuff. I'm not entirely sure about their laptops though...
Also Apple make a lot of money from services such as itune and their app store. Itune made more than Spotify. It all works together with their close ecosystem.
It's a real pain to move from apple to android because text messages goes straight to apple server. You need to sign off and jump a hoop to get text message back to android. Also getting mp3 off of itunes or getting bandcamp mp3s on to itune. It's like LA fitness, at least in 2010, where if you want to cancel your gym membership you need to download the pdf from their website and then mail it to the provided address and then they'll charge you anyway one extra month.
It's also only recently that the Apple ecosystem is relevant with Continuity stuffs. Before that, iPods, iPhones and iPads are all very isolated and don't require Apple ecosystem much.
TIL people are still sending SMS from their PC...
I'd say most of us will either use the Signal client or web.whatsapp.com without bothering connecting the actual devices together.
On one hand, smartphones are more or less commodities now. Most established smartphone makers can make great phones (at this point I only compare cameras and even then, they also to all be great) so it is only natural that margins become pretty thin. But right now they are just too thin and the ecosystem is not really healthy.
We don't really need another Apple making huge margins on its smartphone business though.
I think I'd argue we need another two or three. Monocultures are almost never a good idea in the long term.
Even Google is now facing the issue that despite Project Treble, most OEMs don't care to release newer versions or provide the respective upgrades, thus rending useless whatever they show at IO.
Because it shows.
Content and Apps. Apple takes a nice bite.
Samsung sells a commodity. Then people use the Google Play store and google makes money. I guess Samsung dreams of it's own phone OS. Was it LG or Samsung who bought WebOS?
https://appleinsider.com/articles/18/04/17/apple-grabs-86-of...
I assumed Samsung’s android phones were the top of the range. Who do you think is the high end android phone brand
I feel like the vast majority of the Android ecosystem foot gunned itself pushing its way out of reasonably priced device segments. There really are no modern equivalents to the Moto G or Nexus 5 or even early One Plus phones in the $150-$350 range. Its garbage up through $200, then a giant gap to $1000 phones.
Especially in the tablet segment. I can get why Google didn't want to try to single-handedly prop up the form factor with first party devices, but the last good (and reasonably priced) Android tablets remain the second generation Nexus 7 and Nvidia Shield from half a decade ago.
Until there's another sub 300$ phone with an AMOLED upgrading seems pointless.
My S5 was awful with multiple bugs, quickly dead samsung SSD, my grandfathers smart TV was slow despite being bought in 2018, and horror stories about Samsung appliances.
Also, your article on Apple's smartphone profit share is from April 2018, so more like 2017 than 2018. Not sure how relevant that is to 2019 earnings.
[1] https://www.wsj.com/articles/samsung-hopes-strong-chip-sales...
Also, remember that Samsung is still selling these components to Huawei, Oppo, etc., so it's not a total loss when they take market share.
not sure why that matters? the nascent non-memory component business is not the major cost-center, or money-maker for the company. Samsung's doesn't always use internal parts in their products -- take for instance, Sharp, which had been Samsung's LCD panel supplier until Foxconn took over. There are also rumors that some lower end Samsung smartphone use displays made by BOE.
Two independent industries. Those Chinese manufacturers still have to use memory products made by either Samsung, Hynix or Micron. It does not matter which smartphone OEMs make more profit or has greater marketshare. Those three DRAM makers combined account for 90% of global DRAM supplies. China is not going to have its own domestic (major) DRAM manufacturer anytime soon.
This is all part of business cycle that went a bit berserk in 2016 when Samsung decided to increase their capex significantly to boost their capacity to capture greater marketshare in spite of the obvious resulting glut. Yes, consumers benefitted from plummeting prices, but most DRAM makers had to cut capex and capacity to deal with the DRAM glut and plummeting prices in 2016. The lower capex and capacity likewise eventually led to the price hike of 2017-2018 that we just witnessed. During this rise, the DRAM market participants again started expanding and we are seeing prices falling again. Barring unseen major technical breakthrough or extraordinary market demand (no, I don't mean Apple's market share or profit margin, fanbois), this cycle would continue...
"Chinese competitors are basically giving up profits for growth"
It interesting how Apple have managed to capture so much of the profit in the industry, and consumers are willing to go with them rather than one of their essentially subsidised rivals.
I wonder how long this situation can continue for, some kind of reversion to the mean has to happen eventually.
On the phone front, they were used to selling phones at premium pricing only relying on their brand name. You don't have to look past Nokia or Blackberry to see how that will end. They're not really innovative, and while their devices are generally quality, they've pushed the price point too high. Xiaomi does 90 percent of it for 30 percent of the price. Huawei does 200 percent for about the same price.
On the chip front, TSMC has been outpacing them for years, and is getting all the contracts.
