Korean electronics giant Samsung may face the toughest challenges in recent years in 2018
In 2018, Samsung faced a series of significant challenges as the growth in its smartphone and semiconductor businesses slowed down. The launch of the Galaxy S9 and Galaxy S9+ was highly anticipated, but the company was entering a more difficult period than in recent years. In 2017, Samsung's mobile division managed to thrive despite a downturn in the market, thanks to the success of the Galaxy S8. This contrasted with earlier generations of smartphones that had struggled to gain traction. Additionally, the semiconductor market saw strong demand and supply shortages, which helped boost prices and allowed Samsung to overtake Intel as the world’s largest chipmaker.
Apple also played a role in supporting Samsung’s profits by purchasing OLED panels for the iPhone X, further strengthening Samsung’s position in the mobile sector. Samsung’s stock price surged by over 41% in 2017, but this momentum may not continue into 2018. Investors have become more cautious, and the company’s stock has seen little growth so far this year.
One major issue is the slowing smartphone market. According to Gartner, global smartphone sales fell by 5.6% in the fourth quarter of 2017—the first decline since 2004. Consumers are holding onto their devices longer and are less willing to pay high prices for new models. The average smartphone price has now surpassed $1,000, making it harder for companies like Samsung to justify premium pricing.
The competition in the smartphone industry is fiercer than ever. Samsung isn’t just facing Apple; it’s also battling Chinese brands such as Huawei, OPPO, vivo, and Xiaomi, which offer high-end devices at significantly lower prices. In India, a key market, Xiaomi outperformed Samsung in the fourth quarter.
Meanwhile, the semiconductor market, which contributed greatly to Samsung’s profits last year, is expected to grow at a much slower pace in 2018. Additionally, Apple might reduce its reliance on Samsung’s display technology by sourcing screens from LG, which could impact Samsung’s revenue.
Despite these challenges, there are potential bright spots. During the S9 launch, Samsung introduced a trade-in program that allows users to get credit for their old devices. For example, Galaxy S8 or iPhone X users could receive up to $300, while Galaxy S7 owners could get $200. This could encourage customers who were delaying an upgrade to purchase the new S9 or S9+.
According to IHS, the Galaxy S7 and S7 Edge remain among the most popular models, with a combined market share of 5.26%. Even though the S9 looks similar to the S8, it could still drive upgrades, especially if consumers perceive it as a meaningful improvement.
Analysts at Counterpoint Research predict that the S9 series could sell nearly 43 million units in 2018—surpassing the 35 million units sold by the S8 in 2017. However, some users might opt for the cheaper S8 instead, which could affect Samsung’s profits.
Semiconductors remain a critical part of Samsung’s business. While the market may not grow as fast as in 2017, it’s still expected to reach $451 billion, a 7.5% increase from the previous year. Prices for DRAM and NAND flash memory chips are rising, which should benefit Samsung. However, analysts warn that semiconductor revenue in the first quarter may actually decline.
After a successful year, expectations for Samsung remain high. But 2018 will likely be more challenging than 2017, as the company navigates a more competitive landscape and faces declining growth in key markets.
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