The only thing I can think of that Samsung does better than anyone else is OLED, and others are catching up very quickly.
I think Samsung will join the ranks of HTC and LG as also rans in short time...
They are more out-marketed than "out-tech-ed".
In the premium market, Huawei is lapping them. Samsung used to vie for best camera. Now they're with Apple in lagging far behind the Pixel and P series.
>In the premium market, Huawei is lapping them
Where? In China? My personal opinion is when you dive deep, Huawei is more about marketing hype than substance. The tri-camera is Israel tech, they rely on Samsung for memory chip and OLED, things like their battery life achieved by furiously killing background apps might spur outcry elsewhere.
I think this is also where Amazon is leading the future to：Those who market the best win.
If your goes to r/Android, Huawei is at least as popular as Samsung, and even more of a topic maker. And that has been the case for sometime now.
I have a Samsung S10E, but that is because I can't own a Huawei in US, for there is no customer support here.
TBH, S10 is the best phone Samsung has made in THREE years and I am quite happy with it. The past gens of Galaxies, are good but boring yet expensive. Huawei is as expensive, but they somehow find a way to excite the consumer base with, what I would call, useful gimmicks, like 6 cameras stuff. Oppo/Vivo (BBK and its subsidiaries) does the same, but more from the 'hide-the-front-camera' mechanics side.
It doesn't matter where the tech is coming from, Israel doesn't make their phones, what matters is here is to come up with a complete package that people would pay for it.
So it isn't really controversial to say the Chinese makes the best Android phone in the world today. It is just funny those those phones are nowhere to be found in US.
I used to be one of them, constantly tweaking it, ROMs, root and flash, compile my own ROM, compare specs and eager to know what's new, but that's long ago, I've quit being a slave to my phone, I've realized I just need my phone to work when it needs to(like average people?), and I spend no more than 20 minutes per day on it now and never waste time on the phone itself.
Average people don't know and won't understand specs, that's where brands like Oppo and Vivo thrive, they are good at marketing, hell if you go into deep China you will hear salesgirls peddling OPPO/VIVO as the best of the best in the world.
Give you another example. I'm on the market for a new phone. I went to a local shop to get a feel of the latest offerings. While I was there, three groups of friends/couple/mother-and-son came to the shop and they all talked about Huawei. This is not in China btw.
So what? Apple didn't make their own camera sensors. Apple didn't make their memory chips. Apple used Samsung's OLED too. And iPhones are great products.
Of course, you can argue Huawei's software is lagging behind Apple, but where is Samsung standing?
Incorrect. Unable to compete and inadequate customer support are the reasons.
Samsung used to have a big user base in China. But product offerings from local manufactures became much better. Design, software and quality wise, they suit the customers' needs better. Samsung's products are simply - "meh".
In terms of customer support, Samsung treated Chinese customers like second class citizen. E.g. during the faulty emmc and fire-catching battery fiasco, they refused to offer the same level of customer service as they did in the US and Europe.
When the first/second case of exploding battery surfaced, Samsung accused the owner putting his phone in a microwave to cause the battery to explode.
Also Samsung adopts some dirty marketing tricks which is well known in China. They have been fined in Taiwan before.
https://www.theguardian.com/technology/2013/oct/24/samsung-f...
All the factors combined, caused their market share to plummet.
Welcome to the groovy train, you are about 5 years late to the party.
>On the chip front, TSMC has been outpacing them for years, and is getting all the contracts.
Actually TSMC more or less created the whole outsourcing fab business in the late 80's and has led the outsourcing business for the past 30 years. The fact that Samsung went from nothing in mid 2000's to #2 today is quite remarkable, even surpassing TSMC in 14nm and the first EUV rollout.
> The only thing I can think of that Samsung does better than anyone else is OLED, and others are catching up very quickly.
Samsung has been known for their displays for decades. On mobile OLED, Samsung had pretty much 95% market share for the past decade or so and I keep hearing about competitors in China and Taiwan that are in fact still 3-4 generation behind and busy sending spies to copy and steal SDS's IP, so I doubt it.
* I did change the battery twice though. Too bad it's not as easy as taking the back cover as on a Nexus One...
When I tried to get internet here in Spain a few years ago, I asked Vodafone how much it cost. 40 Euros per month (then add on tax). I asked how much it was for a bundle with internet a phone and a mobile contract. Same price.
I do see younger people with a lot of lat generation iPhones probably as handed downs from people on contracts.
As for stats, I could only get those from 2015, it was 50% across Europe, 77% worldwide.
https://www.globalrewardsolutions.com/wp-content/uploads/GRS...
Although I did find a couple that show Spain only has around 20% prepaid, which was quite surprising to me.
Although, there are rumors that Huawei are working on their own OS. And it would be interesting to see whether they would also introduce an OS for their laptop series.